EXECUTION COPY
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ASSET PURCHASE AGREEMENT
by and among
ON STAGE ENTERTAINMENT, INC.
(a Nevada corporation),
CASINO RESOURCE CORPORATION
(a Minnesota corporation)
COUNTRY TONITE ENTERPRISES, INC.
(a Nevada corporation),
and
CRC OF BRANSON, INC.
(a Missouri corporation)
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Section Page
1. Definitions.........................................................1
2. Purchase and Sale of the Business and Assets........................7
2.1 The Purchased Assets.......................................7
2.2 Excluded Assets............................................8
2.3 Assumed Liabilities........................................8
2.4 Excluded Liabilities.......................................9
2.5 Consent of Third Parties...................................9
2.6 Purchase Price.............................................9
2.7 Allocation of the Purchase Price..........................11
3. Closing............................................................11
3.1 Location; Date............................................11
3.2 Closing Deliveries........................................11
4. Representations and Warranties of the Selling Entities.............12
4.1 Corporate Status..........................................12
4.2 Authorization.............................................12
4.3 Consents and Approvals....................................12
4.4 Financial Statements......................................13
4.5 Title to Assets and Related Matters.......................13
4.6 Real Property.............................................14
4.7 Certain Personal Property.................................14
4.8 Personal Property Leases..................................15
4.9 Inventory.................................................15
4.10 Product Warranties and Price Guarantees...................15
4.11 Liabilities...............................................15
4.12 Taxes.....................................................15
4.13 Subsidiaries..............................................16
4.14 Legal Proceedings and Compliance with Law.................16
4.15 Contracts.................................................17
4.16 No Selling Entity is in Default under any Contract........19
4.17 Insurance.................................................19
4.18 Intellectual Property.....................................19
4.19 Employee Relations........................................20
4.20 ERISA.....................................................21
4.21 Absence of Certain Changes................................23
4.22 Customers.................................................24
4.23 Finder's Fees.............................................24
4.24 Additional Information....................................24
4.25 Transactions with Affiliates..............................24
4.26 Full Disclosure...........................................24
5. Representations and Warranties of On Stage.........................25
5.1 Corporate Status..........................................25
5.2 Authorization.............................................25
5.3 Consents and Approvals....................................25
5.4 Capital Stock Ownership...................................25
5.5 Finder's Fees.............................................25
5.6 Proxy Statement...........................................25
6. Certain Agreements.................................................26
6.1 Access....................................................26
6.2 Shareholder Vote; Proxy Statement.........................26
6.3 No Solicitation...........................................27
6.4 Update Schedules..........................................29
6.5 Financial Information.....................................29
6.6 Restrictive Covenants.....................................29
6.7 Required Consents, Regulatory and other Approvals.........31
6.8 Publicity.................................................31
6.9 Satisfaction of Liabilities...............................32
6.10 Employee Benefit Matters..................................32
6.11 Financing.................................................32
6.12 Business Financial Statements.............................32
6.13 Right of First Negotiation................................32
6.14 Employment and Employment Benefits........................33
7. Conduct of the Business Prior to the Closing.......................33
7.1 Operation in Ordinary Course..............................33
7.2 Business Organization.....................................34
7.3 Corporate Organization....................................34
7.4 Business Restrictions.....................................34
8. Conditions Precedent to Obligations of On Stage....................35
8.1 Representations and Warranties............................35
8.2 Agreements, Conditions and Covenants......................35
8.3 CRC Shareholder Approval..................................35
8.4 Officers' Certificate.....................................35
8.5 Required Consents and Approvals...........................35
8.6 Third Party Consents......................................35
8.7 Legality..................................................36
8.8 Financing.................................................36
8.9 Title Insurance...........................................36
8.10 Real Property Leases......................................37
8.11 Performance Contract......................................37
8.12 Xxxxx Xxxxxx Xxxx Employment Agreement....................37
8.13 Opinion of Counsel........................................37
8.14 Utility Agreement.........................................38
8.15 Collateral Agreements.....................................38
9. Conditions Precedent to Obligations of the Selling Entities........38
9.1 Representations and Warranties............................38
9.2 Agreements, Conditions and Covenants......................38
9.3 Officer's Certificate.....................................38
9.4 CRC Shareholder Approval..................................38
9.5 Legality..................................................38
9.6 Performance Contract......................................38
9.7 Opinion of Counsel........................................38
9.8 Collateral Agreements.....................................39
10. Indemnification....................................................39
10.1 Indemnification by the Selling Entities...................39
10.2 Indemnification by On Stage...............................40
10.3 Limitations on Liability..................................40
10.4 Survival..................................................40
10.5 Indemnification Procedure.................................41
10.6 Exception to Limitations..................................42
10.7 Payment of Indemnification Obligations....................42
10.8 Right to Set Off..........................................43
11. Termination........................................................43
11.1 Grounds for Termination...................................43
11.2 Effect of Termination.....................................45
12. Payment of Expenses; Bulk Sales Act; Sales and Transfer Taxes......46
13. Contents of Agreement..............................................46
14. Amendment; Parties in Interest; Assignment; Etc....................46
15. Interpretation.....................................................46
16. Remedies...........................................................47
17. Notices............................................................47
18. Governing Law......................................................48
19. Consent to Jurisdiction; Service of Process; Etc...................48
20. Further Assurances.................................................48
21. Exhibits; Schedules................................................48
22. No Benefit to Others...............................................49
23. Counterparts.......................................................49
Exhibits
A Employment Agreement
B Form of $1,300,000 Subordinated Promissory Note
C Form of Performance Contract
Schedules
2.1 Permitted Encumbrances
2.1(a) Real Property Owned
2.1(b) Real Property Leased
2.1(c) Equipment and Other Tangible Personal Property
2.1(d) Contracts of the Business
2.1(f) Permits
2.1(g) Intellectual Property
2.1(j) Prepaid Expenses
2.1(k)(i) Software
2.1(k)(ii) Third Party Software Licenses
2.1(l) Other Intangible Assets
2.2 Excluded Assets
2.3 Assumed Contracts and Permits
4.3 Consents and Approvals
4.4 Financial Statements
4.5 Title to Assets and Related Matters
4.6 Real Property
4.7 Certain Personal Property
4.8 Personal Property Leases
4.10 Product Warranties and Price Guarantees
4.11 Liabilities
4.12 Taxes
4.13 Subsidiaries
4.14 Legal Proceedings and Compliance with Law
4.15 Contracts
4.17 Insurance
4.18 Intellectual Property
4.19 Employee Relations
4.20 ERISA
4.22 Customers
4.24 Additional Information
4.25 Transactions with Affiliates
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of the 21st day of September,
1998, by and among On Stage Entertainment, Inc., a Nevada corporation ("On
Stage"), Casino Resource Corporation, a Minnesota corporation ("CRC"), Country
Tonite Enterprises, Inc., a Nevada corporation ("CTE"), and CRC of Branson,
Inc., a Missouri corporation ("CRC of Branson", and together with CRC and CTE,
the "Selling Entities", and each individually, a "Selling Entity").
Certain other terms are used herein as defined below in Section 1 or
elsewhere in this Agreement.
Background
The Selling Entities desire to transfer to On Stage the Purchased
Assets (as defined herein) in exchange for the assumption by On Stage of the
Assumed Liabilities (as defined herein) and the payment by On Stage of the
Purchase Price (as defined herein) in accordance with the terms and conditions
set forth in this Agreement. On Stage desires to acquire the Purchased Assets
and assume the Assumed Liabilities. To induce On Stage to enter into this
Agreement, Xxxx X. Xxxxxx, the principal shareholder of CRC, has agreed to
support, and granted an irrevocable proxy to On Stage to vote his shares in
favor of, this Agreement and the Transactions contemplated hereby.
NOW, THEREFORE, in consideration of and reliance on the respective
representations, warranties and covenants contained herein and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Definitions. For convenience, certain terms used in more than one part of
this Agreement are listed in alphabetical order and defined or referred to below
(such terms as well as any other terms defined elsewhere in this Agreement shall
be equally applicable to both the singular and plural forms of the terms
defined).
"$1,300,000 Subordinated Note" means the 9.5% Subordinated Note in the
principal amount of $1,300,000.00 (subject to reduction, as set forth therein,
in the event the Country Tonight Theater in Branson, Missouri does not produce
$6 million total gross revenue for calendar year 1998) payable by On Stage to
CRC in the form of Exhibit "B" hereto.
"Affiliates" means, with respect to a particular party, Persons
controlling, controlled by or under common control with that party, as well as
the officers, directors and majority-owned Persons of that party and of its
other Affiliates. For purposes of the foregoing, ownership, directly or
indirectly, of 20% or more of the voting stock or other equity interest of a
person shall be deemed to constitute control.
"Agreement" means this Agreement, including the Schedules and Exhibits
attached hereto.
"Assets" means all of the assets, properties and rights of every kind
and description, real and personal, tangible and intangible (including
goodwill), wherever situated and whether or not reflected in the most recent
Financial Statements, that are owned or possessed by a Selling Entity and relate
primarily to the Business.
"Assumed Liabilities" is defined in Section 2.3.
"Audited Financial Statements" is defined in Section 4.6.
"Balance Sheet" is defined in Section 4.6.
"Balance Sheet Date" is defined in Section 4.6.
"Benefit Plans" means all employee benefit plans of any Selling Entity
relating to the Business (including plans within the meaning of Section 3(3) of
ERISA) and any related or separate Contracts, plans, trusts, programs, policies,
arrangements, practices, customs and understandings, in each case whether formal
or informal, that provide benefits to any present or former employee of the
Business, or present or former beneficiary, dependent or assignee of any such
employee or former employee, including all incentive, bonus, deferred
compensation, vacation, holiday, medical, disability, share purchase or other
similar plans, policies, programs, practices or arrangements.
"BDO Xxxxxxx" means BDO Xxxxxxx, LLP, a certified independent
accounting firm.
"Business" means collectively the business of the Selling Entities
conducted under the "Country Tonite" name, including the ownership and operation
of the Country Tonight Theater in Branson, Missouri, the ownership and operation
of the Country Tonight production show based in Las Vegas, Nevada and the
operation of the Country Tonight Theater in Pigeon Forge, Tennessee.
"Charter Documents" means an entity's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement or similar document governing
the entity.
"Closing" is defined in Section 3.1.
"Closing Date" means the date of the Closing.
"Closing Statement" is defined in Section 2.8(a).
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"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agreements" means the $1,300,000 Subordinated Note, and
such subordination agreement, pledge agreement and security agreement as the
parties hereto shall enter into prior to the closing.
"Commission" means the United States Securities and Exchange
Commission.
"Commitments" is defined in Section 8.11.
"Confidential Information" means any confidential information or trade
secrets of the Business, including information and knowledge pertaining to
products and services offered, innovations, designs, ideas, plans, trade
secrets, proprietary information, know-how and other technical information,
advertising, marketing plans and systems, distribution and sales methods and
systems, sales and profit figures, customer and client lists, and relationships
with dealers, distributors, wholesalers, customers, clients, suppliers and
others who have business dealings with the Business.
"Contract" means any written or oral contract, agreement, lease, plan,
instrument or other document or commitment, arrangement, undertaking, practice
or authorization that is binding on any Person or its property under applicable
law.
"Copyrights" means registered copyrights, copyright applications and
unregistered copyrights.
"Court Order" means any judgment, decree, injunction, order or ruling
of any Federal, state, local or foreign court or governmental or regulatory body
or arbitrator or authority that is binding on any Person or its property under
applicable law.
"Customers" is defined in Section 4.22.
"Default" means (a) a breach, default or violation, (b) the occurrence
of an event that with or without the passage of time or the giving of notice, or
both, would constitute a breach, default or violation or cause an Encumbrance to
arise or (c) with respect to any Contract, the occurrence of an event that with
or without the passage of time or the giving of notice, or both, would give rise
to a right of termination, renegotiation or acceleration or a right to receive
damages or a payment of penalties.
"Employment Agreement" means the Employment Agreement between On Stage
and Xxxxx Xxxxxx Xxxx (or another producer acceptable to On Stage) in the form
of Exhibit "A" hereto.
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"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability or voting, defect of title or other claim, charge
or encumbrance of any nature whatsoever on any property or property interest.
"Environmental Condition" is defined in Section 4.14(b).
"Environmental Law" is defined in Section 4.14(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" is defined in Section 2.2.
"Excluded Liabilities" is defined in Section 2.4.
"Financial Statements" is defined in Section 4.6.
"GAAP" means generally accepted accounting principles.
"Hazardous Substances" means (i) any "hazardous substances" as defined
by the federal Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. xx.xx. 9601 et seq., (ii) any "extremely hazardous substance,"
"hazardous chemical" or "toxic chemical" as those terms are defined by the
federal Emergency Planning and Community Right-to-Know Act, 42 U.S.C. xx.xx.
11001 et seq., (iii) any "hazardous waste" as defined under the federal Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C. xx.xx. 6901 et seq., (iv) any "pollutant" as defined under the federal
Water Pollution Control Act, 33 U.S.C. xx.xx. 1251 et seq., as any of such laws
in clauses (i) through (iv) may be amended from time to time, and (v) any
regulated substance or waste under any Laws or Court Orders that currently exist
or that may be enacted, promulgated or issued in the future by any Federal,
state or local governmental authorities concerning protection of the
environment.
"Indemnified Party" is defined in Section 10.1.
"Intellectual Property" means any Copyrights, Patents, Trademarks,
technology rights and licenses, trade secrets, franchises, know-how and
formulae, inventions, designs, processes, drawings, specifications, patterns and
other intellectual property owned by or licensed to a Selling Entity relating
primarily to the Business.
"Inventory" means any inventory, including raw materials, supplies,
work in process and finished goods.
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"Knowledge of a Selling Entity" means the actual knowledge of a
director, officer or other employee of a Selling Entity.
"Law" means any statute, law, ordinance, regulation, order or rule of
any Federal, state, local, foreign or other governmental agency or body or of
any other type of regulatory body, including those covering environmental,
energy, safety, health, transportation, bribery, record keeping, zoning,
antidiscrimination, antitrust, wage and hour, and price and wage control
matters.
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or endorsement of
or by any Person, absolute or contingent, accrued or unaccrued, due or to become
due, liquidated or unliquidated.
"Litigation" means any lawsuit, claim, action, dispute, investigation,
arbitration, inquiry, administrative or other proceeding or prosecution.
"Material Adverse Effect" means a material adverse effect on the
Business or the Purchased Assets, in each case taken as a whole, or the
financial condition or the results of operations of the Business, and when used
with respect to representations, warranties or conditions, means the individual
effect of the situation to which it relates and also the aggregate effect of all
similar situations unless the context indicates otherwise.
"Non-Assignable Contract" is defined in Section 2.5.
"Ordinary Course" or "ordinary course of business" means the ordinary
course of business that is consistent in nature and, where relevant, amount with
past practices.
"Patents" means all patents and patent applications.
"Performance Contract" means the Performance Contract to be entered
into at the Closing between Country Tonite Theatre, L.L.C. (an Affiliate of CRC)
and On Stage Theaters, Inc. (an Affiliate of On Stage) in the form of Exhibit
"C" hereto.
"Permit" means any governmental permit, license, registration,
certificate of occupancy, approval and other authorization.
"Person" means any natural person, corporation, partnership,
proprietorship, association, trust or other legal entity.
"Personal Property Leases" is defined in Section 4.10.
"Prorations" is defined in Section 2.6.
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"Proxy Statement" is defined in Section 4.30.
"Purchase Price" is defined in Section 2.6.
"Purchased Assets" is defined in Section 2.1.
"Real Estate Leases" is defined in Section 4.8.
"Real Property" is defined in Section 4.8.
"Representatives" is defined in Section 6.3(a).
"Restricted Business " is defined in Section 6.6(a).
"Required Consents" is defined in Section 4.3.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Entities" is defined above in the preamble.
"Shareholders Meeting" is defined in Section 4.30.
"Software" means any computer software of any nature whatsoever,
including all systems software, all applications software, whether for general
business usage (e.g., accounting, finance, word processing, graphics,
spreadsheet analysis, etc.) or specific, unique-to-the-Business usage (e.g.,
telephone call processing, etc.) and all computer operating, security or
programming software, that is owned by or licensed to a Selling Entity and
relates primarily to the Business, or has been developed or designed for, or is
in the process of being developed or designed primarily for the Business, and
any and all documentation and object and source codes related thereto.
"Superior Proposal" is defined in Section 6.3(a).
"Taxes" is defined in Section 4.12.
"Termination Fee" is defined in Section 11.2(b).
"Trademarks" means registered trademarks, registered service marks,
trademark and service xxxx applications, unregistered trademarks and service
marks and brand names, service marks and logos.
"Transaction Documents" means this Agreement, the Employment Agreement,
the Performance Contract and the Collateral Agreements.
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"Transactions" means the purchase and sale of the Purchased Assets and
the consummation of the other transactions contemplated by the Transaction
Documents.
"Transferred Employees " is defined in Section 6.14(a).
2. Purchase and Sale of the Business and Assets.
2.1 The Purchased Assets. Subject to the terms and conditions of this
Agreement, at the Closing, the Selling Entities shall grant, sell, assign,
transfer, convey and deliver to On Stage, free and clear of all Encumbrances
whatsoever, other than the permitted Encumbrances set forth on Schedule 2.1 (the
"Permitted Encumbrances"), and On Stage shall purchase from the Selling
Entities, the Business as a going concern, and all right, title and interest of
the Selling Entities in and to all of the Assets other than the Excluded Assets
(collectively, the "Purchased Assets") as the same shall exist on the Closing
Date including the following:
(a) Real Property Owned. The real property owned by each
Selling Entity described on Schedule 2.1(a), together with the
buildings, structures, improvements and fixtures located thereon, and
all rights, privileges, easements, licenses, hereditaments and other
appurtenances relating thereto;
(b) Real Property Leased. Each Selling Entity's interest, as a
lessee, in the real property leased by such Selling Entity described on
Schedule 2.1(b), and any easements, deposits or other rights pertaining
thereto;
(c) Equipment and Other Tangible Personal Property. All
equipment, leasehold improvements, automobiles, supplies, office
furniture and office equipment, computers and telecommunications
equipment and other items of personal property that are owned by each
Selling Entity relating primarily to the Business, including those
described on Schedule 2.1(c);
(d) Contracts of the Business. All of the interest of each
Selling Entity in all Contracts, leases of equipment and other personal
property, sale orders, purchase orders, commitments, instruments and
all other agreements primarily relating to the Business, including
those listed on Schedule 2.1(d);
(e) Customer Records, Sales and Marketing Materials. All
customer records, including principal contacts, address and telephone
number, purchasing history, payment information and any other
information with respect to the customers of the Business, sales data,
catalogs, brochures, suppliers' names, mailing lists, art work,
photographs and advertising material relating primarily to the
Business, whether in electronic form or otherwise;
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(f) Permits. All rights under Permits relating to the
Business, including those listed on Schedule 2.1(f), to the extent such
Permits are transferable to On Stage;
(g) Intellectual Property. All Intellectual Property,
including the Intellectual Property described in Schedule 2.1(g) and
exclusive rights to the name "Country Tonite Enterprises, Inc." and to
the trademark "Country Tonite", and all goodwill associated therewith;
(h) Property, Personnel and Accounting Records. All other
records of the Selling Entities relating primarily to the Business,
including property records and records relating to employees (provided
that the Selling Entities shall be entitled to retain copies of the
foregoing);
(i) Inventory. All Inventory relating primarily to the
Business on the Closing Date;
(j) Prepaid Expenses. All rights relating to any prepaid
expenses of or arising primarily in connection with the Business at the
Closing Date, including those described on Schedule 2.1(j);
(k) Software. All Software, including the Software described
in Schedule 2.1(k)(i), and all documentation related thereto; provided,
however, that all third party licensed Software included in the
Purchased Assets shall be transferred to On Stage subject to the terms
and conditions of the third party licenses listed in Schedule
2.1(k)(ii) under which the particular Selling Entity acquired such
licensed Software; and
(l) Other Intangible Assets. All other assets (including all
causes of action, rights of action, contract rights and warranty and
product liability claims against third parties) relating primarily to
the Purchased Assets or the Business, including those described on
Schedule 2.1(l).
2.2 Excluded Assets. The corporate seal, Charter Documents, bylaws,
minute book and other corporate records of each Selling Entity, those assets of
each Selling Entity described in Schedule 2.2, insurance Contracts, cash,
accounts receivable and (for the avoidance of doubt) CRC of Tennessee's 60%
joint venture interest in Country Tonite Theater, L.L.C. (collectively, the
"Excluded Assets") shall not be included in the Purchased Assets in any event.
2.3 Assumed Liabilities. At the Closing, and subject to Section 2.4, On
Stage shall assume the following obligations (the "Assumed Liabilities"):
(a) all obligations that come into existence after the Closing
(and do not relate to the period prior to or at the Closing) under all
Contracts and Permits listed on
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Schedule 2.3 that are conveyed to On Stage as Purchased Assets pursuant
to the terms and conditions hereof; and
(b) all advance deposits (including interest accrued thereon)
and pre-paid ticket sales (and ticket or amusement taxes pertaining
thereto) of the Business as of the Closing Date, but only to the extent
of the amount of the advance deposits (including interest accrued
thereon) and pre-paid ticket sales applied as a reduction in the
Purchase Price at Closing pursuant to Section 2.6(c).
2.4 Excluded Liabilities. Except as expressly set forth in Section 2.3,
On Stage shall not, by virtue of its purchase of the Purchased Assets or
otherwise in connection with the Transactions, assume or become responsible for
any Liabilities (the "Excluded Liabilities") of any Selling Entity of any nature
whatsoever, including (a) Liabilities relating to or arising out of any Selling
Entity, the Purchased Assets, the Business (including any event, condition,
occurrence, action, inaction or transaction relating to any of the foregoing) or
the actions of any Selling Entity's officers, employees, representatives or
agents prior to or at the Closing, (b) Liabilities for any Taxes (other than
what is provided in Section 2.3(b)), (c) Liabilities relating to any claims for
health care or other welfare benefits, (d) Liabilities relating to any violation
of any Law, (e) tort Liabilities, (f) Liabilities from claims arising under any
Contract or Permit not assumed by On Stage pursuant hereto or included in any
arrangement set forth in Section 2.5; (g) Liabilities for claims arising under
any Contract or Permit to the extent such claim is based on events, conditions,
acts or omissions of any Person which occurred prior to or at the Closing; (h)
contingent Liabilities unknown to the Selling Entities at the Closing; and (i)
Liabilities for any accounts payable or indebtedness for money borrowed.
2.5 Consent of Third Parties. Nothing in this Agreement shall be
construed as an attempt by any Selling Entity to assign to On Stage any Contract
or Permit included in the Purchased Assets that is by its terms or by Law
nonassignable without the consent of any other party or parties, unless such
consent or approval shall have been given, or as to which all the remedies for
the enforcement thereof available to the Selling Entities would not by Law pass
to On Stage as an incident of the assignments provided for by this Agreement (a
"Non-Assignable Contract"). To the extent that any such consent or approval in
respect of, or a novation of, a Non-Assignable Contract shall not have been
obtained on or before the Closing Date, the appropriate Selling Entity shall
continue to use reasonable efforts to obtain any such consent, approval or
novation after the Closing Date until such time as it shall have been obtained,
and shall cooperate with On Stage in any economically feasible arrangement to
provide that On Stage shall receive the benefits of the relevant Selling Entity
under such Non-Assignable Contract, provided that On Stage shall undertake to
pay or satisfy the corresponding Liabilities under the terms of such
Non-Assignable Contract to the extent that it would have been responsible
therefor if such consent, approval or novation had been obtained.
2.6 Purchase Price. In addition to assuming the Assumed Liabilities,
the aggregate price to be paid by On Stage to the Selling Entities (the
"Purchase Price") for the purchase of the
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Purchased Assets shall be equal to the following (which calculation shall be
made as of the Closing Date and set forth in a certificate of On Stage and CRC
delivered at the Closing):
(a) $13,800,000,
(b) plus, the lesser of (i) $120,000 or (ii) the value at
the Selling Entities' cost of Inventory located at
the Branson gift shop included in the Purchased
Assets, plus 30% of the cost of the Inventory bearing
the "Country Tonite" name or logo located at the
Pigeon Forge gift shop, which amount shall be paid
from time to time as the parties agree;
(c) minus, the amount of all advance deposits (including
interest accrued thereon) and pre-paid ticket sales
(and ticket or amusement taxes pertaining thereto) of
the Business included in the Assumed Liabilities,
(d) minus the following, to the extent such amounts
relate primarily to the Purchased Assets or the
Business, are unpaid as of the date of Closing and
have not been paid by the Selling Entities prior to
or at the Closing:
(i) the prorated amount for the period prior to the
Closing Date of all real estate taxes and
assessments, both general and special, water charges
and sewer rents, whether or not then due or payable,
and all other normally proratable items, based upon
the latest assessments or actual invoices available
(should any such proration be inaccurate based upon
the actual tax xxxx or assessment when received, any
party hereto may demand and shall be entitled to
receive on demand, a payment from the other
correcting such inaccuracy);
(ii) any fees, taxes, impact fees, assessments,
delinquent or otherwise, attributable to a period
prior to the Closing Date;
(iii) any other land use charges attributable to any
period prior to the Closing Date;
(iv) one-half of all necessary State of Missouri,
county and municipal transfer, document stamp and/or
recording taxes incident to the transaction
contemplated in this Agreement normally attributable
to the grantor;
(v) one-half of the cost of any escrow fee and
charges of any escrow agent, regardless of whether or
not such escrow agent is also counsel for any party
hereto, the issuer of the Commitments or the agent of
such issuer; and
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(vi) the cost in excess of $5,000 of any endorsement
to or affirmative insurance obtained in connection
with the title insurance policies to be issued
pursuant to the Commitments (as defined in Section
8.9 of this Agreement), if such endorsement or
affirmative insurance is required in order for the
title insurance company issuing such policies to
delete any exception from coverage relating to any
encroachment onto and/or violation of an existing
easement and/or setback requirement.
On Stage shall pay the Purchase Price at Closing as follows: (x) $1,300,000
shall be paid by delivery of the $1,300,000 Subordinated Promissory Note and (y)
the remainder of the Purchase Price shall be paid by wire transfer of
immediately available funds pursuant to written wire instructions provided by
CRC no later than three business days prior to the Closing Date.
2.7 Allocation of the Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets as On Stage and the Selling Entities (in
consultation with BDO Xxxxxxx) shall agree in writing prior to the Closing. The
Selling Entities and On Stage shall prepare their respective Federal, state and
local tax returns employing such agreed allocation and shall not take a position
in any tax proceeding or otherwise that is inconsistent with such allocation.
The Selling Entities and On Stage shall give prompt notice to each other of the
commencement of any tax audit or the assertion of any proposed deficiency or
adjustment by any taxing authority or agency which challenges such allocation.
3. Closing.
3.1 Location; Date. The closing of the Transactions (the "Closing")
shall take place at the offices of Xxxxxx, Xxxxx and Xxxxxxx LLP, 0000 Xxx Xxxxx
Xxxxxx, Xxxxxxxxxxxx, XX 00000 at 10:00 A.M. local time on the later of October
29, 1998 or the third business day after the date on which the conditions set
forth in Sections 8 and 9 to be satisfied prior to the Closing have been
satisfied (or waived by the party entitled to the benefit thereof), or at such
other place, time or date as On Stage and CRC may agree.
3.2 Closing Deliveries. In connection with the completion of the
Transactions contemplated in Section 2, at the Closing;
(a) On Stage shall deliver or cause to be delivered to the
Selling Entities:
(i) the cash portion of the Purchase Price; and
(ii) such assumption agreements and other agreements,
documents and instruments as may be contemplated by this
Agreement and such other items as may be reasonably requested
by the Selling Entities to consummate the transactions
contemplated by this Agreement, each in form and substance
reasonably satisfactory to the Selling Entities.
11
(b) The Selling Entities shall deliver or cause to be
delivered to On Stage:
(i) such bills of sale and assignment, deeds and
assumption agreements as may be required to transfer each
Selling Entity's right, title and interest in and to the
Purchased Assets in form and substance reasonably satisfactory
to On Stage; and
(ii) such other agreements, documents and instruments
as may be con templated by this Agreement and such other items
as may be reasonably requested by On Stage to consummate the
transactions contemplated by this Agreement, each in form and
substance reasonably satisfactory to On Stage.
(c) On Stage shall deliver to the Selling Entities, and the
Selling Entities shall deliver to On Stage, the certificates, instruments and
agreements referred to in Section 9 and Section 8, respectively.
4. Representations and Warranties of the Selling Entities. The Selling Entities,
jointly and severally, hereby represent and warrant to On Stage as follows:
4.1 Corporate Status. Each Selling Entity is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and each is qualified to do business as
a foreign corporation and is in good standing in each jurisdiction where it is
required to be so qualified, except where the failure to be so qualified would
not have a Material Adverse Effect.
4.2 Authorization. Each Selling Entity has the requisite power and
authority to own its property and carry on the Business as currently conducted,
and to execute and deliver the Transaction Documents to which it is a party and
(subject only to the approval of the shareholders of CRC) to perform the
Transactions to be performed by it. Such execution, delivery and performance by
each Selling Entity has been duly authorized by all necessary action, except for
the approval of the shareholders of CRC. Each Transaction Document executed and
delivered by the Selling Entities as of the date hereof has been duly executed
and delivered by each Selling Entity and constitutes a valid and binding
obligation of each Selling Entity, enforceable against each Selling Entity in
accordance with its terms. Each Transaction Document to be executed and
delivered by a Selling Entity after the date hereof will have been duly executed
and delivered by the relevant Selling Entity and will constitute a valid and
binding obligation of such Selling Entity, enforceable against it in accordance
with its terms.
4.3 Consents and Approvals. Except for the consents specified in
Schedule 4.3 (together with the filing and approval set forth in clauses (i) and
(ii) below, the "Required Consents"), neither the execution nor delivery by each
Selling Entity of any Transaction Document to which it is a party, nor the
performance of the Transactions to be performed by it
12
thereunder, will require any filing, consent or approval, constitute a Default
or cause any payment obligation to arise under (a) any Law or Court Order to
which any Selling Entity is subject, (b) the Charter Documents or bylaws of any
Selling Entity or (c) any Contract, Permit or other document to which each
Selling Entity is a party or by which the Business or Purchased Assets may be
subject, except for (i) the filing by CRC of the Proxy Statement (as hereinafter
defined) and related proxy materials with the Commission in accordance with the
Exchange Act and the rules and regulations thereunder and (ii) the approval of
the shareholders of CRC.
4.4 Financial Statements. Schedule 4.4 includes correct and complete
copies of audited financial statements consisting of the balance sheets of the
Business as of September 30, 1996 and 1997 and the related statement of income
for the years then ended, all of which are audited by BDO Xxxxxxx (collectively,
the "Audited Financial Statements") and unaudited financial statements
consisting of the balance sheet of the Business as of June 30, 1998 and the
related statement of income for the nine-month period then ended, both of which
are reviewed by BDO Xxxxxxx (collectively, the "Interim Financial Statements"
and together with the Audited Financial Statements, the "Financial Statements").
The Financial Statements are in all material respects consistent with the books
and records of the Business and there are no material transactions required by
GAAP, applied on a consistent basis, to be recorded in accounting records that
have not been recorded in the accounting records underlying such Financial
Statements. The Financial Statements have been prepared in accordance with GAAP
consistently applied and present fairly the financial position and assets and
liabilities of the Business as of the dates thereof and the results of its
operations for the periods then ended, subject to normal year-end adjustments
and the absence of notes in the case of the Interim Financial Statements. There
is an allocation of costs to the Business from the Selling Entities, or from the
Business to the Selling Entities in the Audited Financial Statements. The
allocation of costs is reflected as a management fee in the statement of
operations and deficit. The Selling Entities warrant that there is no other
allocation of cost to the Business from the Selling Entities, or from the
Business to the Selling Entities. The balance sheet as of September 30, 1997
that is included in the Financial Statements is referred to herein as the
"Balance Sheet" and the date thereof is referred to as the "Balance Sheet Date."
The balance sheet as of June 30, 1998 that is included in the Financial
Statements is referred to herein as the "Interim Balance Sheet" and the date
thereof is referred to as the "Interim Balance Sheet Date." The Country Tonight
Theater in Branson, Missouri will produce $6 million total gross revenue for
calendar year 1998.
4.5 Title to Assets and Related Matters. The Selling Entities
collectively own and will transfer to On Stage at the Closing good, marketable
and indefeasible title to, or with respect to leased assets included in the
Purchased Assets, a valid leasehold interest in, subject to the terms and
conditions of such leases, all of the Purchased Assets, free and clear of all
Encumbrances other than Permitted Encumbrances. The use of the Purchased Assets
is not subject to any Encumbrances (other than Permitted Encumbrances), and such
use does not materially encroach on the property or rights of any other Person.
All Purchased Assets are in the possession or under the control of one or more
of the Selling Entities and consist of all of the Assets necessary to operate
the Business as currently, and since September 30, 1997, operated
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and which generated the revenues reflected in the Financial Statements. Except
as set forth on Schedule 4.5, all of the tangible personal property included in
the Purchased Assets (a) is in good working condition and repair, subject to
normal wear and tear, (b) is usable in the ordinary course of business and (c)
conforms in all material respects with all applicable Laws relating to its
construction, use and operation. Except for those items subject to the Personal
Property Leases, no Person other than the Selling Entities owns any vehicles,
equipment or other tangible assets located on the Real Property that are used by
the Selling Entities in the Business (other than immaterial items of personal
property owned by the employees of the Selling Entities) or that are necessary
for the operation of the Business as currently, and since September 30, 1997,
operated.
4.6 Real Property. Schedule 4.6 sets forth the complete legal
description of all real estate (including a description of how such real estate
is zoned) used in the operation of the Business as well as any other real estate
that is in the possession of or leased by each Selling Entity and the
improvements (including buildings and other structures) located on such real
estate (collectively, the "Real Property"), identifies which Real Property is
owned and which is leased, and lists any leases under which any such Real
Property is possessed by each Selling Entity or leased by each Selling Entity to
others (the "Real Estate Leases"). All of the buildings and structures included
in the Real Property are structurally sound, and all of the heating,
ventilating, air conditioning, plumbing, sprinkler, fire alarm, electrical and
drainage systems, elevators and roofs, and all other fixtures, equipment and
systems at or serving such Real Property are in good condition, repair and
working order (subject to normal wear and tear) and constitute all of the
systems, elevators, roofs, fixtures and equipment utilized by the Selling
Entities in the operation of the Business as currently, and since September 30,
1997, operated, and there is no condition that will result in the termination of
the present access from the Real Property to such utility services and other
facilities. No Selling Entity has received any written (or to the Knowledge of
any Selling Entity oral) notices, and no Selling Entity has reason to believe,
that any governmental body having jurisdiction over any Real Property intends to
exercise the power of expropriation or eminent domain or a similar power with
respect to all or any part of the Real Property. No Selling Entity has received
any written (or to the Knowledge of any Selling Entity oral) notices, from any
governmental body, and no Selling Entity has reason to believe, that any of the
Real Property or any improvements erected or situated thereon, or the uses
conducted thereon or therein, violate any Laws of any governmental body having
jurisdiction over such Real Property. No Selling Entity has received any written
(or to the Knowledge of any Selling Entity oral) notice from the holder of any
mortgage, from any insurance company which has issued a policy with respect to
any of the Real Property or from any board of fire underwriters (or other body
exercising similar functions) claiming any defects or deficiencies in any of the
Real Property or suggesting or requesting the performance of any repairs,
alterations or other work to any of the Real Property.
4.7 Certain Personal Property. The Selling Entities have delivered to
On Stage a complete fixed asset schedule, describing and specifying the location
of all items of tangible personal property that are included in the Interim
Balance Sheet. Except as listed on Schedule
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4.7, since the Interim Balance Sheet Date, no Selling Entity has (a) acquired
any items of tangible personal property that has, in any case, a carrying value
in excess of $10,000, or an aggregate carrying value in excess of $25,000 or (b)
disposed of (other than in the ordinary course of business) any items of
tangible personal property (other than Inventory) that have, in any case, an
initial carrying value in excess of $10,000, or an initial aggregate carrying
value in excess of $25,000.
4.8 Personal Property Leases. Schedule 4.8 lists all assets and
property (other than Real Property) that have been used in the operation of the
Business and that are possessed by a Selling Entity under an existing lease,
including all trucks, automobiles, machinery, equipment, office equipment,
furniture and computers, except for any lease under which the aggregate annual
payments are less than $1,000 (each, an "Immaterial Lease"). Schedule 4.8 also
lists the leases under which such assets and property listed on Schedule 4.8 are
possessed. All of such leases (excluding "Immaterial Leases") are referred to
herein as the "Personal Property Leases."
4.9 Inventory. All Inventory of each Selling Entity consists of items
useable or saleable in the ordinary course and is valued on each Selling
Entity's books and records at the lower of cost or fair market value. The
inventory records for the Selling Entities that have been delivered to On Stage
or made available for inspection by On Stage are materially accurate with
respect to the data contained therein.
4.10 Product Warranties and Price Guarantees. Schedule 4.10 sets forth
any outstanding warranties or price guarantees made by each Selling Entity.
4.11 Liabilities. Except as specified on Schedule 4.11, no Selling
Entity has any Liabilities with respect to the Business, and none of the
Purchased Assets are subject to any Liabilities, except (a) as specifically
disclosed on the Interim Balance Sheet, (b) Liabilities incurred in the ordinary
course since the Interim Balance Sheet Date, and (c) Liabilities under any
Contracts specifically disclosed (or not required to be disclosed because of the
term or amount involved) that were not required under GAAP to have been
specifically disclosed or reserved for in the Financial Statements.
4.12 Taxes. With respect to each Selling Entity and each member of any
affiliated group of a Selling Entity, within the meaning of section 1504 of the
Code, of which a Selling Entity is or has been a member (the Selling Entities
and each such other company referred to in this Section 4.12 as the "Company")
(a) except as described in Schedule 4.12, all reports, returns, statements
(including estimated reports, returns, or statements), and other similar filings
required to be filed on or before the Closing Date by the Company (the "Tax
Returns") with respect to any Taxes (as defined below) have been timely filed
with the appropriate governmental agencies in all jurisdictions in which such
Tax Returns are required to be filed, and all such Tax Returns correctly reflect
the liability of the Company for Taxes for the periods, properties, or events
covered thereby; (b) except as described in Schedule 4.12, all Taxes payable
with respect to the Tax Returns referred to in the preceding clause, and all
Taxes
15
accruable or otherwise attributable to events occurring prior to the Closing
Date, whether disputed or not, whether or not shown on any Tax Return, and
whether or not currently due or payable, will have been paid in full prior to
the Closing Date, or an adequate accrual in accordance with generally accepted
accounting principles has been provided with respect thereto on the Interim
Balance Sheet; (c) except as described in Schedule 4.12, the Company has no
knowledge of any unassessed Tax deficiencies or of any audits or investigations
pending or threatened against the Company with respect to any Taxes; (d) except
as described in Schedule 4.12, no Tax Returns of the Company have been examined
by the Internal Revenue Service, and any assessments with respect to such
returns have been fully paid; (e) except as described in Schedule 4.12, there is
in effect no extension for the filing of any Tax Return and the Company has not
extended or waived the application of any statute of limitations of any
jurisdiction regarding the assessment or collection of any Tax; (f) since
January 1, 1994, no claim has been made by any Tax authority in a jurisdiction
in which the Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction; (g) there are no liens for Taxes upon any asset
of the Company except for liens for current Taxes not yet due; (h) the Company
has timely made all deposits required by law to be made with respect to
employees' withholding and other payroll, employment, or other withholding
taxes, including the portions of such taxes imposed upon the Company.
For purposes of this Agreement, "Taxes" means any taxes,
duties, assessments, fees, levies, or similar governmental charges, together
with any interest, penalties, and additions to tax, imposed by any taxing
authority, wherever located (i.e., whether federal, state, local, municipal, or
foreign), including all net income, gross income, gross receipts, net receipts,
sales, use, transfer, franchise, privilege, profits, social security,
disability, withholding, payroll, unemployment, employment, excise, severance,
property, windfall profits, value added, ad valorem, occupation, or any other
similar governmental charge or imposition.
4.13 Subsidiaries. Except as disclosed on Schedule 4.13, no Selling
Entity owns in relation to the Business, directly or indirectly, any interest or
investment (whether equity or debt) in any corporation, partnership, business,
trust, joint venture or other legal entity.
4.14 Legal Proceedings and Compliance with Law.
(a) Except as disclosed on Schedule 4.14(a), there is no
Litigation that is pending or, to the Knowledge of a Selling Entity,
threatened against or related to a Selling Entity with respect to the
Business or the Purchased Assets. There has been no Default under any
Law applicable to the Purchased Assets or the Business, including any
Law relating to protection or quality of the environment, except for
any Defaults that have been cured, and no Selling Entity has received
any notices from any governmental entity regarding any alleged Default
or investigation under any written order, instruction or direction
pursuant to any Law except those that have been cured. Since January 1,
1994, there has been no Default with respect to any Court Order
applicable to a Selling Entity.
16
(b) Without limiting the generality of Section 4.14(a), except
as described on Schedule 4.14(b), to the Knowledge of the Selling
Entities there has not been any Environmental Condition (i) at any
premises at which the Business is currently conducted, (ii) at any
property owned, leased or operated at any time by a Selling Entity (or
any predecessor of a Selling Entity) or any Person controlled by any
Affiliate of a Selling Entity, or (iii) at any property at which wastes
have been deposited or disposed by or at the behest or direction of a
Selling Entity (or any predecessor of a Selling Entity) or any Person
controlled by any Affiliate of a Selling Entity, nor has any Selling
Entity received written notice of any such Environmental Condition or
any investigation, to determine whether any such Environmental
Condition exists. "Environmental Condition" means any condition or
circumstance, including the presence of Hazardous Substances, whether
created by a Selling Entity (or any predecessor of a Selling Entity) or
any third party, at or relating to any such property or premises that
would (x) require abatement or correction under an Environmental Law,
(y) give rise to any civil or criminal liability under an Environmental
Law or (z) create a public or private nuisance. "Environmental Law"
means all Laws and Court Orders relating to protection or quality of
the environment as well as any principles of common law under which a
Person may be held liable for the release or discharge of any materials
into the environment.
(c) Each Selling Entity has delivered to On Stage correct and
complete copies of all written reports, studies or assessments in the
possession or control of any Selling Entity that relate to any
Environmental Condition. No Selling Entity has Knowledge of any other
written reports, studies or assessments, whether in the possession or
control of a Selling Entity, that relate to any Environmental
Condition.
(d) Except in those cases where the failure would not have a
Material Adverse Effect, (i) each Selling Entity has obtained and is in
substantial compliance with all Permits, all of which are listed on
Schedule 4.14(d) along with their respective expiration dates, that are
required for the ownership of the Purchased Assets or operation of the
Business as currently operated, (ii) all of the Permits are currently
valid and in full force and (iii) each Selling Entity has filed such
timely and complete renewal applications as may be required with
respect to its respective Permits. No Selling Entity has Knowledge of
any threatened revocation, cancellation or withdrawal of a Permit.
4.15 Contracts. Schedule 4.15 lists each Contract of the following
types to which each Selling Entity is a party or by which it is bound relating
primarily to the Business or the Purchased Assets:
(a) Contracts with any present or former 5% stockholder,
director, officer, employee or consultant or with any Affiliate of a
Selling Entity;
17
(b) Contracts for the purchase of, or payment for, supplies or
products, or for the performance of services, from or by a third party,
in excess of $10,000 with respect to any one supplier or other party;
(c) Contracts to sell or supply products, Inventory or other
property to, or to perform services for, a third party, that involve an
amount in excess of $10,000 with respect to any one customer or other
party;
(d) Contracts to sell any product or provide any service to a
governmental or regulatory body;
(e) Contracts limiting or restraining any Selling Entity from
engaging or competing in any lines or business with any Person;
(f) Contracts with any customer providing for a volume refund,
retrospective price adjustment or price guarantee;
(g) Contracts to lease to, or to operate for, any other party
any asset that involves an amount in excess of $5,000 in any individual
case (other than Real Estate Leases and Personal Property Leases
identified on a Schedule);
(h) Any notes, debenture, bonds, conditional sale agreements,
equipment trust sale and lease-back and leasing agreements, letter of
credit agreements, reimbursement agreements, loan agreements or other
Contracts for the borrowing or lending of money (including loans to or
from officers, directors, shareholders or Affiliates of any Selling
Entity), or agreements or arrangements for a line of credit or for a
guarantee of, or other undertaking in connection with, the indebtedness
of any other Person;
(i) Contracts creating or recognizing any Encumbrances with
respect to any Assets;
(j) Contracts with distributors, manufacturers' sales
representatives or other sales agents;
(k) Contracts that relate in whole or in part to any Software,
technical assistance or other know-how or other Intellectual Property
right;
(l) Contracts for any capital expenditure or leasehold
improvement in excess of $5,000; and
(m) Any other Contracts (other than those that may be
terminated on not more than 30 days' notice without Liability and those
described in any of (a) through (l) above)
18
not made in the ordinary course of business or which are material to
the Business or the Assets.
4.16 No Selling Entity is in Default under any Contract. To the
Knowledge of the Selling Entities, no Selling Entity is in Default under any
Contract relating primarily to the Business or has received any communication
from, or given any communication to, any other party indicating that a Selling
Entity or such other party, as the case may be, is in Default under any such
Contract. To the Knowledge of the Selling Entities, none of the other parties to
any such Contract to which a Selling Entity is a party is in Default thereunder.
4.17 Insurance. Schedule 4.17 lists all policies or binders of
insurance held by or on behalf of each Selling Entity or relating to the
Business or any of the Purchased Assets, specifying with respect to each policy
the insurer, the type of insurance, the amount of the coverage, the insured, the
expiration date, the policy number and any pending claims thereunder.
4.18 Intellectual Property.
(a) Schedule 4.18 sets forth a correct and complete list and
description of all Intellectual Property and all Software owned by or
licensed to any Selling Entity and used, in whole or in part, directly
or indirectly in, and material to the Business, and indicates whether
such Intellectual Property and Software is owned or licensed by such
Selling Entity.
(b) Except as disclosed on Schedule 4.18: (i) the Selling
Entities own or possess adequate licenses or other valid rights to use
(without the making of any payment to others or the obligation to grant
rights to others in exchange) all of such Intellectual Property and
Software; (ii) the Intellectual Property and Software included in the
Purchased Assets constitute all such rights and property necessary to
conduct the Business in accordance with past practice and the rights to
which are being transferred to On Stage together with the other
Purchased Assets; (iii) no Selling Entity is in Default under any
Contract with respect to any of such Intellectual Property or Software;
(iv) the validity of such Intellectual Property and the rights of any
Selling Entity therein and to the Software has not been questioned in
any Litigation to which a Selling Entity is or was a party or in any
other written notice to a Selling Entity, nor, to the Knowledge of each
Selling Entity, is any such Litigation threatened; and (v) to the
Knowledge of each Selling Entity, the conduct of the Business does not
materially conflict with patent rights, licenses, trademark rights,
trade name rights, copyrights or other intellectual property rights of
others.
(c) Except as disclosed on Schedule 4.18, to the Knowledge of
each Selling Entity, no material use of any Intellectual Property or
Software included within the Purchased Assets has heretofore been, or
is now being, made by any Person other than a Selling Entity, except
for Software licensed to a Selling Entity under a third party license
19
agreement listed on Schedule 4.18. Except as disclosed on Schedule
4.18, to the Knowledge of each Selling Entity, there is no current, and
there has not since January 1, 1994 been any, infringement of any such
Intellectual Property or Software owned or licensed by a Selling Entity
or used in the Business. Except for interests being transferred
pursuant to this Agreement, no present or former director, officer,
employee or consultant of a Selling Entity or any Affiliate of a
Selling Entity has any interest, direct or indirect, in any of the
Intellectual Property or Software.
(d) To the Knowledge of each Selling Entity, (i) no
Confidential Information of a Selling Entity has been used, divulged or
appropriated for the benefit of any Person other than the Selling
Entities or otherwise to the detriment of any Selling Entity and (ii)
no employee or consultant of a Selling Entity is, or is currently
expected to be, in Default under any term of any employment Contract,
agreement or arrangement relating to the Intellectual Property, or any
confidentiality agreement or any other Contract or any restrictive
covenant relating to the Intellectual Property, or to the development
or exploitation thereof.
4.19 Employee Relations.
(a) Except as described on Schedule 4.19, no Selling Entity is
in relation to the Business (i) a party to or otherwise bound by any
collective bargaining or other type of union agreement, (ii) a party
to, involved in or, to the Knowledge of any Selling Entity, threatened
by, any labor dispute or unfair labor practice charge, or (iii)
currently negotiating any collective bargaining agreement, and no
Selling Entity has experienced any work stoppage during the last three
years in the operation of the Business as a result of a labor dispute.
Schedule 4.19 sets forth the names and current annual salary rates or
current hourly wages of all present employees of the Business.
(b) Each Selling Entity in the operation of the Business is in
material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and
hours, and is not engaged in any unfair labor practice. There are no
outstanding written claims against any Selling Entity (whether under
Law, contract, policy, or otherwise) asserted by or on behalf of any
present or former employee or job applicant of the Business on account
of or for (i) overtime pay, other than overtime pay for work done in
the current payroll period, (ii) wages or salary for any period other
than the current payroll period, (iii) any amount of vacation pay or
pay in lieu of vacation time off, other than vacation time off or pay
in lieu thereof earned in or in respect of the current fiscal year,
(iv) any amount of severance pay or similar benefits, (v) unemployment
insurance benefits, (vi) workers' compensation or disability benefits,
(vii) any violation of any statute, ordinance, order, rule or
regulation relating to plant closings, employment terminations or
layoffs, including employee retraining, (viii) any violation of any
statute, ordinance, order, rule or regulations relating to employee
"whistleblower" or "right-to-know" rights and protection, (ix) any
violation
20
of any statute, ordinance, order, rule or regulations relating to the
employment obligations of federal contractors or subcontractors or (x)
any violation of any Law relating to minimum wages or maximum hours of
work, and to the Knowledge of each Selling Entity no such claims have
been asserted. Since January 1, 1994, no Person (including any
governmental body) has asserted or threatened any claims against any
Selling Entity relating to the Business under or arising out of any Law
relating to discrimination or occupational safety in employment or
employment practices.
4.20 ERISA.
(a) Schedule 4.20(a) contains a complete list of all Benefit
Plans sponsored or maintained by the Selling Entities, or under which
the Selling Entities may be obligated. The Selling Entities do not have
any current or contingent liability with respect to any Benefit Plan
other than those listed on Schedule 4.20(a). For purposes of this
Section 4.20 and Section 6.10, the term "Selling Entity" shall include
any partnership or corporation that is a member of any controlled group
of partnerships or corporations (as defined in Section 414(b) of the
Code) that includes the Selling Entities, any trade or business
(whether or not incorporated) that is under common control (as defined
in Section 414(c) of the Code) with any Selling Entity, any
organization (whether or not incorporated) that is a member of an
affiliated service group (as defined in Section 414(m) of the Code)
that includes each Selling Entity and any other entity required to be
aggregated with any Selling Entity pursuant to the regulations issued
under Section 414(o) of the Code. Each Benefit Plan providing benefits
that are funded through a policy of insurance is indicated by the word
"insured" placed by the listing of the Benefit Plan on Schedule
4.20(a).
(b) The Selling Entities have delivered to On Stage, to the
extent applicable, (i) accurate and complete copies of all Benefit Plan
documents and all other documents relating thereto, including all
summary plan descriptions, summary annual reports and insurance
contracts, (ii) accurate and complete detailed summaries of all
unwritten Benefit Plans, (iii) accurate and complete copies of the most
recent financial statements and actuarial reports with respect to all
Benefit Plans for which financial statements or actuarial reports are
required or have been prepared and (iv) accurate and complete copies of
all annual reports for all Benefit Plans (for which annual reports are
required) prepared within the last three years.
(c) All Benefit Plans conform (and for the past six years have
conformed) to, and are being administered and operated (and for the
past six years have been administered and operated) in material
compliance with, the requirements of ERISA, the Code and all applicable
Laws. All returns, reports and disclosure statements required to be
made under ERISA and the Code with respect to all Benefit Plans have
been timely filed or delivered or an extension for the delayed filing
has been obtained from the Internal Revenue Service or the U.S.
Department of Labor. To the Knowledge of the
21
Selling Entities, there has not been any "prohibited transaction," as
such term is defined in Section 4975 of the Code or Section 406 of
ERISA involving any of the Benefit Plans, that could subject the
Selling Entities to any penalty or tax imposed under the Code or ERISA.
(d) Any Benefit Plan that is intended to be qualified under
Section 401(a) of the Code and exempt from tax under Section 501(a) of
the Code has been determined by the Internal Revenue Service to be so
qualified or an application for determination has been timely filed
(and is still pending) with the Internal Revenue Service, and such
determination remains in effect and has not been revoked. Copies of the
most recent Internal Revenue Service determination letters, if any,
applicable to the Benefit Plans have been delivered to On Stage.
Nothing has occurred since the date of any such determination (if
received) that would adversely affect such qualification or exemption.
(e) No Selling Entity sponsors or contributes to, and has not
at any time sponsored or contributed to, a defined benefit plan subject
to Title IV of ERISA, and no Selling Entity has incurred any liability
under Title IV of ERISA. No Selling Entity has a current or contingent
obligation to contribute to any multiemployer plan (as defined in
Section 3(37) of ERISA), nor has any Selling Entity ever had any
obligation to contribute to a multiemployer plan.
(f) There are no pending or, to the Knowledge of each Selling
Entity, threatened claims by or on behalf of any Benefit Plans, or by
or on behalf of any participants or beneficiaries of any Benefit Plans
or other persons, alleging any breach of fiduciary duty on the part of
any Selling Entity or any of its officers, directors or employees under
ERISA or any applicable Law, or claiming benefit payments other than
those made in the ordinary operation of such plans, nor is there, to
the Knowledge of each Selling Entity, any basis for any such claim. To
the Knowledge of each Selling Entity, the Benefit Plans are not the
subject of any investigation, audit or action by the Internal Revenue
Service, the U.S. Department of Labor or the Pension Benefit Guaranty
Corporation ("PBGC"). Except as disclosed on Schedule 4.20(f), no
Selling Entity has made a plan or commitment, whether or not legally
binding, to create any additional Benefit Plan or to modify or change
any existing Benefit Plan.
(g) Each Selling Entity has made all required contributions
under its Benefit Plan on a timely basis, or such contributions are
properly accrued on the Financial Statements.
(h) There have been no accumulated funding deficiencies (as
defined in Section 412 of the Code or Section 302 of ERISA) with
respect to any Benefit Plan and no request for a waiver from the
Internal Revenue Service with respect to any minimum funding
requirement under Section 412 of the Code. No Selling Entity has
incurred any liability for any excise, income or other taxes or
penalties with respect to any Benefit
22
Plan, and no event has occurred and no circumstance exists or has
existed that could give rise to any such liability.
(i) The execution of and performance of the transactions
contemplated by this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) result in any
payment, severance compensation, acceleration, vesting or increase in
benefits with respect to any employee or former employee of a Selling
Entity, and no compensation or benefits to be provided to such
employees or former employees under any Benefit Plan or other agreement
in effect as of the Closing will be considered an "excess parachute
payment" under Section 280G of the Code.
(j) With respect to any Benefit Plan that is an employee
welfare benefit plan (within the meaning of Section 3(1) of ERISA) (a
"Welfare Plan"), (i) each Welfare Plan for which contributions are
claimed as deductions under any provision of the Code is in compliance
with all applicable requirements pertaining to such deduction, (ii)
with respect to any welfare benefit fund (within the meaning of Section
419 of the Code) related to a Welfare Plan, there is no disqualified
benefit (within the meaning of Section 4976(b) of the Code) that would
result in the imposition of a tax under Section 4976(a) of the Code,
(iii) any Benefit Plan that is a group health plan (within the meaning
of Section 4980B(g)(2) of the Code) complies, and in each and every
case has complied, with all of the requirements of Section 4980B of the
Code, ERISA, Title XXII of the Public Health Service Act, the
applicable provisions of the Social Security Act and other applicable
laws, (iv) all Welfare Plans may be amended or terminated by a Selling
Entity at any time on or after the Closing, and (v) no Welfare Plan
provides health or other benefits after an employee's or former
employee's retirement or other termination of employment except as
required by Section 4980B of the Code.
(k) All persons classified by a Selling Entity as independent
contractors satisfy and have satisfied the requirements of applicable
law to be so classified, each Selling Entity has fully and accurately
reported their compensation on IRS Forms 1099 when required to do so,
and no Selling Entity has any obligations to provide benefits with
respect to such persons under Benefit Plans or otherwise.
4.21 Absence of Certain Changes. Except as contemplated by this
Agreement, since the Interim Balance Sheet Date, except as mutually agreed, the
Business has been conducted in the ordinary course and there has not been with
respect to any Selling Entity:
(a) any material adverse change in the Business or its assets
or liabilities;
(b) any increase in the compensation payable or to become
payable to any employee or agent of the Business, except for increases
for non-officer employees made in the ordinary course of business, nor
any other change in any employment or consulting arrangement of the
Business;
23
(c) any sale, assignment or transfer of any material assets of
the Business, or any additions to or transactions involving any
material assets of the Business, other than those made in the ordinary
course of business;
(d) any change in the accounting policies followed with
respect to the Business or the method of applying such principles;
(e) any capital expenditure commitment of the Business
involving in any individual case, or series of related cases, more than
(i) $10,000 or (ii) an amount that would cause the sum of all such
capital expenditure commitments to exceed $25,000; or
(f) any other transaction involving a development affecting
the Business or the Purchased Assets outside the ordinary course of
business consistent with past practice.
4.22 Customers. Each Selling Entity has used its reasonable business
efforts to maintain and does currently maintain, good working relationships with
all of its tour operators and ticketing receptives (collectively, "Customers").
Schedule 4.22 contains a list of the names of each of the five Customers that,
for the six months ended June 30, 1998 were the largest dollar volume Customers
of each Selling Entity. Except as specified on Schedule 4.22, none of such
Customers has given any Selling Entity written (or to the Knowledge of any
Selling Entity oral) notice terminating, canceling or threatening to terminate
or cancel any Contract or relationship with a Selling Entity.
4.23 Finder's Fees. No Person has been retained by the Selling Entities
that is or will be entitled to any commission or finder's or similar fee in
connection with the Transactions.
4.24 Additional Information. Schedule 4.24 accurately sets forth all
names under which each Selling Entity has conducted any business or which it has
otherwise used at any time during the past five years.
4.25 Transactions with Affiliates. Except as set forth on Schedule
4.25, no Affiliate of any Selling Entity owns or has a controlling ownership
interest in any corporation or other entity (other than another Selling Entity)
that is a party to any Contract with respect to the Purchased Assets or the
Business.
4.26 Full Disclosure. There are and will be no materially misleading
statements in any of the representations and warranties made by each Selling
Entity in this Agreement (including the Schedules and Exhibits attached hereto)
or any other Transaction Document or in any of the documents, certificates and
instruments delivered or to be delivered by each Selling Entity pursuant to this
Agreement and no Selling Entity has omitted to state any fact necessary to make
statements made herein or therein not materially misleading. There is no fact
known to any Selling Entity that has specific application to the Business (other
than general economic or
24
industry conditions) and that materially adversely affects or, as far as the
Selling Entities reasonably foresee, materially threatens, the assets, business,
prospects, financial condition, or results of operations of the Business that
has not been set forth in this Agreement or the Schedules hereto.
5. Representations and Warranties of On Stage. On Stage hereby represents and
warrants to each Selling Entity as follows:
5.1 Corporate Status. On Stage is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada. On Stage
has the requisite power and authority to execute and deliver the Transaction
Documents to which it is a party and to perform the Transactions to be performed
by it thereunder, and such execution, delivery and performance by it have been
duly authorized by all necessary corporate action.
5.2 Authorization. On Stage has the requisite power and authority to
execute and deliver the Transaction Documents to which it is a party and to
perform the Transactions to be performed by it. Such execution, delivery and
performance by On Stage has been duly authorized by all necessary action. Each
Transaction Document executed and delivered by On Stage as of the date hereof
has been duly executed and delivered by On Stage and constitutes a valid and
binding obligation of On Stage, enforceable against On Stage in accordance with
its terms. Each Transaction Document to be executed and delivered by On Stage
after the date hereof will have been duly executed and delivered by On Stage and
will constitute a valid and binding obligation of On Stage, enforceable against
it in accordance with its terms.
5.3 Consents and Approvals. Neither the execution and delivery by On
Stage of the Transaction Documents to which it is a party, nor the performance
of the Transactions to be performed by it thereunder, will require any filing,
consent or approval or constitute a Default under (a) any Law or Court Order to
which it is subject, (b) its Charter Documents or bylaws or (c) any Contract,
Permit or other document to which it is a party or by which its properties or
other assets may be subject.
5.4 Capital Stock Ownership. The total authorized capital stock of On
Stage consists of 25,000,000 shares of common stock, par value $.01 per share
(of which approximately 7,397,350 shares were issued and outstanding as of July
1, 1998), and 1,000,000 shares of preferred stock, par value $.01 per share (of
which no shares are outstanding). As of April 21, 1998, On Stage had outstanding
options and warrants to purchase 3,354,820 shares of its common stock and no
shares of its preferred stock.
5.5 Finder's Fees. No Person retained by On Stage is or will be
entitled to any commission or finder's or similar fee in connection with the
Transactions.
5.6 Proxy Statement. The information supplied by On Stage for inclusion
in the Proxy Statement shall not, at the time the Proxy Statement is first
mailed to shareholders, or at
25
the time of the Shareholders Meeting or the Closing, contain any statement
which, at such time and in light of the circumstances under which it was made,
is false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made in the Proxy
Statement not false or misleading or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Shareholders Meeting which has become false or
misleading. If at any time prior to the Closing any event relating to On Stage
or any Affiliate of On Stage should be discovered by On Stage which should be
set forth in a supplement to the Proxy Statement, On Stage shall promptly inform
CRC.
6. Certain Agreements.
6.1 Access. Between the date of this Agreement and the Closing Date,
the Selling Entities shall (a) give On Stage and any Person who is considering
providing financing to On Stage to finance any portion of the Purchase Price,
and their respective authorized representatives and legal counsel, reasonable
access to all properties, books, Contracts, Assets and records of each Selling
Entity relating to the Business or the Purchased Assets, (b) permit On Stage to
make inspections thereof, and (c) cause its officers and its advisors to furnish
On Stage with such financial and operating data and other information with
respect to the Business of each Selling Entity and to discuss with On Stage and
its authorized representatives and legal counsel the affairs of the Selling
Entities relating to the Business or the Purchased Assets, all as On Stage may
from time to time reasonably request.
6.2 Shareholder Vote; Proxy Statement.
(a) As promptly as practicable after the date hereof, CRC
shall take all action necessary in accordance with Rules 14a-1 et seq.
of the Exchange Act, the Minnesota Business Corporation Act, the rules
of the National Association of Securities Dealers, Inc. and CRC's
Charter Documents to call, give notice of, convene and hold the
Shareholders Meeting as promptly as practicable (unless such date shall
be delayed due to circumstances reasonably beyond the control of CRC)
to consider and vote upon the approval of this Agreement and the
Transactions contemplated hereby and for such other purposes as may be
necessary or desirable. Subject to the fiduciary duties of the Board of
Directors under applicable law, as determined by such directors in good
faith after consultation with and based upon the advice of outside
legal counsel, the Board of Directors of CRC shall use its reasonable
best efforts to solicit and secure from its shareholders such approval
of this Agreement and the Transactions contemplated hereby, which
efforts may include soliciting shareholder proxies therefor and to
advise On Stage upon its request, from time to time, as to the status
of the shareholder vote then tabulated.
(b) As promptly as practicable after the date hereof, CRC
shall prepare and file with the Commission preliminary proxy materials
of CRC under the Exchange Act with respect to this Agreement and the
Transactions contemplated hereby and will
26
thereafter use its reasonable best efforts to respond to any comments
of the Commission with respect thereto and to cause the Proxy Statement
and other proxy materials to be mailed to CRC's shareholders as
promptly as practicable in compliance with the rules and regulations
under the Exchange Act. The Proxy Statement shall include the
unqualified recommendation of CRC's Board of Directors that CRC's
shareholders vote in favor of the approval of this Agreement and the
Transactions contemplated hereby, unless otherwise necessary due to the
applicable fiduciary duties of the directors of CRC, as determined by
such directors in good faith after consultation with and based upon the
advice of independent legal counsel.
(c) CRC and On Stage shall cooperate with each other in the
preparation of (and On Stage shall provide to CRC all information
necessary in order to prepare) the Proxy Statement and On Stage shall
provide promptly to CRC any information that On Stage may obtain that
could necessitate amending such document.
(d) CRC will notify On Stage promptly of the receipt of any
comments from the Commission or its staff and of any requests by the
Commission or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply On Stage with
copies of all correspondence between CRC or any of its representatives
on the one hand and the Commission or its staff on the other hand with
respect thereto. If at any time prior to the Closing, any material
event shall occur that is required to be set forth in an amendment of,
or a supplement to, the Proxy Statement, CRC shall promptly prepare and
file such amendment or supplement and distribute such amendment or
supplement as required by applicable law, including mailing such
supplement or amendment to CRC's shareholders.
(e) The information provided and to be provided by CRC and On
Stage for use in the Proxy Statement shall at all times prior to the
Closing be true and correct in all material respects and shall not omit
to state any material fact required to be stated therein or necessary
in order to make such information not materially false or misleading,
and CRC and On Stage each agree to promptly correct any such
information provided by it for use in the Proxy Statement that shall
have become false or misleading. The Proxy Statement, when filed with
the Commission shall comply as to form in all material respects with
all applicable requirements of law.
6.3 No Solicitation.
(a) Without the prior written consent of On Stage, from and
after the date hereof, each Selling Entity will not, and will not
authorize or permit any of its subsidiaries or any officers, directors,
employees, financial advisors, agents or other representatives of any
of the foregoing ("Representatives") to, directly or indirectly, (i)
solicit, initiate or encourage (including by way of furnishing
information) or take any other action to facilitate knowingly any
inquiries or the making of any proposal which
27
constitutes or may reasonably be expected to lead to an Acquisition
Proposal (hereinafter defined) from any person; (ii) engage in any
discussion or negotiations relating to any Acquisition Proposal; or
(iii) enter into any agreement with respect to, agree to, approve or
recommend any Acquisition Proposal; provided, however, that
notwithstanding any other provision hereof, CRC may, (A) at any time
prior to the time CRC's shareholders shall have voted to approve this
Agreement and the Transactions contemplated hereby engage in
discussions or negotiations with a third party (and may furnish such
third party information concerning the Business and its properties and
assets) who (without any solicitation, initiation, encouragement,
discussion or negotiation, directly or indirectly, by or with any
Selling Entity or the Representatives after the date hereof) makes an
unsolicited bona fide written Acquisition Proposal if, and only to the
extent that, (1) the third party has first made an Acquisition Proposal
that CRC's Board of Directors reasonably and in good faith believes is
financially superior to the Transactions contemplated by this Agreement
and has demonstrated that the funds necessary for the Acquisition
Proposal are reasonably likely to be available (as determined in good
faith in each case by CRC's Board of Directors after consultation with
its financial advisors) and which Acquisition Proposal accomplishes at
least the same long-term strategic benefits afforded to the Selling
Entities and CRC's shareholders by this Agreement and the Transactions
contemplated hereby (such an Acquisition Proposal, a "Superior
Proposal"), and CRC's Board of Directors shall conclude in good faith,
after considering applicable provisions of state law, on the basis of
advice of outside legal counsel that such action is necessary for the
Board of Directors to act in a manner consistent with its fiduciary
duties under applicable law, and (2) prior to furnishing such
information to or entering into discussions or negotiations with such
person or entity, CRC receives from such person or entity an executed
confidentiality agreement in form and substance identical to that
certain Mutual Nondisclosure Agreement between On Stage and CRC dated
February, 1998, and (3) CRC shall have fully complied with this Section
6.3; (B) comply with Rule 14e-2 promulgated under the Exchange Act with
regard to a tender or exchange offer; and/or (C) accept a Superior
Proposal from a third party, provided CRC terminates this Agreement
pursuant to Section 11.1(i). As used herein, "Acquisition Proposal"
means a proposal or offer for, or other business combination involving,
a substantial portion of the assets of the Business whether directly or
indirectly through a tender or exchange offer, merger, consolidation or
other business combination involving CRC or any other Selling Entity or
any proposal to acquire in any manner a substantial equity interest in,
or a substantial portion of the assets of, CRC or any other Selling
Entity.
(b) Each Selling Entity shall immediately cease and terminate
any existing solicitation, initiation, encouragement, activity,
discussion or negotiation with any parties conducted heretofore by any
Selling Entity or their Representatives with respect to the foregoing
and shall promptly request the return of all confidential or
proprietary information of the Business furnished to any of such
parties. CRC shall notify On Stage orally and in writing of any such
inquiries, offers or proposals (including the terms and conditions of
any such proposal and the identity of the person making it), within 24
hours
28
of the receipt thereof, shall keep On Stage informed of the status and
details of any such inquiry, offer or proposal, and shall give On Stage
at least two business days prior written notice of (i) any meeting of
the Board of Directors of CRC to take any action with respect to an
Acquisition Proposal or to withdrawing or modifying, in a manner
adverse to On Stage, its recommendation to CRC's shareholders in favor
of approval of this Agreement and the Transactions contemplated hereby,
and (ii) any agreement to be entered into with any person making such
inquiry, offer or proposal.
(c) Prior to acceptance of a Superior Proposal, CRC shall, and
shall cause its financial and legal advisors to, negotiate in good
faith with On Stage, for a period of not less than two business days,
to make such changes to the terms and conditions of this Agreement as
(i) would enable the Selling Entities to proceed with the Transactions
contemplated hereby and (ii) are consistent with the fiduciary duties
of CRC's Board of Directors under applicable law.
(d) During the period from the date of this Agreement through
the Closing, each Selling Entity shall not terminate, amend, modify or
waive any provision of any confidentiality or standstill agreement to
which it is a party. During such period, each Selling Entity shall
enforce, to the fullest extent permitted under applicable law, the
provisions of any such agreement, including by obtaining injunctions to
prevent any breaches of such agreements and to enforce specifically the
terms and provisions thereof in any court of the United States of
America or of any state having jurisdiction.
6.4 Update Schedules. Between the date hereof and the Closing Date,
each Selling Entity shall promptly disclose to On Stage in writing any
information set forth in the Schedules that is no longer complete, true or
applicable and any information of the nature of that set forth in the Schedules
that arises after the date hereof and that would have been required to be
included in the Schedules if such information had been obtained on the date of
delivery thereof.
6.5 Financial Information. Until the Closing, the Selling Entities
shall provide On Stage, as soon as practicable but in no event no later than 20
days after the end of each month, with an unaudited consolidated balance sheet
of the Business and the related consolidated statement of income of the Business
as of and for the month then ended, prepared on the same basis as the Interim
Financial Statements referred to in Section 4.4, and certified as such by the
chief financial officer of each Selling Entity.
6.6 Restrictive Covenants.
(a) Each Selling Entity covenants that for the period ending
four years after the Closing Date, it will not, directly or indirectly, own,
manage, operate, join, control, finance or participate in the ownership,
management, operation, control or financing of, or be connected as a partner,
principal, agent, representative, consultant or otherwise with or use or permit
its name to be used in connection with, any business or enterprise engaged
directly or indirectly in
29
competition with the business conducted by On Stage and its Affiliates,
including any business involving a live stage production or the Business
(together, the "Restricted Business"), within any portion of the United States,
Canada or Western Europe. Nothing in this Section 6.6(a) to the contrary,
however, shall restrict the performance of the Performance Contract in
accordance with the terms thereof. Furthermore, notwithstanding the foregoing,
the Selling Entities may engage in the Restricted Business in casinos owned and
operated by CRC or its Affiliates, provided that the Selling Entities comply
with Section 6.13, that the Restricted Business in such casinos is not similar
to the Country Tonite business and that the Restricted Business in such casinos
is not located within 100 miles of either Pigeon Forge, Tennessee or Branson,
Missouri or any other locations where there is a Country Tonite business. It is
recognized by On Stage, and each Selling Entity, that the Restricted Business is
and is expected to continue to be conducted throughout the United States, Canada
and Western Europe and that a more narrow geographical limitation of any nature
on this non-competition covenant (and the non-solicitation covenant set forth in
Section 6.6(b)) are therefore not appropriate. The foregoing restriction shall
not be construed to prohibit the ownership by any Selling Entity of a passive
investment of not more than five percent (5%) of any class of securities of any
corporation which is engaged in any of the foregoing businesses and which is
listed on a recognized securities exchange.
(b) No Selling Entity shall, during the period ending two
years after the Closing Date, either directly or indirectly, (i) with respect to
the activities prohibited by Section 6.6(a), call on or solicit any Person who
or which within the past two years has been a Customer with respect to the
Restricted Business or (ii) solicit the employment of any Person who is employed
by On Stage or any Affiliate of On Stage during such period on a full or
part-time basis (except after any such Person's employment has been terminated
by On Stage or any such Affiliate).
(c) Each Selling Entity acknowledges that Confidential
Information is a valuable and unique asset and agrees that no Selling Entity
shall disclose any Confidential Information after the Closing Date to any Person
for any reason whatsoever, unless such information (i) is in the public domain
through no wrongful act of any such Person, (ii) has been rightfully received
from a third party without restriction and without breach of this Agreement or
(iii) is required by law to be disclosed.
(d) Each Selling Entity acknowledges that the restrictions
contained in this Section 6.6 are reasonable and necessary to protect the
legitimate interests of On Stage and that any violation will result in
irreparable injury to On Stage. On Stage shall be entitled to preliminary and
permanent injunctive relief, without the necessity of proving actual damages or
posting any bond, as well as an equitable accounting of all earnings, profits
and other benefits arising from any violation of this Section 6.6, which rights
shall be cumulative and in addition to any other rights or remedies to which On
Stage may be entitled. In the event that any of the provisions of this Section
6.6 should ever be adjudicated to exceed the time, geographic, product or
service, or other limitations permitted by applicable law in any jurisdiction,
then such
30
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic, product or service, or other limitations permitted by applicable
law.
(e) On Stage and each Selling Entity intend to and do hereby
confer jurisdiction to enforce the covenants set forth in this Section 6.6 upon
the courts of any jurisdiction within the geographical scope of such covenants.
In addition to Section 14 and not in limitation thereof, if the courts of any
one or more of such jurisdictions hold such covenants unenforceable in whole or
in part, it is the intention of On Stage and each Selling Entity that such
determination not bar or in any way adversely affect the right of On Stage and
its Affiliates to equitable relief and remedies hereunder in courts of any other
jurisdiction as to breaches or violations of this Section 6.6, such covenants
being, for this purpose, severable into diverse and independent covenants.
6.7 Required Consents, Regulatory and other Approvals. Subject to the
fiduciary duties of CRC's Board of Directors, as determined by such directors in
good faith after consultation with and based upon the advice of outside legal
counsel, the Selling Entities shall (a) take all commercially reasonable steps
necessary or desirable, and proceed diligently and in good faith and use all
commercially reasonable efforts, as promptly as practicable to obtain the
Required Consents, approvals or actions of, to make all filings with and to give
all notices to governmental or regulatory authorities or any other Person
required of the Selling Entities to consummate the transactions contemplated
hereby and by the Transaction Documents, (b) provide such other information and
communications to such governmental or regulatory authorities or other Persons
as On Stage or such governmental or regulatory authorities or other Persons may
reasonably request in connection therewith and (c) cooperate with On Stage as
promptly as practicable in obtaining the Required Consents, approvals or actions
of, making all filings with and giving all notices to governmental or regulatory
authorities or other Persons required of On Stage to consummate the transactions
contemplated hereby and by the Transaction Documents. The Selling Entities will
provide prompt notification to On Stage when any Required Consent, approval,
action, filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise On Stage of any communications
(and, unless precluded by Law, provide copies of any such communications that
are in writing) with any governmental or regulatory authority or other Person
regarding any of the transactions contemplated by this Agreement or any of the
Transaction Documents.
6.8 Publicity. Neither any Selling Entity nor On Stage, nor any
affiliates which they respectively control, shall issue or cause the publication
of any press release or other public statement or announcement with respect to
this Agreement or the Transactions contemplated hereby without the prior
consultation of the other parties hereto, except as may be required by law or by
obligations pursuant to any listing agreement with the Nasdaq SmallCap and the
Nasdaq National Market.
31
6.9 Satisfaction of Liabilities. Each Selling Entity shall, in the
ordinary course of business, fully satisfy or cause to be satisfied all third
party Liabilities and obligations of any Selling Entity relating to the Business
which are not Assumed Liabilities.
6.10 Employee Benefit Matters. On Stage shall have no responsibility,
liability or other obligations with respect to any Benefit Plans of the Selling
Entities, and the Selling Entities shall be fully responsible therefor.
6.11 Financing. On Stage will use reasonable commercial efforts to
enter into definitive agreements providing for the financing of On Stage's
acquisition of the Business hereunder, containing terms satisfactory to On Stage
in its sole discretion, and to obtain on the Closing Date the financing
contemplated by such definitive financing agreements. From time to time, upon
CRC's request, On Stage shall advise CRC as to the status of its efforts to
obtain such financing.
6.12 Business Financial Statements.
(a) On Stage and CRC have engaged BDO Xxxxxxx to prepare in
accordance with GAAP (i) an audited consolidated balance sheet of the
Business as of December 31, 1996 and 1997 and audited consolidated
income statements and statements of cash flows for the 12-month periods
then ended and (ii) after the Closing, a statement of net Purchased
Assets and the Assumed Liabilities as of the Closing Date. On Stage and
CRC shall each pay BDO Xxxxxxx one-half of its fees and expenses in
connection with the preparation of such financial statements.
(b) After the Closing, each Selling Entity shall provide to On
Stage and its accountants and other representatives reasonable access
to accounting and other books and records of the Selling Entities and
personnel at the Selling Entities to permit the preparation of the
interim unaudited 1998 financial statements of the Business required to
be filed by On Stage under the Exchange Act.
6.13 Right of First Negotiation. Within five years of the Closing Date,
CRC shall promptly notify On Stage in writing in the event that CRC or any of
its Affiliates desires to provide live entertainment in any venue owned, leased
or operated by any of the Selling Entities, or any Affiliates thereof. For the
seven days following receipt of such notification by On Stage, the Selling
Entities shall undertake in good faith, exclusively with On Stage, to negotiate
an agreement for On Stage or its Affiliates to provide such live entertainment.
After the expiration of such seven day period, in the event that the material
terms of an agreement for the provision of such live entertainment have not been
agreed to in principle between On Stage or its relevant Affiliate and the
relevant Selling Entity, such Selling Entity shall thereafter be free to engage
in negotiations for the provision of such live entertainment with On Stage or
any third party, or to produce such live entertainment itself.
32
6.14 Employment and Employment Benefits.
(a) On Stage shall offer full-time employment to all employees
of any Selling Entity who are employed in the Business on a full-time
basis as of the Closing and (except as required by law) who are not
then absent due to serious bodily injury, long-term sickness or
disability, layoff or leave of absence. Such employment shall be at
will and not at less than the current cash compensation level of each
such employee. Such employees who accept such offered employment are
herein collectively referred to as the "Transferred Employees." On
Stage shall afford to all Transferred Employees credit for all of their
years of employment with any Selling Entity in the determination of
vesting and other rights under On Stage's benefits programs, including
vacation time based on employment through the Closing Date, as
applicable. Each Selling Entity shall be responsible for, and hold On
Stage harmless against, any severance payments or other obligations
(including without limitation any liability for wrongful discharge)
that may be due by reason of termination of employment of any employees
of any Selling Entity who are not Transferred Employees, whether or not
such termination occurred before or after the Closing. On Stage shall
be responsible for, and hold each Selling Entity harmless against, any
severance payments that may be due by reason of termination of
employment of Transferred Employees by On Stage at any time after the
Closing. CRC shall compensate each Transferred Employee on or before
the Closing Date for all 1998 unused vacation time, discretionary time
off and attendance bonuses.
(b) With respect to On Stage's benefit programs, On Stage
agrees to waive for all Transferred Employees and their eligible
dependants (a) any eligibility waiting periods; and (b) any
pre-existing conditions and actively at work exclusions except that On
Stage may require any Transferred Employee or eligible dependent who,
as of the Closing Date, is then in the process of satisfying any
similar exclusions or waiting periods under any Selling Entity's
benefits programs to fully satisfy the balance of the applicable time
period for such exclusions or waiting period under On Stage's benefit
programs.
(c) Nothing contained in the Agreement shall confer any rights
or remedies upon any employees or consultants of any Selling Entity as
a third party beneficiary. On Stage and each Selling Entity expressly
disclaim any and all liability to any such third party arising out of
this Agreement.
7. Conduct of the Business Prior to the Closing.
7.1 Operation in Ordinary Course. Between the date of this Agreement
and the Closing Date, each Selling Entity shall conduct the Business in all
material respects in the ordinary course and use commercially reasonable efforts
to maintain the good will of all current business relationships.
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7.2 Business Organization. Between the date of this Agreement and the
Closing Date, each Selling Entity shall use commercially reasonable efforts to
preserve substantially intact its respective business organization and keep
available the services of each of its present officers and employees.
7.3 Corporate Organization. Between the date of this Agreement and the
Closing Date, no Selling Entity shall amend its Charter Document or bylaws in a
manner that adversely effects any of the Transactions, if applicable, and shall
not:
(a) be party to any merger, consolidation or other business
combination; or
(b) sell, lease, license or otherwise dispose of any of its
Assets (including rights with respect to the Intellectual Property),
except in the ordinary course of business.
7.4 Business Restrictions. Between the date of this Agreement and the
Closing Date, except as mutually agreed, no Selling Entity shall in relation to
the Business, without the prior written consent of On Stage:
(a) acquire or dispose of any of the Assets, other than
Inventory in the ordinary course of business consistent with past
practices;
(b) except in the ordinary course of business, increase in any
manner the compensation of any director or officer or increase in any
manner the compensation of any class of employees;
(c) create or materially modify any bonus, deferred
compensation, pension, profit sharing, retirement, insurance, stock
purchase, stock option, or other fringe benefit plan, arrangement or
practice or any other employee benefit plan;
(d) enter into, amend, modify, terminate (partially or
completely), grant any waiver under or give any consent with respect to
any Contract;
(e) violate, breach or default under, in any material respect,
or take or fail to take any action that (with or without notice or
lapse of time or both) would constitute a material violation or breach
of, or default under any term or provision of any Contract or any
Permit;
(f) engage in any transaction with respect to the Business
with any officer, director, Affiliate or associate of any Selling
Entity or any associate of any such officer, director or Affiliate;
(g) enter into any agreement that materially restricts it from
carrying on the Business;
34
(h) cancel any material debts of others or waive any material
claims or rights;
(i) act so as to, or omit from taking any action that would,
cause any of the representations and warranties in Section 4 to be
inaccurate in any material respect; or
(j) enter into any Contract to do or engage in any of the
foregoing.
8. Conditions Precedent to Obligations of On Stage.
All obligations of On Stage to consummate the Transactions are subject
to the satisfaction (or waiver by On Stage) prior thereto of each of the
following conditions:
8.1 Representations and Warranties. The representations and warranties
of the Selling Entities set forth in this Agreement shall be true and correct in
all respects on the date hereof and (except to the extent such representations
and warranties speak as of an earlier date) shall also be true and correct in
all material respects (or, in the case of representations and warranties
qualified by materiality, shall also be true and correct in all respects) on and
as of the Closing Date with the same force and effect as if made on and as of
the Closing Date.
8.2 Agreements, Conditions and Covenants. The Selling Entities shall
have performed or complied with all agreements, conditions and covenants
required by this Agreement to be performed or complied with them on or before
the Closing Date.
8.3 CRC Shareholder Approval. The shareholders of CRC shall have
approved this Agreement and the Transactions contemplated hereby.
8.4 Officers' Certificate. On Stage shall have received a certificate
of an officer of each Selling Entity to the effect set forth in Sections 8.2 and
8.3.
8.5 Required Consents and Approvals. All Required Consents, approvals
and actions of, filings with and notices to, any governmental or regulatory
authority necessary to permit On Stage and the Selling Entities to perform their
obligations under this Agreement and to consummate the transactions contemplated
hereby and thereby (and to permit On Stage to operate the Business after the
Closing) (a) shall have been duly obtained, made or given, (b) shall be in form
and substance reasonably satisfactory to On Stage, (c) shall not be subject to
the satisfaction of any condition that has not been satisfied or waived and (d)
shall be in full force and effect, and all terminations or expirations of
waiting periods imposed by any governmental or regulatory authority necessary
for the consummation of the transactions contemplated by this Agreement and the
Transaction Documents shall have occurred.
8.6 Third Party Consents. All consents (or in lieu thereof waivers) to
the performance by On Stage and the Selling Entities of their obligations under
this Agreement or to the consummation of the transaction contemplated hereby as
are required under any Contract to
35
which On Stage or the Selling Entities are a party or by which any of their
respective Assets are bound (a) shall have been obtained, (b) shall be in form
and substance reasonably satisfactory to On Stage, (c) shall not be subject to
the satisfaction of any condition that has not been satisfied or waived and (d)
shall be in full force and effect, except where the failure to obtain any such
consent (or in lieu thereof waiver) could not reasonably be expected,
individually or in the aggregate with other such failures, to materially
adversely affect On Stage, the Assets, the Assumed Liabilities or the Business
or otherwise result in a material diminution of the benefits of the transactions
contemplated by this Agreement to On Stage.
8.7 Legality. No Law or Court Order shall be pending or threatened that
prevents or that seeks to restrain the consummation, or challenges the validity
or legality, of this Agreement or the Transactions or that would materially
limit or adversely affect On Stage's acquisition of the Purchased Assets.
8.8 Financing. On Stage shall have obtained financing having terms
satisfactory to On Stage and in an amount at least equal to $12.5 million plus
up to $500,000 of the expenses of On Stage incurred in connection with the
negotiation, preparation, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
8.9 Title Insurance. The Selling Entities shall have obtained and
delivered to On Stage the following title insurance commitments (the cost and
expense of which shall be paid one-half by CRC and one-half by On Stage) issued
by a title insurance company acceptable to On Stage and its lender, if any, each
in their respective sole and absolute discretion: (a) as to the Real Property
owned by any one or more of the Selling Entities, (i) a commitment for issuance
of an ALTA Form B Owner's Policy of Title Insurance with extended coverage
showing all endorsements thereto which On Stage may reasonably request, along
with legible copies of all documents shown as exceptions thereto and (ii) a
commitment for issuance of a 1970 ALTA Form B Mortgagee's Policy of Title
Insurance with extended coverage showing all endorsements thereto which On
Stage's lender may request, along with legible copies of all documents shown as
exceptions thereto; and (b) as to the Real Property leased by any one or more of
the Selling Entities, (i) a commitment for issuance of an ALTA Form B Leasehold
Owner's Policy of Title Insurance with extended coverage showing all
endorsements thereto which On Stage may reasonably request, along with legible
copies of all documents shown as exceptions thereto and (ii) a commitment for
issuance of a 1970 ALTA Form B Leasehold Mortgagee's Policy of Title Insurance
with extended coverage showing all endorsements thereto which On Stage's lender
may request, along with legible copies of all documents shown as exceptions
thereto (all of the foregoing title commitments may hereinafter be referred to
collectively as the "Commitments"). In order to satisfy the provisions of this
Section 8.9, each of the Commitments must (x) be satisfactory, in form and
substance, to On Stage in its reasonable discretion and On Stage's lender, in
such lender's sole and absolute discretion, (y) contain no exceptions to title
or the survey, except for those exceptions approved by On Stage (subject to the
last sentence of this Section 8.9) and On Stage's lender, at any time prior to
Closing, and (z) have the appropriate policies of title insurance issued
pursuant to and in strict accordance with each of the
36
Commitments at, or within five business days of their receipt of all documents
recorded in connection with the, Closing, provided that if the title insurance
policies are to be issued within five business days of receipt of all documents
recorded in connection with the Closing, On Stage and its lender shall each
receive at Closing, for each Commitment, a "xxxx-up" of the Commitment
evidencing the form of the title insurance policy to be issued pursuant to said
Commitment and written evidence that gap coverage will be provided. Anything set
forth in this Agreement to the contrary notwithstanding, On Stage shall have the
right to terminate this Agreement (upon which Section 11.2(a) shall apply) by
delivering notice of such termination to the Selling Entities prior to the
Closing if On Stage in its reasonable discretion determines that any one or more
of the title exceptions or other matters shown on any of the Commitments or the
surveys are not acceptable to On Stage. The Selling Entities hereby covenant
that they shall cure all title exceptions and other matters shown on any of the
Commitments other than the items identified as "Special Exceptions" and numbered
1 (but only with respect to taxes for 1998 and subsequent years), 2 (but only
with respect to items shown on that certain survey prepared by Xxxxxx Xxxxxx
Xx., X.X.#00000, dated June 19, 1998, as the same may be amended), 3 (but only
as shown on that certain survey prepared by Xxxxxx Xxxxxx Xx., X.X.#00000, dated
June 19, 1998, as the same may be amended), 4,5,6 (but only as shown on that
certain survey prepared by Xxxxxx Xxxxxx Xx., X.X.#00000, dated June 19, 1998,
as the same may be amended) on the title report included as part of Schedule 4.6
hereto which may be cured by payment of a sum of money not to exceed $300,000 by
execution of a document requiring the signature of no party other than one or
more of the Selling Entities or any of their respective mortgagees, including
any affidavits which may reasonably be required by the title insurer (including
a standard title insurance company form of owner's affidavit to induce the
deletion from the Commitments of any exception for parties in possession and for
mechanics' or materialmen's liens).
8.10 Real Property Leases. With respect to each of the Real Property
Leases the Selling Entities shall have delivered to On Stage an estoppel
certificate and consent to assignment from the lessor thereunder in form and
substance reasonably satisfactory to On Stage.
8.11 Performance Contract. By no later than September 30, 1998, Country
Tonite Theatre, L.L.C. shall have delivered to On Stage Theaters, Inc. the
Performance Contract, fully executed by both Country Tonite Theatre, L.L.C. and
by Xxxxxxxx Ventures, L.L.C.
8.12 Xxxxx Xxxxxx Xxxx Employment Agreement. Xxxxx Xxxxxx Xxxx or
another producer acceptable to On Stage will have, by no later than October 20,
1998, entered into an Employment Agreement with On Stage (a copy of which is
attached hereto as Exhibit "A"), the effectiveness of which is conditioned upon
the consummation of the transactions contemplated by this Agreement.
8.13 Opinion of Counsel. On Stage shall have received the opinion of
Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx, LLP, counsel to the Selling Entities, in
a form reasonably acceptable to On Stage.
37
8.14 Utility Agreement. On Stage shall have finalized the form and
substance of a written agreement with White River Valley Electric Cooperative,
Inc. respecting the easement located under a portion of the Country Tonite
Theatre, which agreement must be reasonably acceptable to On Stage.
8.15 Collateral Agreements. CRC shall have executed and delivered such
of the Collateral Agreements to which it is a party.
9. Conditions Precedent to Obligations of the Selling Entities.
All obligations of the Selling Entities to consummate the Transactions
are subject to the satisfaction (or waiver by the Selling Entities) prior
thereto of each of the following conditions:
9.1 Representations and Warranties. The representations and warranties
of On Stage set forth in this Agreement shall be true and correct in all
respects on the date hereof and (except to the extent such representations and
warranties speak as of an earlier date) shall also be true and correct in all
material respects (or, in the case of representations and warranties qualified
by materiality, shall also be true and correct in all respects) on and as of the
Closing Date with the same force and effect as if made on and as of the Closing
Date.
9.2 Agreements, Conditions and Covenants. On Stage shall have performed
or complied with all agreements, conditions and covenants required by this
Agreement to be performed or complied with by it on or before the Closing Date.
9.3 Officer's Certificate. The Selling Entities shall have received a
certificate of an officer of On Stage to the effects set forth in Sections 9.1
and 9.2
9.4 CRC Shareholder Approval. The shareholders of CRC shall have
approved this Agreement and the Transactions contemplated hereby.
9.5 Legality. No Law or Court Order shall be pending or threatened that
prevents or that seeks to restrain the consummation, or challenges the validity
or legality, of the Transactions.
9.6 Performance Contract. On Stage Theaters, Inc. shall have executed
and delivered to Country Tonite Theatre, L.L.C. the Performance Contract.
9.7 Opinion of Counsel. The Selling Entities shall have received the
opinion of Xxxxxx, Xxxxx & Bockius LLP, counsel to On Stage, in a form
reasonably acceptable to the Selling Entities.
38
9.8 Collateral Agreements. On Stage shall have executed and delivered
such of the Collateral Agreements to which it is a party or signatory.
10. Indemnification.
10.1 Indemnification by the Selling Entities. The Selling Entities,
jointly and severally, shall indemnify and hold harmless On Stage and its
Affiliates (and each of its and their officers, directors, employees, agents,
successors and assigns) (each, an "On Stage Indemnified Party") from, against
and in respect of any and all Liabilities, claims, demands, judgments,
settlement payments, losses, costs, damages, deficiencies, diminution in value
and expenses whatsoever (including reasonable attorneys', consultants' and other
professional fees and disbursements of every kind, nature and description
incurred by such On Stage Indemnified Party in connection therewith)
(collectively, "Damages") that such On Stage Indemnified Party may sustain,
suffer or incur that result from, arise out of or relate to:
(a) any Excluded Liability,
(b) (i) any breach of any representation or warranty of any
Selling Entity contained in this Agreement, including the
representations and warranties of the Selling Entities contained in
Section 4, or (ii) any breach of or any inaccuracy in any
representation or warranty in or omission from any certificate,
schedule, exhibit, statement, document or instrument furnished to On
Stage by a Selling Entity (or any of its representatives or agents)
pursuant hereto or in connection with the negotiation, execution or
performance hereof, and (iii) in each of the foregoing cases without
regard to any knowledge, materiality (including any reference to
Material Adverse Effect) or other similar qualifying provision or
exception that may be included in or applied to any such representation
or warranty;
(c) any breach of any covenant or agreement of any Selling
Entity contained in this Agreement;
(d) any claim by any officer, former officer, employee, former
employee, shareholder or former shareholder of any Selling Entity
relating to the period prior to or at the Closing;
(e) any claim of infringement of any intellectual property
right resulting from On Stage's operation of the Business as presently
operated by the Selling Entities;
(f) any Environmental Condition existing on or prior to the
Closing;
(g) any Liability or obligation of a Selling Entity involving
Taxes, except for any Taxes expressly assumed herein, due and payable
by, or imposed with respect to a
39
Selling Entity for any taxable periods ending on or prior to the
Closing Date (whether or not such taxes have been due and payable); or
(h) Xxxxxx v. Country Tonite Enterprises, Inc. et al. (Case
No. A355405; District Court for Xxxxx County, Nevada); and
(i) the enforcement of this Section 10.1.
10.2 Indemnification by On Stage. On Stage shall indemnify and hold
harmless each of the Selling Entities and their Affiliates (and each of their
officers, directors, employees, agents, successors and assigns) (each, a "CRC
Indemnified Party") from, against and in respect of any and all Damages that
such CRC Indemnified Party may sustain, suffer or incur that result from, arise
out of or relate to:
(a) any Assumed Liability;
(b) any breach by On Stage of Section 6.14; or
(c) the operation of the Business after the Closing (to the
extent such Damage is not subject to Section 10.1); and
(d) the enforcement of this Section 10.2.
10.3 Limitations on Liability. Except as otherwise provided in Section
10.6 and except that this limitation shall not apply to any indemnification
claim arising under or with respect to either of Sections 4.5 and 4.23, the
Selling Entities shall not be liable to any On Stage Indemnified Party under
Section 10.1(b) for any misrepresentation or breach of warranty until the
aggregate amount for which they would otherwise (but for this provision) be
liable to any or all On Stage Indemnified Parties for all such
misrepresentations and breaches of warranty exceeds $300,000 (after which the
Selling Entities shall be fully responsible only for any such excess). In
addition, except as otherwise provided in Section 10.6, the Selling Entities
indemnification obligations under Section 10.1 shall not exceed $13,800,000.
10.4 Survival. Except as otherwise provided in Section 10.5, the
representations and warranties given or made by any party in this Agreement or
in any certificate or other writing furnished in connection herewith, and all
rights to assert an indemnification claim under Section 10.1(b), shall survive
the Closing for a period of two years after the Closing Date and shall
thereafter terminate and be of no further force or effect, except that (a) all
representations and warranties relating to Taxes and Tax Returns shall survive
the Closing for the period of the applicable statutes of limitation plus any
extensions or waivers thereof, (b) all representations and warranties set forth
in Sections 4.2, 4.3, 4.5, 4.6, 4.14, 4.20 and 4.23 shall survive the Closing
without limitation and (c) any representation or warranty as to which a claim
(including without limitation a contingent claim) shall have been asserted
during the survival period shall
40
continue in effect with respect to such claim until such claim shall have been
finally resolved or settled. Each party shall be entitled to rely upon the
representations and warranties of the other party or parties set forth herein,
notwithstanding any investigation or audit conducted before or after the Closing
Date or the decision of any party to complete the Closing.
10.5 Indemnification Procedure. All claims for indemnification under
Sections 10.1 and 10.2 shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which a party
obligated to indemnify (the "Indemnifying Party") would be liable to a
party entitled to indemnification hereunder (the "Indemnified Party")
is asserted against an Indemnified Party by a third party, the
Indemnified Party shall with reasonable promptness notify the
Indemnifying Party of such claim or demand (the "Claim Notice"),
specifying the nature of such claim or demand and the amount or the
estimated amount thereof to the extent then feasible (which estimate
shall not be conclusive of the final amount of such claim or demand).
The Indemnifying Party shall have 30 days from the receipt of the Claim
Notice (the "Notice Period") to notify the Indemnified Party (i)
whether or not the Indemnifying Party disputes the Indemnifying Party's
liability to the Indemnified Party hereunder with respect to such claim
or demand and (ii) whether or not the Indemnifying Party desires, at
the sole cost and expense of the Indemnifying Party, to defend against
such claim or demand, provided that the Indemnified Party is hereby
authorized (but not obligated) prior to and during the Notice Period to
file any motion, answer or other pleading and to take any other action
which the Indemnified Party shall deem necessary or appropriate to
protect the Indemnified Party's interests. In the event that the
Indemnifying Party notifies the Indemnified Party within the Notice
Period that the Indemnifying Party does not dispute the Indemnifying
Party's obligation to indemnify hereunder and desires to defend the
Indemnified Party against such claim or demand and except as
hereinafter provided, the Indemnifying Party shall have the right to
defend (with counsel reasonably satisfactory to the Indemnified Party)
by appropriate proceedings, which proceedings shall be promptly settled
or prosecuted by the Indemnifying Party to a final conclusion; provided
that, unless the Indemnified Party otherwise agrees in writing, the
Indemnifying Party may not settle any matter (in whole or in part)
unless such settlement includes a complete and unconditional release of
the Indemnified Party. If the Indemnified Party desires to participate
in, but not control, any such defense or settlement the Indemnified
Party may do so at its sole cost and expense. If the Indemnifying Party
elects not to defend the Indemnified Party against such claim or
demand, whether by not giving the Indemnified Party timely notice as
provided above or otherwise, then the Indemnified Party, without
waiving any rights against the Indemnifying Party, may settle or defend
against any such claim in the Indemnified Party's sole discretion and,
if it is ultimately determined that the Indemnifying Party is
responsible therefor under this Section 10, then the Indemnified Party
shall be entitled to recover from the Indemnifying Party the amount of
any settlement or judgment and all
41
indemnifiable costs and expenses of the Indemnified Party with respect
thereto, including interest from the date such costs and expenses were
incurred.
(b) If at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given in writing to the
Indemnifying Party, any claim or demand referred to in the first
sentence of Section 10.5(a) seeks material prospective relief which
could have a materially adverse effect on the businesses, operations,
assets, properties, prospects or condition (financial or otherwise) of
any Indemnified Party, the Indemnified Party shall have the right to
control or assume (as the case may be) the defense of any such claim or
demand and the amount of any judgment or settlement and the reasonable
costs and expenses of defense shall be included as part of the
indemnification obligations of the Indemnifying Party hereunder. If the
Indemnified Party should elect to exercise such right, the Indemnifying
Party shall have the right to participate in, but not control, the
defense of such claim or demand at the sole cost and expense of the
Indemnifying Party.
(c) In the event the Indemnified Party should have a claim
against the Indemnifying Party hereunder which does not involve a claim
or demand being asserted against or sought to be collected by a third
party, the Indemnified Party shall with reasonable promptness send a
Claim Notice with respect to such claim to the Indemnifying Party. If
the Indemnifying Party does not notify the Indemnified Party within the
Notice Period that the Indemnifying Party disputes such claim, the
amount of such claim shall be conclusively deemed a liability of the
Indemnifying Party hereunder.
(d) Nothing herein shall be deemed to prevent the Indemnified
Party from making (and an Indemnified Party may make) a claim hereunder
for potential or contingent claims or demands provided the Claim Notice
sets forth the specific basis for any such potential or contingent
claim or demand to the extent then feasible and the Indemnified Party
has reasonable grounds to believe that such a claim or demand may be
made. The Indemnified Party's failure to give reasonably prompt notice
to the Indemnifying Party of any actual, threatened or possible claim
or demand which may give rise to a right of indemnification hereunder
shall not relieve the Indemnifying Party of any liability which the
Indemnifying Party may have to the Indemnified Party unless the failure
to give such notice materially and adversely prejudiced the
Indemnifying Party.
10.6 Exception to Limitations. Nothing herein shall be deemed to limit
or restrict in any manner any rights or remedies that any party has, or might
have, at law, in equity or otherwise, against any other party hereto, based on
any willful misrepresentation, willful breach of warranty or willful failure to
fulfill any agreement or covenant.
10.7 Payment of Indemnification Obligations. In the event that any
Indemnifying Party is required to make any payment under this Section 10, such
party shall promptly pay the
42
Indemnified Party the amount of such indemnity obligation. If there should be a
dispute as to such amount, such Indemnifying Party shall nevertheless pay when
due such portion, if any, of the obligation as shall not be subject to dispute.
The difference, if any, between the amount of the obligation ultimately
determined as properly payable under this Section 10 and the portion, if any,
theretofore paid shall bear interest for the period from the date the amount was
demanded by the Indemnified Party until payment in full, payable on demand, at
the rate of 10% per annum. Notwithstanding anything herein to the contrary, all
indemnification payments to an On Stage Indemnified Party shall be satisfied
first by set-off against the $1,300,000 Subordinated Note pursuant to Section
10.8 until such time as the principal thereof has been fully so reduced or paid.
10.8 Right to Set Off. On Stage shall have the right to pay to any
other Indemnified Party any amount owing or believed by On Stage in good faith
to be owing by an Indemnifying Party to such Indemnified Party under Section
10.1 and to set off the amount of such payment or payments against the payment
obligations of On Stage under the $1,300,000 Subordinated Note. On Stage shall
also have the right to set off any amount owing, or which On Stage believes in
good faith is or may be owing by an Indemnifying Party under Section 10.1,
against the payment obligations of On Stage under the $1,300,000 Subordinated
Note, which amount shall be deposited into escrow on such terms and condition as
the parties shall agree in the event that CRC reasonably and in good faith
disputes such set-off.
11. Termination.
11.1 Grounds for Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by mutual written consent of On Stage and CRC; or
(b) by CRC or by On Stage, if the Closing has not occurred
prior to November 30, 1998; provided, however, that such right to
terminate this Agreement shall not be available to any party (with the
Selling Entities collectively deemed as one party) that has breached
any of its covenants, representations or warranties in this Agreement
in any material respect (which breach has not been cured); or
(c) by CRC or On Stage, if there shall be any Law that makes
consummation of the Transactions illegal or otherwise prohibited or if
any Court Order enjoining the Selling Entities or On Stage from
consummating the Transactions is entered and such Court Order shall
become final and nonappealable; or
(d) by On Stage, if a Selling Entity shall have breached any
of its covenants hereunder in any material respect or if the
representations and
43
warranties of the Selling Entities contained in this Agreement or in
any certificate or other writing delivered by a Selling Entity pursuant
hereto shall not be true and correct in any material respect, except
for such changes as are contemplated by this Agreement, and, in either
event, if such breach is subject to cure, the Selling Entities have not
cured such breach within 10 business days of On Stage's notice of an
intent to terminate; or
(e) by CRC, if On Stage shall have breached any of its
covenants hereunder or if the representations and warranties of On
Stage contained in this Agreement or in any certificate or other
writing delivered by On Stage pursuant hereto shall not be true and
correct, except for such changes as are contemplated by this Agreement,
and, in either event, if such breach is subject to cure, On Stage has
not cured such breach within 10 business days of notice of an intent to
terminate; or
(f) by On Stage after the occurrence of an event which could
reasonably be expected to result in a Material Adverse Effect; or
(g) by On Stage if the Board of Directors of CRC or any
committee of the Board of Directors of CRC (i) shall withdraw or modify
in any adverse manner its approval or recommendation of this Agreement,
(ii) within ten days after On Stage's request, shall fail to reaffirm
such approval or recommendation, (iii) shall approve or recommend any
acquisition of a material portion of its assets or the Business or any
tender offer for shares of its capital stock, in each case, other than
by On Stage or an affiliate thereof, (iv) a tender offer or exchange
offer for any of the outstanding shares of CRC common stock shall have
been commenced or a registration statement with respect thereto shall
have been filed and the Board of Directors of CRC shall have
recommended that the shareholders of CRC tender their shares in such
tender or exchange offer or publicly announced its intention to take no
position with respect to such tender or exchange offer, or (v) shall
resolve to take any of the actions specified in this Section 11.1(g);
or
(h) by either On Stage or CRC if CRC shareholder approval of
this Agreement and the Transactions contemplated hereby shall fail to
have been obtained at the Shareholders Meeting, including any
adjournments thereof; or
(i) by CRC, prior to the approval of this Agreement and the
Transactions contemplated hereby by the shareholders of CRC, upon five
days' prior notice to On Stage, if, as a result of a Superior Proposal
by a party other than On Stage or any of its affiliates, the Board of
Directors of CRC determines in good faith that their fiduciary
obligations under applicable law require that such Superior Proposal be
accepted; provided, however, that CRC has fully complied with its
obligations under Section 6.3
44
and with all the applicable requirements of Section 11.2(b), including
the payment of the Termination Fee and the On Stage Expenses (each as
hereinafter defined); or
(j) by either On Stage or CRC on October 20, October 21 or
October 22, 1998 if both (i) On Stage has not waived in a writing
delivered to CRC in accordance with the provisions of Section 17 below
the conditions set forth in Section 8.8 and (ii) On Stage has not
obtained a firm commitment for the financing referred to in Section 8.8
that is acceptable to CRC in its reasonable discretion. The October 23
deadline set forth herein, at the expense of On Stage, may be extended
by CRC in a writing to that effect delivered to On Stage in accordance
with the provisions of Section 17 below. CRC shall consider any such
request made by On Stage in good faith. If neither On Stage nor CRC
exercises the termination rights set forth in this Section 11.1(j): (i)
On Stage shall deposit by October 23, 1998 (or such later date as CRC
may agree pursuant to the preceding sentence) $250,000 into escrow to
be applied to the Purchase Price at the Closing or to be paid to CRC if
Closing does not occur solely as a result of a breach by On Stage of a
covenant or agreement of On Stage set forth in this Agreement, and
otherwise to be held and applied on such terms and conditions as On
Stage and CRC shall reasonably agree; and (ii) the terms and provisions
of Section 8.8 hereof shall terminate and end and cease to be of any
further force or effect.
11.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided
in Section 11.1, this Agreement shall forthwith become void and there
shall be no liability on the part of any of the parties, except (i) as
set forth in Sections 6.8, 11.2(b), 12, 18 and 19, and (ii) nothing
herein shall relieve any party from liability for any willful breach
hereof.
(b) If (i) this Agreement (A) is terminated by On Stage
pursuant to Section 11.1(g) or (h) or by CRC pursuant to Section
11.1(h) or (i), or (B) is terminated as a result of any Selling
Entity's breach of Section 6.3 which is not cured within 10 days after
notice thereof to CRC, and (ii) either (1) at the time of such
termination or prior to the Shareholders Meeting there shall have been
an Acquisition Proposal (whether or not such offer shall have been
rejected or shall have been withdrawn prior to the time of such
termination or of the Shareholders Meeting), or (2) within one year
after termination of the Agreement a Selling Entity shall have entered
into an agreement with respect to, or consummated, an Acquisition
Proposal, CRC shall pay to On Stage an amount equal to (i) a cash
termination fee of $690,000 (the "Termination Fee"), and (ii) all
expenses incurred by On Stage in connection with the negotiation,
execution and performance of the transactions contemplated hereby
(including all fees and expenses payable to On Stage's financial
advisors and counsel) not to exceed $250,000 ("On Stage Expenses")
within one business day after such termination or, in the case of
(ii)(2), entering into an agreement with respect to, or consummating an
Acquisition Proposal.
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12. Payment of Expenses; Bulk Sales Act; Sales and Transfer Taxes. Except as set
forth in Section 6.12(a), each party hereto shall pay its own expenses for
lawyers, accountants, consultants, investment bankers, brokers, finders and
other advisers with respect to the Transactions. Further, the parties hereby
waive compliance with the bulk sales act or comparable statutory provisions of
each applicable jurisdiction. The Selling Entities jointly and severally shall
indemnify On Stage and its officers, directors, employees, agents and Affiliates
in respect of, and hold each of them harmless from and against, any and all
Damages suffered, occurred or sustained by any of them or to which any of them
becomes subject, resulting from, arising out of or relating to the failure of
the Selling Entities to comply with the terms of any such bulk sales or
comparable provisions applicable to the Transactions. It is further agreed that
the Selling Entities shall pay all federal, state and local sales, documentary
and other transfer taxes, if any, due as a result of the purchase, sale or
transfer of the Purchased Assets in accordance herewith, whether or not imposed
by law on the Selling Entities, and the Selling Entities jointly and severally
shall indemnify, reimburse and hold harmless On Stage in respect of any
liability for payment of or failure to pay any such taxes or the filing of or
failure to file any reports required in connection therewith.
13. Contents of Agreement. This Agreement, together with the other Transaction
Documents, sets forth the entire understanding of the parties hereto with
respect to the Transactions and supersedes all prior agreements or
understandings among the parties regarding those matters, including that certain
Letter of Intent dated May 5, 1998 between CRC and On Stage, and those certain
letters dated June 15, 1998 from Xxxxxx Xxxxx to Xxxxxxxx Xxxxx and August 13,
1998 from Xxxx X. Xxxxxx to Xxxxx Xxxxx, respectively.
14. Amendment; Parties in Interest; Assignment; Etc. This Agreement may be
amended, modified or supplemented only by a written instrument duly executed by
On Stage and CRC. If any provision of this Agreement shall for any reason be
held to be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or unenforceability shall not affect any other provision hereof, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective heirs, legal
representatives, successors and assigns of the parties hereto. Any term or
provision of this Agreement may be waived at any time by the party entitled to
the benefit thereof by a written instrument duly executed by such party. The
parties hereto shall execute and deliver any and all documents and take any and
all other actions that may be deemed reasonably necessary by their respective
counsel to complete the Transactions.
15. Interpretation. Unless the context of this Agreement clearly requires
otherwise, (a) references to the plural include the singular, the singular the
plural, and the part the whole, (b) "or" has the inclusive meaning frequently
identified with the phrase "and/or," (c) "including" has the inclusive meaning
frequently identified with the phrase "but not limited to" and (d) all
currencies refer to United States dollars. The section and other headings
contained in this Agreement are for reference purposes only and shall not
control or affect the construction of this
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Agreement or the interpretation thereof in any respect. Section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified. Each accounting term used herein that is not specifically defined
herein shall have the meaning given to it under GAAP.
16. Remedies. The remedies provided by Section 10 shall constitute the exclusive
remedies for the matters covered thereby. With respect to any matters not
covered by such Section, any party hereto shall be entitled to such rights and
remedies as such party may have at law or in equity or otherwise for any breach
of this Agreement, including the right to seek specific performance, rescission
or restitution, none of which rights or remedies shall be affected or diminished
by the remedies provided hereunder.
17. Notices. All notices that are required or permitted hereunder shall be in
writing and shall be sufficient if personally delivered or sent by mail,
facsimile message or Federal Express or other delivery service. Any notices
shall be deemed given upon the earlier of the date when received at, or the
third day after the date when sent by registered or certified mail or the day
after the date when sent by Federal Express to, the address or fax number set
forth below, unless such address or fax number is changed by notice to the other
party hereto:
If to On Stage:
On Stage Entertainment, Inc.
0000 Xxxx Xxxxx Xxxxx
Xxx Xxxxx, XX 00000
FAX: 000-000-0000
Attn: Xxxxxxxxxxx Xxxxx, Esquire
General Counsel and Corporate Secretary
with a required copy to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
FAX: 000-000-0000
Attn: Xxxxx X. XxXxxxxx, Esquire
If to the Selling Entities:
Casino Resource Corporation
000 Xxxxxxxxx Xxxxxxxxx
Xxxxx Xxxxxxx, XX 00000
Fax: 000-000-0000
Attn: President
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With a required copy to:
Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx, LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
FAX: 000-000-0000
Attn: Xxxxxx Xxxxxx, Esquire
18. Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
its provisions concerning conflict of laws.
19. Consent to Jurisdiction; Service of Process; Etc.
(a) Each party hereto irrevocably and unconditionally (i)
agrees that any suit, action or other legal proceeding (collectively,
"Suit") arising out of this Agreement may be brought and adjudicated in
the United States District Court for the Eastern District of
Pennsylvania, if such court does not have jurisdiction or will not
accept jurisdiction, in any court of competent civil jurisdiction in
Philadelphia County, Pennsylvania, (ii) consents and submits to the
non-exclusive jurisdiction of any such court for the purposes of any
such Suit and (iii) waives and agrees not to assert by way of motion,
as a defense or otherwise in any such Suit, any claim that it is not
subject to the jurisdiction of the above courts, that such Suit is
brought in an inconvenient forum or that the venue of such Suit is
improper.
(b) Each party hereto also irrevocably consents to the service
of any process, pleadings, notices or other papers in a manner
permitted by the notice provisions of Section 17 or by any other method
provided or permitted under applicable law. Each party hereto agrees
that final judgment in any Suit (with all right of appeal having either
expired or been waived or exhausted) shall be conclusive and that On
Stage shall be entitled to enforce such judgment in any other
jurisdiction of the world by suit on the judgment, a certified or
exemplified copy of which shall be conclusive evidence of the fact and
amount of indebtedness arising from such judgment.
20. Further Assurances. At any time and from time to time after the Closing, the
parties agree to cooperate with each other, to execute and deliver such other
documents, instruments to transfer or assignment, files, books and records and
do all such further acts and things as may be reasonably required to carry out
the intent of the parties hereunder.
21. Exhibits; Schedules. The Exhibits and the Schedules hereto are intended to
be and hereby are specifically made a part of this Agreement.
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22. No Benefit to Others. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto (and, with respect to Section 10 and related provisions of this
Agreement, the other Indemnified Parties) and the heirs, administrators,
personal representatives, successors, assigns, and they shall not be construed
as conferring any rights on any other persons.
23. Counterparts. This Agreement may be executed in counterparts, each of which
shall be binding as of the date first written above, and all of which shall
constitute one and the same instrument. Each such copy shall be deemed to be an
original, and it shall not be necessary in making proof this Agreement to
produce or account for more than one such counterpart.
[remainder of page intentionally blank]
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IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto on the day and year first written above.
ON STAGE ENTERTAINMENT, INC.
By: ________________________________
Name:
Title:
CASINO RESOURCE CORPORATION
By:___________________________
Name:
Title:
COUNTRY TONITE ENTERPRISES, INC.
By:___________________________
Name:
Title:
CRC OF BRANSON, INC.
By:___________________________
Name:
Title:
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