EXHIBIT 10.5
FINDERS AND RELEASE AGREEMENT
This Finders and Release Agreement is entered into by and between Xxxxx
Xxxxxxx ("Xxxxxxx"), an individual; CDI Acquisition JV, a Texas joint venture;
CD Partners JV, a Texas joint venture ( jointly referred to herein as the "Joint
Venture"); and CD Warehouse, Inc., a Delaware corporation, ("CD Warehouse") for
the purpose of setting forth the compensation and consideration received and to
be received by the Joint Venture for its assistance in identifying Compact Disc
International, Ltd., a Texas limited partnership ("Compact Disc"), for potential
investment or acquisition by CD Warehouse and/or Xxxxxxx and to release any and
all other claims by and between CD Warehouse, Xxxxxxx and the Joint Venture.
1. IDENTIFICATION OF COMPACT DISC INTERNATIONAL, LTD. The parties agree by
and among themselves that the Joint Venture has performed a valuable service
by identifying Compact Disc and/or its assets for potential investment or as
an acquisition opportunity for CD Warehouse or Xxxxxxx;
2. ACQUISITION OF COMPACT DISC ASSETS PURSUANT TO AN INITIAL PUBLIC OFFERING
BY CD WAREHOUSE. It is presently contemplated by the parties hereto that CD
Warehouse will enter into a binding agreement to acquire the business or
assets of Compact Disc and its subsidiaries. CD Warehouse's acquisition will
be subject to the completion of an initial public offering ("IPO") of its
common stock within one hundred and twenty days from the date hereof.
3. COMPENSATION/ CONSIDERATION. Joint Venture and CD Warehouse hereby agree
to the following consideration:
(a) FINDER'S FEE. CD Warehouse will pay the Joint Venture a finder's fee
of $100,000 payable as follows:
(i) A non-refundable payment of $20,000 (the "First Non-Refundable
Payment"), will be placed in escrow by CD Warehouse with Inwood National
Bank ("Inwood") in Dallas, Texas, concurrently with the date of the
execution hereof; and
(ii) The balance of $80,000 (or $60,000 if a Second Non-refundable
Payment in the amount of $20,000 is made as described below) at the closing
of the IPO; provided, however, if within four months from the date of
execution hereof the registration statement for the IPO (the "Registration
Statement") has not been declared effective by the Securities and Exchange
Commission (the "SEC") and CD Warehouse elects to withdraw such
Registration Statement, no additional monies
with respect to the finder's fee shall be payable to the Joint Venture
and the Joint Venture's compensation hereunder shall be limited to the First
Non-Refundable Payment; PROVIDED, FURTHER, that if by such date CD Warehouse
has not withdrawn the Registration Statement, CD Warehouse will make a
second non-refundable payment of $20,000 (the "Second Non-Refundable
Payment" and, together with the First Non-Refundable Payment, the
"Non-Refundable Payments"), into escrow pending the consummation of
the IPO; PROVIDED, FURTHER, if within eight months from the date of
execution hereof the Registration Statement has not been declared
effective by the SEC and CD Warehouse elects to withdraw such
Registration Statement, no additional monies in respect of the
finder's fee shall be payable to the Joint Venture and the Joint
Venture's compensation hereunder shall be limited to the Non-Refundable
Payments.
(iii) The escrow agreement to be entered into by CD Warehouse will
be in substantially the same form attached hereto as Exhibit A, and shall
provide that Inwood will pay the First Non-Refundable Payment to the Joint
Venture four months from the execution date hereof or the earlier
notification to Inwood by the IPO underwriter that the IPO has been
consummated or that the Registration Statement has been withdrawn. The
escrow agreement shall also provide that Inwood will pay the Second
Non-Refundable Payment to the Joint Venture eight months from the date of
execution hereof or upon the earlier notification to Inwood by the IPO
underwriter that the IPO has been consummated or that the Registration
Statement has been withdrawn.
(iv) Anything contained in this Agreement to the contrary
notwithstanding, in the event CD Warehouse withdraws the Registration
Statement but CD Warehouse and/or Xxxxxxx nevertheless consummates the
acquisition of Compact Disc and/or its assets by any other means prior to
September 6, 1997, the entire finder's fee or any outstanding balance
thereof shall be payable at the closing of such acquisition.
(b) CANCELLATION AND RELEASE OF JOINT VENTURE AFFILIATES FRANCHISE
AGREEMENTS AND PRE-PAYMENTS DUE THE FRANCHISEES. As part of the acquisition
contemplated by and between Compact Disc and CD Warehouse, CD Warehouse will
be assigned all of Compact Disc's right, title and interest as the franchisor
in various outstanding franchise and development agreements. Certain
affiliated entities of the Joint Venture are currently franchisees pursuant
to the franchise agreements that would be assigned/acquired by CD
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Warehouse. As additional consideration, CD Warehouse hereby agrees that if
the acquisition agreement contemplated by and between CD Warehouse and
Compact Disc is consummated either through the IPO or by any other means
prior to September 6, 1997, CD Warehouse will cancel and release the
franchise and development agreement(s) by and between Northwest C.D. Traders,
L.L.C., a Texas limited liability company, and Northwest Broadway Joint
Venture, a Texas joint venture, as franchisees, and Compact Disc as
franchisor (collectively, the "Joint Venture Franchise Agreements") and
release the franchisees and all guarantors and other related parties from all
obligations thereunder or with respect thereto (including without limitation
all post termination obligations and other obligations which, by their terms,
survive the termination or expiration of the Joint Venture Franchise
Agreements except those provisions prohibiting the use of the name and
proprietary software as noted below). Joint Venture agrees that CD
Warehouse's cancellation and release of the Joint Venture Franchise
Agreements would also be subject to the payment of all franchise royalty
payments to the date of cancellation and release of such franchise agreements
and the cancellation of any and all Pre-paid Development Fee Advance(s) that
Compact Disc may then owe the franchisees. Joint Venture also agrees that if
the Joint Venture Franchise Agreements are ultimately canceled and released
as set forth above, that the Joint Venture will cause its individual members,
the franchisees and all related guarantors and parties pursuant to such
agreements to agree that, within one-hundred twenty (120) days from the date
of such cancellation and release, they will cease using the CD Warehouse name
and any proprietary software provided by Compact Disc.
4. RELEASE AND WAIVER. Effective as of the date this Finders and Release
Agreement is executed and the First Non-Refundable Payment is placed in
escrow with Inwood, CD Warehouse, Xxxxxxx and Joint Venture hereby agree to
mutually release and waive any and all claims that they may have one against
the other, other than as stated herein. Xxxxxxx and CD Warehouse and Joint
Venture specifically waive and release one from the other, any obligation or
claim that they may currently or hereafter possess pursuant to the terms of
the Non-Disclosure and Non-Circumvention Agreement, dated September 5, 1995,
a copy of which is attached hereto as Exhibit B and the Memorandum of
Understanding, dated November 25, 1995, a copy of which is attached hereto as
Exhibit C.
5. MISCELLANEOUS. The obligations of the parties shall be binding on and inure
to the benefit of their respective heirs, successors, assigns and affiliates.
This agreement may be amended or modified only by a subsequent agreement in
writing. This agreement shall be construed and enforced according to the laws of
Texas without regard to conflicts of laws principles, and jurisdiction and venue
shall be in the Federal District Court for the Northern District of Texas,
Dallas Division.
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Dated this 3rd day of September, 1996.
Joint Venture: CDI Acquisition JV / CD Partners J.V.
Texas Joint Venture(s)
/s/ Xxxxxxxx Xxxxxxx
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Xxxxxxxx Xxxxxxx, individually and
as a Joint Venturer
/s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx, individually and
as a Venturer
/s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx, individually and as a
Venturer
CD Warehouse: CD Warehouse, Inc.
a Delaware Corporation
/s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx, President
Xxxxxxx:
/s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx, an individual
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