Exhibit 10(a)
ASSET PURCHASE AGREEMENT
THIS AGREEMENT made this 22nd day of March, 1999, by and between
BLOWOUT ENTERTAINMENT, INC., a Delaware corporation, whose address is One
Airport Center, 2nd Floor, 0000 X.X. Xxxxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxx
00000 ("Seller"), and M.G.A., INC., a Delaware corporation, whose address
is 000 X. Xxxx Xxxxxx, Xxxxxx, Xxxxxxx 00000 ("Purchaser").
WHEREAS, Seller plans to file a voluntary Petition under Chapter 11 of
Title 11, of the United States Code ("Bankruptcy Code") in the immediate
future; and
WHEREAS, the parties hereto desire that certain assets of Seller be
sold to Purchaser and that certain leases and executory contracts to which
Seller is a party be assumed and assigned, pursuant to this Agreement; and
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other, as an
inducement to the consummation of the sale, assumption and assignment
described herein, and certain additional agreements related to the sale,
assumption and assignment;
NOW, THEREFORE, for valuable consideration, including the mutual
representations, warranties and covenants herein contained, the receipt of
which is hereby acknowledged, the parties hereby agree as follows:
DEFINITIONS
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare
Benefit Plan or material fringe benefit plan or program.
"GAAP" means United States generally accepted accounting principles as
used by the Financial Accounting Standards Board of the American Institute
of Certified Public Accountants, consistently applied and maintained.
"INTELLECTUAL PROPERTY" means all (a) patents, patent applications,
patent disclosures, and improvements thereto, (b) trademarks, service
marks, trade dress, logos, trade names, and registrations and applications
for registration thereof, except for "Blowout Video" which is
expressly excluded from this definition,
(c) copyrights and registrations and applications for
registration thereof, (d) mask works and registrations and applications for
registration thereof, (e) computer software, data, documentation,
(f) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how,
manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, marketing, and business
data, pricing and costs information, business and marketing plans, and
customer and supplier lists and information), (g) other proprietary rights,
and (h) copies and tangible embodiments thereof (in whatever form or
medium).
"PRE-PETITION RENTRAK INVENTORY" means all video cassette tape, DVD
and game inventory leased by Seller from Rentrak Corporation ("Rentrak")
pursuant to its existing Rentrak National Account Agreement ("Existing
Rentrak Agreement"), that is in the Stores as of the date of filing a
voluntary Chapter 11 bankruptcy petition as contemplated herein.
"POST-PETITION RENTRAK INVENTORY" means all video cassette tape, DVD
and game inventory leased in the future by Seller from Rentrak, pursuant to
the Individual Rentrak Agreements (as hereinafter defined) between the date
of filing a voluntary Chapter 11 bankruptcy petition and the Closing Date.
"SECURITY INTEREST" means any lien, mortgage, pledge, security
interest, encumbrance, charge, or other lien, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for taxes not yet due and
payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings, (c) liens arising under workers compensation,
unemployment insurance social security, retirement, and similar
legislation, (d) liens arising in connection with sales of foreign
receivables, (e) liens on goods in transit incurred pursuant to documentary
letters of credit, (f) purchase money liens and liens securing rental
payments under capital lease arrangements, and (g) other liens arising in
the ordinary course of business and not incurred in connection with the
borrowing of money.
"TAXES" means any federal, state, local, or foreign income, gross
receipts, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property, stamp, excise,
occupation, sales, use, transfer, value added, alternative minimum,
estimated, or other tax, including any interest, penalty, or additional
charge thereto, whether disputed or not.
ARTICLE I
PURCHASE AND SALE OF ASSETS; ASSUMPTION
AND ASSIGNMENT OF LEASES AND EXECUTORY CONTRACTS
1.1 PURCHASED ASSETS. Subject to and upon the terms and
conditions set forth herein, the Seller agrees to and will sell, transfer,
assign and deliver to the Purchaser at the Closing (as hereinafter
defined), and the Purchaser agrees to and will purchase, acquire and take
assignment and delivery of, the assets of the Seller located at Seller's
leased store space(s) listed on Schedule 1.1 (the
"Stores") or that otherwise relate primarily to Seller's business at
the Stores, as same shall exist on the Closing Date, as hereinafter
defined (collectively, the "Assets"), including but not limited to:
1.1.1 (a) All machinery, appliances, equipment, computers
and peripherals, tools, supplies, leasehold improvements, construction in
progress, furniture and fixtures owned by the Seller, that are located at
the Stores and at the corporate home office of Seller, at the address set
forth herein, (b) tangible personal property including, but without
limitation, inventories located at the Stores, and tangible personal
property including, but without limitation, inventory and store supplies
(but not store fixtures) located in Seller's corporate warehouse in
Wilmington, Ohio, (c) Intellectual Property, goodwill associated therewith,
licenses and sublicenses granted and obtained with respect thereto, and
rights thereunder, remedies against infringements thereof, and rights to
protection of interests therein under the laws of all jurisdictions, (d)
without limiting the generality of the foregoing, all right, title and
interest in the name "Videos & More," (e) account balances and accounts
receivables generated at the Store level, but excluding corporate-level
accounts, notes, and other receivables, (f) originals of all books,
records, ledgers, files, documents, correspondence, customer lists,
creative materials, advertising and promotional materials generated at the
level of the Stores; provided, however, that the Seller will have
reasonable access to inspect and copy the same for a period of 5 years
after Closing; (g) all software at the Store and corporate home-office
levels and all contents in all computer discs, CD Roms, DVD's and hard
drives, (h) all P.O.S. software systems, and (i) cash in Stores in an
amount not less than $200.00 per Store; PROVIDED, HOWEVER, that the Assets
shall not include (A) the corporate charter or qualifications to conduct
business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification
numbers, seals, minute books, transfer books, and other documents relating
to the organization, maintenance, and existence of the Seller as a
corporation, (B) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the
Purchaser on the other hand entered into on or
after the date of this Agreement); or (C) any real property owned by Seller
in fee simple.
1.1.2 All inventory and equipment owned by the Seller
located at the Stores or in the possession of customers, or in the Seller's
Wilmington, Ohio warehouse space, including without limitation, video
cassette tapes and games, digital video discs, audio books, laser discs,
video hardware and software, and video cassette players held at the Stores
for rental and sale; provided that Seller shall deliver to Purchaser not
less than 625,000 pre-recorded video cassette tapes and games, digital
video discs, audio books and laser discs on the Closing Date; and provided
further, however, that said minimum number of 625,000 may be reduced in
proportion to the reduction in the purchase of inventory resulting from any
reduction in the number of Stores purchased and consequent reduction of the
Purchase Price as set forth in 2.1.2, 2.1.3 and 2.1.4.
1.1.3 Customer lists and related information of the
Stores.
1.1.4 All of Seller's right, title and interest in and to
any other assets located at the Stores and/or relating solely to the Stores
and the business conducted thereat.
1.1.5 All of the Seller's right, title, and interest in
and to, the Intellectual Property as herein defined, including, but not
limited to, the assets listed on Schedule 1.1.5, but excluding such
property as is listed in Section 1.3.3 hereinbelow.
1.1.6 All cooperative advertising credits and market
development funds (whether accrued or receivable).
1.1.7 The Assets located at the Stores shall not include
any assets of any kind that are located, as of the Closing Date, at Stores
that are not acquired by assumption and assignment by Purchaser from
Seller.
1.2 ASSUMED AND ASSIGNED LEASES AND EXECUTORY CONTRACTS.
1.2.1 Seller shall forthwith take all actions necessary
to seek an order from the Bankruptcy Court authorizing it to assume all
leases or rental or occupancy agreements of real property under which
Seller is lessee or occupant (subject to amendments, the terms of which are
set forth in Exhibit "1.2.1" hereto), that are set forth in Schedule 1.2.1;
all leases of personal property under which Seller is lessee that are set
forth in Schedule 1.2.1A hereto; all Individual Rentrak Agreements
concerning Post-Petition Rentrak Inventory; all software licenses from
Streamline Solutions Incorporated; and all personal property contracts and
agreements with Seller's customers.
1.2.2 Seller shall forthwith, at such time as it is
authorized to assume as set forth in Section 1.2.1, hereinabove by
Bankruptcy Court order, assign all assumed rights under all leases and
executory contracts as contemplated under Section 1.2.1 hereinabove, to the
Purchaser.
1.2.3 ASSUMED LIABILITY. The Purchaser agrees to and
will at Closing, assume and agree to pay, discharge and perform when
lawfully due (i) all obligations and liabilities under the Leases, as
hereinafter defined, accruing and/or arising after the Closing Date; (ii)
all obligations and liabilities of the Seller with respect to all rental
and sell-through inventory, including video cassette tapes and games (other
than sell-through titles which are presold by Seller), ordered by Seller in
the ordinary course of business, which are invoiced to Seller and/or
delivered to the Stores during the week of the Closing or on or after the
Closing Date, or which have a "street date," as such term is normally used
in the Video industry, during the week of the Closing or on or after the
Closing Date, regardless of the date of invoice or delivery; (iii) all
obligations and liabilities of the Seller with respect to all Individual
Rentrak Agreements concerning Post-Petition Rentrak Inventory, accruing
and/or arising after the Closing Date, and (iv) all obligations and
liabilities of Seller for the matters referred to in 1.2.8
hereinbelow. Otherwise, Purchaser assumes no liabilities of Seller of any
nature.
1.2.4 Seller shall be reimbursed by Purchaser for
prepayments for all video cassette tapes and games whose "street dates"
occur during the week in which the Closing occurs or thereafter.
1.2.5 SELLER'S DISCOUNT BOOKLETS, COUPONS AND MARKETING
PROGRAMS. Purchaser shall assume the responsibility to honor all of the
Seller's Discount Booklets, Coupons and Marketing Programs offered by the
Seller prior to the Closing in the ordinary course of business.
1.2.6 CREDIT CARD RUNS. Any liability for any "running"
of credit cards which occurs after the Closing, whether or not credit card
information on which such a "run" is based was initially entered before or
after the Closing, shall be the responsibility of Purchaser; provided,
however, that any liability for the "running" of credit cards before the
Closing shall be Seller's sole responsibility.
1.2.7 TAXES AND PRORATIONS. Seller shall be responsible
for all ad valorem taxes or assessments relating to the Assets for taxable
periods up to and including the Closing Date, regardless of when the same
shall become due and payable, and such taxes shall be pro-rated between
Seller and Purchaser as of the Closing Date or within a reasonable time
thereafter. All expense
items including but not limited to insurance, rents, utility charges,
and any prepaid agreements shall be prorated between Seller and Purchaser
as of the Closing Date. Purchaser shall have the right to offset any
amounts which are the responsibility of Seller from the monies due Seller
from Purchaser under this Agreement. The rents for periods prior to
Closing for the Stores will be prorated as of the Closing Date, and
Purchaser shall reimburse Seller for Purchaser's prorata share as
to rent paid in advance. In the case of rent paid in arrears, Seller shall
pay Purchaser for the pro-rated period up to the Closing.
1.2.8 CERTAIN EMPLOYEE BENEFITS. Purchaser will
recognize and honor the accrued vacation, sick and paid-time-off rights of
Seller's Store Level personnel. Purchaser shall pay out to all corporate
level personnel a lump-sum payment, representing their vacation, sick and
paid-time-off rights against Seller.
1.2.9 OTHER CLOSING COSTS. Seller and Purchaser shall
each remain liable for their own closing expenses including attorney's
fees. Seller shall remain liable for any closing expenses incurred by
Seller and/or Seller's agents or employees and shall indemnify Purchaser
against any actions brought against Purchaser, resulting from Seller's
failure to pay any such Closing expenses. Purchaser shall remain liable
for any Closing expenses incurred by Purchaser and/or Purchaser's agents or
employees and shall indemnify Seller against any actions brought against
Seller resulting from Purchaser's failure to pay any such closing expenses.
1.3 EXCLUDED ASSETS. Anything to the Contrary in Sections 1.1 and
1.2 notwithstanding, the Purchased Assets shall exclude:
1.3.1 Any real property owned by Seller in fee simple.
1.3.2 All cash, bank deposits and/or cash equivalents of
Seller, except for cash in Stores in an amount not less than $200.00 per
Store.
1.3.3 The licensed name "Blowout Video," which is
licensed from Rentrak (said name to be licensed separately by Purchaser as
a condition precedent to the Closing hereof).
1.3.4 Claims, lawsuits and choses in action that do not
relate to the store-level specifically.
1.3.5 Pre-paid premiums on Seller's CGL insurance
policies and security deposits.
1.3.6 Tax refunds and tax attributes.
1.3.7 Claims for relief under any of the avoiding powers
provided for under Chapter 5 of the Bankruptcy Code.
1.3.8 Employee Benefit Plans of the Seller.
1.3.9 The originals of all books and records and
software, kept at the corporate home office level; provided, however, that
copies of all such records shall be included in the Assets sold to
Purchaser.
1.3.10 All Pre-Petition Rentrak Inventory and Post-
Petition Rentrak Inventory.
1.3.11 The Seller's right of action against Xxx-Mor
Video, Inc., for unpaid accounts receivable, which is a corporate level
account receivable.
1.3.12 All consigned personal property.
1.3.13 Store fixtures at Seller's Wilmington, Ohio warehouse.
ARTICLE II
PURCHASE PRICE
2.1 PURCHASE PRICE. The purchase price due from Purchaser to Seller
for the sale of the owned Assets and the assumption and assignment of
leases and executory contracts, and the Covenant Not To Compete, shall be
Two Million Four Hundred Thousand and No/100 Dollars ($2,400,000) (the
"Purchase Price").
2.1.1 CERTAIN EMPLOYEE BENEFITS PRICE REDUCTION. In
consideration for the assumption and/or payment by the Purchaser of certain
obligations of the Seller to its personnel for the items referred to in
1.2.8, hereinabove, the purchase price shall be reduced by the
amount equal
to said liabilities and obligations, which amount shall be
stated in writing by Seller no later than 2 days before the Closing Date.
2.1.2 K-MART PRICE REDUCTION. In the event of a failure to
obtain consent to the assumption and assignment provided for herein from K-
Mart, then the Purchase Price provided for in 2.1 shall be reduced
by $94,000.
2.1.3 RALPH'S PRICE REDUCTION. In the event of a failure to
obtain consent to the assumption and assignment provided for herein from
Ralph's/Food for Less, then the Purchase Price provided for in 2.1
shall be reduced by $224,000.
2.1.4 XXXX XXXXXX PRICE REDUCTION. In the event of a failure
to obtain consent to the assumption and assignment provided for herein from
Xxxx Xxxxxx, then the Purchase Price provided for in 2.1 shall be
reduced by $80,000.
2.2 PAYMENT. The balance of the Purchase Price remaining after the
payment, if any, provided for under Section 3.2.2.1(a) hereinbelow, shall
be paid by Purchaser in cash, certified funds or wire transfer at Closing
to the bank account(s) designated by Seller.
2.3 [Intentionally left blank]
2.4 [Intentionally left blank]
2.5 ALLOCATION OF THE PURCHASE PRICE AMONG THE PURCHASED ASSETS. The
Purchase Price shall be allocated, for tax purposes, among each item or
class of the Assets pursuant to Schedule 2.5 hereof. The Seller and the
Purchaser agree that they will prepare and file any notice or other filings
required pursuant to section 1060 of the Internal Revenue Code of 1986, as
amended, and that any such notices or filings will be prepared based on
such tax allocation of the Purchase Price. The Purchaser agrees to send to
the Seller a completed copy of its Form 8594 ("Asset Acquisition Statement
under Section 1060") with respect to this transaction prior to filing such
form with the Internal Revenue Service.
2.6 EMPLOYMENT OF SELLER'S PERSONNEL. The Seller will use its good
faith best efforts to persuade its employees at the Stores to make
themselves available for employment by the Purchaser. Purchaser shall use
its good faith best efforts to interview and review said current employees
of Seller prior to the Closing Date; provided, however, employment of
Seller's personnel by Purchaser shall be in the sole discretion of
Purchaser in the exercise of its business judgment. It is not the intent
of this section to make Seller's employees third party beneficiaries to
this Agreement. Purchaser is not assuming any of Seller's employment
liabilities that have accrued, including but not limited to, unpaid FICA,
FUTA, unemployment tax, pension or profit-sharing plan contributions,
employee fringe benefits, bonuses or incentive programs of any type or
accrued and/or unpaid vacation time or allowances, nor is Purchaser
acquiring any interest or obligation under any Employee Benefit Plans of
Seller. Purchaser will enter into employment agreements with the three
principal officers of Seller, Xxxxx Xxxxx, Xxxxxx Xxxxxxxxx and Xxx Xxxxx,
with a one-year term and on the same terms and conditions, including
salary, fringe benefits and the like, as are in their existing employment
agreements, excluding, however, any change of control provisions.
2.7 [Intentionally Left Blank]
ARTICLE III
BANKRUPTCY COURT APPROVAL; CLOSING
3.1 FILINGS WITH BANKRUPTCY COURT. Promptly after the execution of
this Agreement, but in no event later than March 26, 1999, Seller shall
file with the Bankruptcy Court a motion for approval of this Agreement,
including approval of a sale free and clear of all liens, claims,
encumbrances and interests, and of the assumptions and assignments of
leases and executory contracts.
3.1.1 An Order of the Bankruptcy Court approving the
sale, assumption and assignments to Purchaser, shall be entered not later
than 60 calendar days after the Motion requesting such Order shall have
been filed. If no such Order is entered within that period of time, then
there shall be a failure of a condition precedent to Purchaser's
obligations herein. In that event, termination shall occur and the Break-
up Fee provided under 3.2.6 shall be paid to Purchaser.
3.1.2 Any Order approving the sale shall contain a
provision pursuant to Bankruptcy Code 363(m) that the reversal or
modification thereof on appeal does not affect the validity of such sale to
Purchaser.
3.2 BIDDING PROCEDURES. Seller shall also seek an Order from the
Bankruptcy Court (the "Bidding Procedures Order"), 10 calendar days in
advance of the hearing on the Sale Motion (the "Hearing"), providing for
(i) the procedure for parties to follow in the event Seller receives a
competing offer or proposal relating to the Assets and (ii) approval of the
Overbid Break-up Fee specified in Section 3.2.6, which pleadings shall be
in form and substance satisfactory to Purchaser. The Bidding Procedures
Order shall provide, among other things, the following:
3.2.1 Only Purchaser and a party who has submitted a
Qualified Bid may bid at the Hearing.
3.2.2 A Qualified Bid must meet the following conditions:
3.2.2.1 the maker of such bid must provide
to Seller at least five calendar days prior to the Hearing reasonably
satisfactory evidence of (a) financial capability and good faith intent to
fulfill all of the terms and conditions of this Agreement on a timely
basis, accompanied by payment of an initial cash deposit in the amount of
at least $300,000 and (b) adequate assurance of future performance of the
Assumed Liabilities and Assigned Contracts, as required by the Bankruptcy
Code; and
3.2.2.2 the maker of such bid must execute
an asset purchase agreement essentially identical to the Agreement, except
that the bid must provide for a purchase price equal to the Purchase Price
set forth in Section 2.1 hereof, plus an additional $300,000.
3.2.3 Any dispute as to any bidder's intent or ability shall
be resolved by the Bankruptcy Court at the Hearing on the Sale Motion.
3.2.4 At the Hearing on the Sale Motion, the Bankruptcy Court
shall decide which of the bids is the highest and best bid, and the holder
of said bid must stipulate and agree on the record at the Hearing to be
bound by all the terms of the Agreement. If Purchaser's bid is not
selected as the highest and best bid, Purchaser shall be entitled to match
the highest and best bid, in which event Purchaser's bid shall be deemed
the highest and best bid. Purchaser shall be credited with the $100,000
break-up fee set forth in Section 3.2.6 as part of its bid.
3.2.5 Any counterbid in the bidding process over the initial
counterbid must be at least $200,000 higher than the prior bid or
counterbid. All subsequent counterbids will be at least $200,000 higher
than any prior bid or counterbid.
3.2.6 If Seller terminates this Agreement because Purchaser's
bid is not the highest and best bid, then within five days of the date of
such termination, Purchaser shall be paid the Break-up Fee of $100,000,
which fee shall be paid solely from the deposit paid by the successful
bidder as part of such successful bidder's Qualified Bid, without any
administrative liability to the estate.
3.3 NO SHOP.
3.3.1 Seller agrees that during the period commencing on the
date hereof and ending on the earlier of the Closing Date or the
termination of this Agreement, Seller will not, directly or indirectly
(a) encourage, solicit or initiate discussions or negotiations with any
corporation, partnership, person, entity or group, other than Purchaser,
concerning any merger, consolidation, sale of assets, sale of securities or
acquisition of beneficial ownership with respect to the Seller or the
Assets, or (b) otherwise initiate any action (unless in response to an
unsolicited offer) which would prejudice the ability of Purchaser to close
under this Agreement; provided, however, that notwithstanding the
foregoing, nothing in this Section 3.3.1 shall prohibit or limit in any
way, the ability of Seller to (A) notify (including by means of
advertisement) any corporation, partnership, person, entity or group of (1)
the contents of the Bidding Procedures Order, (2) their ability to submit a
Qualified Bid,
(3) the procedures to be followed when submitting a
Qualified Bid and (4) information relating to the Hearing, including the
time and location thereof or (B) accommodate a prospective bidder's
reasonable request for information in conjunction with its due diligence
review of Seller, provided such bidder submits evidence satisfactory to
Seller of its or his financial capability to consummate the Contemplated
Transactions.
3.3.2 Seller and Purchaser shall issue a joint press release
upon the execution of this Agreement. The content of any such press
release shall be reasonably agreed upon by both Seller and Purchaser. No
press release will be issued by either Seller or Purchaser unless a
reasonable effort is made to agree upon the content thereof.
3.4 ADMINISTRATIVE EXPENSE. Seller agrees that in the event Seller
avoids a prepetition payment to one or more holders of the Assumed
Liabilities or any non-debtor party to the Assigned Contracts, Purchaser
shall have an allowed administrative expense claim to the extent Purchaser
elects to reimburse said person(s) in whole or in part for said avoided
prepetition payment(s).
3.5 CLOSING. The parties shall close (the "Closing") the transaction
contemplated by this Agreement (the "Transaction") within fifteen (15) days
after the entry of said Order as required in Section 3.1.1. The Closing
shall take place at the offices of the Purchaser, 000 Xxxx Xxxx Xxxxxx,
Xxxxxx, Xxxxxxx 00000, or by facsimile and overnight courier for the
convenience of the parties. All computations, adjustments, and transfers
for the purposes herein shall be effective as of 12:01 a.m. on the date of
Closing (the "Closing Date"). Time is of the essence of this Agreement.
3.6 CLOSING DOCUMENTS. At the closing and thereafter if requested by
Purchaser, the Seller shall tender to Purchaser fully executed deeds,
affidavits, assignments, bills of sale and other documentation as
Purchaser's attorneys may reasonably require for all Assets, including but
not limited to the following items:
3.6.1 Xxxx of Sale covering the Assets being conveyed.
3.6.2 Assignments of Lease set forth in Schedule 1.2.1
executed by Seller's landlord and Seller for each of the Stores.
3.6.3 Possession of the Assets.
3.6.4 All records and the executed originals of all lease
agreements, service contracts, warranties, maintenance agreements and other
documents affecting the Assets.
3.6.5 Such other documents as may be reasonably requested by
Purchaser in Connection with the conveyance of the Assets and the continued
effective operation thereof.
3.7 RENTRAK CLOSING DOCUMENTS.
3.7.1 The Closing Documents shall also include a Xxxx of Sale
executed by Rentrak, covering the Pre-Petition Rentrak Inventory.
ARTICLE IV
LIEN-FREE SALE
4.1 Upon the Closing, all right, title and interest in and
to the Assets shall be immediately vested in Purchaser free and clear of
any and all liens, claims, encumbrances and interests of any type
whatsoever, pursuant to Bankruptcy Code 363(b) and (f)
(other than expressly assumed liabilities under this Agreement). Any
liens, claims, encumbrances and interests shall attach to the proceeds of
the sale in order of their priority, to the same extent and with the same
validity, force and effect as if such assets had not been sold. The Order
referred to in Section 3.1.1 shall be substantially in the form of Exhibit
4.1 hereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF SELLER. In addition to any
warranties and representations otherwise contained herein, Seller also
represents and warrants to Purchaser as of the date hereof and on the
Closing Date as follows (all representations and warranties shall survive
closing by six months).
5.1.1 TITLE. Seller owns, and has good and marketable title,
to the Assets to be transferred by Seller pursuant to this Agreement.
5.1.2 LEASED ASSETS. Seller is the lessee of the real
property leases listed in Schedule 1.2.1 hereto; Seller is the Lessee of
those personal property Leases that are specifically identified, pursuant
to Schedule 1.2.1A; and Seller is the Lessee of the Post-Petition Rentrak
Inventory.
5.1.3 INTELLECTUAL PROPERTY.
5.1.3.1 To the best of Seller's knowledge,
information and belief, Seller has title to or has the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for the Operation of the businesses of the Seller as
presently conducted and as presently proposed to be conducted at the
Stores. Except for the "Blowout Video" tradename and servicemark, which
are licensed from Rentrak, each item of Intellectual Property owned or used
by Seller immediately prior to the Closing hereunder will be owned or
available for use by the Purchaser on identical terms and conditions
immediately subsequent to the Closing hereunder.
5.1.3.2 Seller has no knowledge that Seller
has interfered with, infringed upon, misappropriated or otherwise come into
conflict with any Intellectual Property rights of third parties, and none
of the employees with responsibility for Intellectual Property matters of
Seller has ever received any charge, complaint, claim or notice alleging
any such interference, infringement, misappropriation, or violation. To
the knowledge of the Seller and employees with responsibility for
Intellectual Property matters of Seller, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with
any Intellectual Property rights of Seller except with respect to the
"Blowout Video" name.
5.1.4 LEASES. Seller has delivered to the Purchaser correct
and complete copies of the real estate leases listed in Schedule 1.2.1 (as
amended to date) (the "Leases"). With respect to each of the Leases, and
subject to each landlord's consent to and approval of the assignment and
transfer of the Leases to Purchaser (to the extent that the same may be
necessary), Seller warrants that, except as provided in Schedule 1.2.1:
5.1.4.1 The lease is legal, valid, binding,
enforceable and has not been terminated.
5.1.4.2 The lease will continue to be legal,
valid, binding, enforceable and will not be terminated as of the Closing.
5.1.4.3 Seller has not assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any
interest in the leasehold.
5.1.4.4 To the best of Seller's knowledge,
information and belief, all facilities leased thereunder have received all
approvals of governmental authorities (including licenses and permits)
required in connection with the operation thereof and have been operated
and maintained in accordance with applicable laws, rules and regulations.
5.1.5 VIOLATIONS, SUITS, ETC. Seller has no knowledge that
Seller is in violation of any law or regulation, or under any order of any
court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or
instrumentality wherever located. Seller has no knowledge, except to the
extent set forth on Schedule 5.1.5, of any (1) claims, actions, suits or
proceedings instituted or filed and, (2) any claims, actions, suits or
proceedings threatened presently or which in the future may be threatened
by any federal, state, municipal or other governmental department,
commission, board, court, bureau, agency or instrumentality
wherever located. Seller has no knowledge that the execution and
the delivery of this Agreement, or the consummation of the transactions
contemplated hereby (including the assignments and assumptions referred to
hereinabove), will violate any statute, regulation, rule, judgment,
order, decree, stipulation, injunction, charge or other restriction
of any government, governmental agency, or court to which the Seller is
subject or any provision of its charter or bylaws. To the best of the
Seller's knowledge, information and belief, the Seller does not need
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for
the Parties to consummate the transactions contemplated by this Agreement
(including the assignments and assumptions referred to hereinabove).
5.1.6 FINANCIAL STATEMENTS. Seller has provided Purchaser
with the following financial statements (collectively, the "Financial
Statements"): (i) audited balance sheet and statement of income and cash
flow as of and for the years ended December 31, 1996 and December 31, 1997
for Seller (the "Most Recent Audited Financial Statements"); (ii) unaudited
balance sheet and statement of income and cash flow (the "Most Recent
Financial Statements") as of and for the year ended December 31, 1998 (the
"Most Recent Unaudited Financial Statement") for the Stores and for the
monthly periods thereafter to the Closing ("Monthly Financial Statements"),
said Most Recent Unaudited Financial Statements and Monthly Financial
Statements being materially correct, subject to usual and customary year-
end adjustments; and (iii) statement of income and cash flow for each of
the Stores as of and for the fiscal year ended. The Most Recent Audited
Financial Statements have been prepared in accordance with GAAP, are
materially correct, accurate and complete as of their dates and as of the
date hereof, and are consistent with the books and records of the Seller
(which books and records are correct and complete).
5.1.7 EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END.
Since the Most Recent Unaudited Financial Statements, there has not been
any adverse change in the assets, liabilities, business, financial
condition, operations, results of operations or future prospects of the
Seller, with respect to the Stores.
5.1.8 PRESENT STATUS. Since the Most Recent Monthly
Financial Statement, the Seller has not: sold or transferred any assets
except sales from inventory in the ordinary course of business and except
sales of warehouse inventory; suffered any damage, destruction, or loss
(whether or not covered by insurance) materially affecting its properties,
business or prospects; waived any rights of substantial value; nor entered
into any transaction other than in the ordinary course of business.
5.1.9 OPERATIONS UNTIL CLOSING. Between the date of this
Agreement and the Closing Date the Seller shall:
5.1.9.1 Operate the Stores in the ordinary
and normal course of business, including, but not limited to, maintaining
normal levels of inventory and equipment and continuing to purchase normal
levels of new release and sell-through inventory ("Normal Course of
Business"), subject to the continued availability of working capital. To
the extent that Seller obtains any such inventory post-petition from
Rentrak, such Post-Petition Rentrak Inventory shall be leased by Seller on
an individual title-by-title basis, pursuant to individual agreements with
Rentrak ("Individual Rentrak Agreements"), which agreements shall be on
essentially the same terms as the Existing Rentrak Agreement. In addition,
Seller shall provide Purchaser with a copy of its new release pre-orders
for the six (6) months prior to this Agreement and each month thereafter
through the date of Closing. In the event that Seller determines in its
reasonable judgment that it does not have the working capital to continue
to operate the Stores in the Normal Course of Business, then Seller shall
immediately notify Purchaser of such determination. On the Closing Date,
Seller shall transfer to Purchaser a full complement of rental and sell-
through tapes as is customary with Seller's operations at the Stores prior
to the date hereof but in no event less than 625,000 video cassette tapes
and games, digital video discs, audio books and laser discs; provided,
however, that said minimum number of 625,000 may be reduced in proportion
to the reduction in the purchase of inventory resulting from any reduction
in the number of Stores purchased and consequent reduction of the Purchase
Price as set forth in 2.1.2, 2.1.3 and 2.1.4; and
provided further that Seller shall not be obligated to purchase and take
delivery of any tapes and/or games after Closing.
5.1.9.2 Use Seller's reasonable best efforts
to maintain the Assets in as good working order and condition as at
present, ordinary wear and tear excepted.
5.1.9.3 Keep in full force and effect until
Closing present insurance policies or other comparable insurance coverage.
5.1.9.4 Not, without Purchaser's consent,
enter into any contracts or obligations, other than those normal consumer
contracts in the ordinary course of business, which by their terms would
either necessitate or, require as a practical business matter, assumption
of or action by Purchaser after the Closing Date; provided, however, that
Seller shall be entitled to continue ordering inventory for the Stores in
the ordinary course of business.
5.1.9.5 Not sell, assign, lease or otherwise
transfer or dispose of the Assets except in the ordinary course of
business. Sales of previously viewed tapes shall be consistent with
Seller's prior operations.
5.1.9.6 Not enter into any employment
contracts which are not terminable at will.
5.1.9.7 NOTIFICATION. Between the date of
this Agreement and the Closing Date, Seller will promptly notify Purchaser
in writing if Seller becomes aware of any fact or condition that causes or
constitutes a breach of any of Seller's covenants as of the date of this
Agreement, or if Seller becomes aware of the occurrence after the date of
this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a breach of any such
covenant had such covenant been made as of the time of occurrence or
discovery of such fact or condition.
5.1.10 OPERATIONS AFTER CLOSING.
5.1.10.1 Seller shall immediately upon the
Closing, cease and desist from using the name "Blowout Video," and shall
never thereafter use said name, except to the extent that Seller's present
name must be used in the prosecution or defense of legal actions; provided,
however, that Seller will take reasonable actions to change its corporate
name; and excepting further, the provisions of 5.1.10.2
hereinbelow.
5.1.10.2 Notwithstanding the provisions of
5.1.10.1, Seller may continue to use the name "Blowout Video" with
respect to individual, presently existing stores that are not acquired by
Purchaser, but only during the pendency of the Chapter 11 Bankruptcy Case,
and only for purposes of temporarily avoiding loss to the debtor's estate.
Said name shall not be sold by the debtor in its bankruptcy case for use by
any purchaser of any stores, other than Purchaser.
5.1.11 ORGANIZATIONAL REPRESENTATIONS AND WARRANTIES OF
SELLER. Seller represents and warrants as follows:
5.1.11.1 Seller is a corporation validly
existing and in good standing under the laws of the State of Delaware.
5.1.11.2 The execution and delivery of this
agreement by Seller has been duly authorized by proper corporate approval
and on the Closing Date, Seller will have all necessary power and authority
to consummate the transactions provided herein.
5.1.11.3 The officers whose signatures are
affixed hereto have the necessary corporate power and authority to bind the
Seller.
5.1.12 [Intentionally left blank]
5.1.13 ACCESS TO RECORDS. The Seller will afford the
Purchaser access, during normal business hours, to all its business
operations, properties, books, files, and records, and will cooperate in
the Purchaser's examination thereof. No such examination, however, shall
constitute a waiver or relinquishment by the Purchaser of its right to rely
upon the Seller covenants, representations, and warranties as made herein
or pursuant hereto. Until the Closing, the Purchaser will hold in
confidence all information so obtained, except as hereinafter provided, and
any document or instrument heretofore or hereafter obtained by the
Purchaser in connection herewith shall be held on an express trust for and
on behalf of the Seller, except as hereinafter provided.
5.1.14 COMPLIANCE. Through the Closing Date, the Seller will
use its best efforts to cause its employees to comply with all applicable
provisions of this Agreement.
15.1.15 FINANCIAL REPORTS. The Seller's revenue and expense
data provided to Purchaser and the Seller's Sales Tax Returns for 1996 and
1997, copies of which have been furnished to Purchaser by Seller prior to
the execution of this Agreement, fairly represent the financial position of
Seller as of their dates, and as of the date hereof.
5.1.16 ENVIRONMENT, HEALTH AND SAFETY.
5.1.16.1 To the best of Seller's knowledge,
information and belief, Seller has complied with all laws (including rules
and regulations thereunder) of federal, state and local governments (and
all agencies thereof) concerning the environment, public health and safety,
and employee health and safety and no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, demand or notice has been filed
or commenced against any of them alleging any failure to comply with any
such law or regulation.
5.1.16.2 Seller has no knowledge of any
liability (and there is no basis related to the past or present operations,
properties or facilities of Seller for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim or
demand against Seller giving rise to any liability) under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Resource Conservation and Recovery Act of 1976, the Federal Water Pollution
Control Act of 1972, the Clean Air Act of 1970, the Safe Drinking Water Act
of 1974, the Toxic Substances Control Act of 1976, the Refuse Act of 1899,
or the Emergency Planning and Community Right-To-Know Act of 1986 (each as
amended), or any other law (or rule or regulation thereunder) of any
federal, state or local government (or agency thereof, concerning release
or threatened release of hazardous substances, public health and safety, or
pollution or protection of the environment.
5.1.16.3 Seller has no knowledge of any
liability (and Seller has not handled or disposed of any substance,
arranged for the disposal of any substance or owned or operated any
property or facility in any manner that could form the basis for any
present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand (under the common law or pursuant to any
statute) against Seller giving rise to any Liability) for damage to any
site, location or body of water (surface or subsurface) or for illness or
personal injury.
5.1.16.4 Seller has no knowledge of any
liability (and there is no basis for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim or
demand against Seller giving rise to any Liability) under the Occupational
Safety and Health Act, as amended, or any other law (or rule or regulation
thereunder) of any federal, state or local government (or agency thereof)
concerning employee health and safety.
5.1.16.5 To the best of Seller's knowledge,
information and belief, Seller has obtained and been in compliance with all
of the terms and conditions of all permits, licenses and other
authorizations which are required under, and has complied will all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables which are contained in,
all federal, state and local laws (including rules, regulations, codes,
plans, judgments, orders, decrees, stipulations, injunctions and charges
thereunder) relating to public health and safety, worker health and safety,
and pollution or protection of the environment, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous or toxic materials or
wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of pollutants, contaminants, or chemical, industrial,
hazardous or toxic materials or wastes.
5.1.16.6 LAWFUL OPERATIONS WITHOUT HAZARDOUS
WASTES. To the best of Seller's knowledge, information and belief, Seller
warrants in the operation of Seller's business or uses on the leased spaces
set out in Schedule 1.2.1 that Seller complied with all applicable laws and
regulations, including permits, during its possession, and to the best of
Seller's knowledge, that during its possession, there has been no on-site
disposal on the leased spaces of hazardous or toxic waste as defined by
federal or state laws, and there has been no storage of hazardous or toxic
waste on the leased spaces, nor off-site disposal of hazardous or toxic
waste generated from any operation on the leased spaces.
Further, Seller agrees to provide Purchaser with any hazardous or
toxic waste evaluations which have been prepared by a private engineer,
business, or a governmental entity, in the Seller's possession or control.
5.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER.
5.2.1 Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
5.2.2 The execution and delivery of this agreement by
Purchaser has been duly authorized by proper corporate action, and on the
Closing Date, Purchaser will have all necessary authority to consummate the
transactions provided herein.
ARTICLE VI
CONDITIONS TO OBLIGATION TO CLOSE
6.1 CONDITIONS TO OBLIGATION TO CLOSE.
6.1.1 CONDITIONS TO OBLIGATION OF THE PURCHASER. The
obligation of the Purchaser to consummate the transactions to be performed
by it in connection with the Closing is subject to satisfaction of the
following conditions:
6.1.1.1 APPROVAL BY BANKRUPTCY COURT.
Approval of this Agreement by the Bankruptcy Court having jurisdiction over
Seller's estate, which Order shall include, INTER ALIA, provisions that
(i) the sale, assumption and assignment of the Assets, Assigned Contracts
and Assumed Liabilities to Purchaser are free and clear of all liens,
security interests, claims and other encumbrances, (ii) Purchaser is a good
faith purchaser, (iii) Purchaser shall have an allowed administrative
expense claim in
Seller's bankruptcy case to the extent Purchaser elects to reimburse
any holder or holders of the Assumed Liabilities or any non-debtor
party to the Assigned Contracts for any prepetition payments avoided
by Seller or its estate. Such Order shall not be subject to any stay of
effectiveness.
6.1.1.2 INJUNCTION. There must not be in
effect any Legal Requirement or any injunction or other Order that
prohibits or restrains Purchaser's acquisition of the Assets and the
assumption of the Assigned Contracts and the Assumed Liabilities or the
consummation of the Agreement.
6.1.1.3 ADDITIONAL AGREEMENTS. Seller shall
have delivered to Purchaser on the Closing Date the documents and
agreements specified in Section 3.6.
6.1.1.4 AGREEMENT WITH SELLER AND RENTRAK.
The Purchaser shall have entered into an agreement with Seller and Rentrak
for the termination of the Seller's lease rights; the purchase of the Pre-
Petition Rentrak Inventory for $200,000; and the delivery by Rentrak of a
Xxxx of Sale covering the Pre-Petition Rentrak Inventory.
6.1.1.5 FILINGS WITH BANKRUPTCY COURT MADE.
All filings with the Bankruptcy Court required by Section 3.1 hereof shall
have been made by Seller and all approvals and Orders sought from such
Bankruptcy Court therein shall have been granted.
6.1.1.6 CONSENT OF LESSOR WAL-MART. The
written consent of Real Property Lessor Wal-Mart shall have been obtained
to its Real Property Lease with Seller, as modified pursuant to the
provisions of Exhibit 1.2.1.
6.1.1.7 The representations and warranties
of Seller set forth hereinabove shall be true and correct in all material
respects at and as of the Closing Date.
6.1.1.8 Seller shall have performed and
complied with all of its covenants hereunder in all material respects
through the Closing.
6.1.1.9 Seller and Purchaser shall have
reinspected the Assets and Purchaser shall be satisfied that Seller has not
sold, assigned, leased or otherwise transferred or disposed of any of the
Assets, except in the ordinary course of business and that sales of
previously viewed tapes and games have been substantially consistent with
Seller's prior operations.
6.1.1.10 Seller shall deliver to Purchaser
executed covenants not to compete in the form attached hereto as Exhibit
6.1.1.5 (the "Covenant Not To Compete").
6.1.1.11 Purchaser shall have entered into a
license agreement with Rentrak Corporation for use of the "Blowout Video"
service xxxx and trade name by Purchaser in connection with the operation
of the Stores for a period of not less than twelve (12) months after
Closing and pursuant to terms and conditions satisfactory to Purchaser in
its reasonable discretion.
6.1.1.12 Purchaser shall have entered into a
lease with respect to Seller's corporate office, on terms and conditions
satisfactory to Purchaser in its reasonable discretion.
6.1.2 CONDITIONS TO OBLIGATION OF THE SELLER. The
obligation of the Seller to consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the
following conditions:
6.1.2.1 The representations and warranties
of Purchaser set forth hereinabove shall be true and correct in all
material respects at and as of the Closing Date;
6.1.2.2 The Purchaser shall have performed
and complied with all of its covenants hereunder in all material respects
through the Closing.
6.1.2.3 The Bankruptcy Court shall have issued an order
approving the transactions as described herein.
ARTICLE VII
ADDITIONAL PROVISIONS
7.1 DEFAULT.
7.1.1 In the event that Seller fails for any reason to close
the Transaction, or in the event that Purchaser, based upon a material
failure by Seller for any reason to operate the Stores in the Normal Course
of Business, determines not to close the Transaction, then Seller shall
pay, or cause to be paid, to Purchaser a break-up fee in the amount of One
Hundred Thousand Dollars ($100,000.00) (the "Break-up Fee") for the time
and resources invested and the costs and expenses incurred by Purchaser in
connection with its evaluation of the Transaction, its due diligence
examination of Seller, and the negotiation and execution of this Agreement.
As security for the payment of the Fee and as a condition to Purchaser's
execution of this Agreement, Seller has arranged for Silicon Valley Bank
("Bank") to issue to Purchaser the Bank's irrevocable standby letter of
credit in the amount of the Fee (the "Letter of Credit"). Any occurrence,
act or omission ("Triggering Event") that would constitute a cause for the
payment of the Break-Up Fee To Purchaser under this Agreement shall require
payment to Purchaser by the Bank. The Letter of Credit, in the
form attached hereto as Exhibit 7.1.1, shall be delivered to Purchaser
by the Bank prior to the execution of this Agreement. For purposes of
this Section 7.1.1, the term "material failure" shall mean a failure that
is reasonably likely to have a material adverse effect on the Assets or
business of Seller at the Stores.
7.1.2 In the event that a default occurs, Purchaser must,
before taking any other action, give a written notice to Seller of such a
default. Seller will then have 10 business days in which to cure said
default.
7.1.3 In the event all contingencies contained herein shall
be met and Purchaser shall fail to purchase the Assets as provided herein
(other than for a reason as set forth in Section 7.1.1), the Purchaser
shall reimburse Seller for the cost of all fees, costs and expenses it may
have incurred or thereafter incur, including but not limited to attorney's
fees, and at Seller's option, Seller may seek specific performance and/or
any remedy available at law or equity.
7.2 [Intentionally left blank]
7.3 CONTINUED INSPECTION. The Purchaser has the right to examine the
Assets after acceptance of this contract by Seller. This right to examine
the Assets shall continue until Closing Date. Purchaser's right to examine
shall be during normal business hours, or as otherwise arranged and shall
not unreasonably interfere with the operation of Seller's business. Upon
request of Purchaser, Seller shall provide for Purchaser's review copies of
all leases, agreements or other documents relating to Seller's business.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 [Intentionally left blank]
8.2 RISK OF LOSS. The risk of loss prior to the Closing Date shall
be with Seller. In the event a material percentage of Assets or a material
percentage of operations of the Stores shall have been damaged adversely or
affected in any material way as a result of any strike, accident or other
casualty or act of God or the public enemy, or any judicial, administrative
or governmental proceeding at such time as Seller proposed to close, then
Purchaser shall have the options of either (i) prorating the Purchase Price
to adjust for the loss; or (ii) proceeding to close with an assignment of
any insurance proceeds which may be paid to reflect such loss or damage, or
(iii) terminating this Agreement without further liability to Seller.
8.3 SEVERABILITY AND OPERATIONS OF LAW. If any provision of this
Agreement is prohibited by the laws of any jurisdiction as those laws apply
to this Agreement, that provision is ineffective to the extent of such
prohibition and/or is modified to conform with such laws, without
invalidating the remaining provisions hereto; and any such prohibition in
any jurisdiction shall not invalidate such provision in any other
jurisdiction.
8.4 CHOICE OF LAW. This Agreement shall be governed by the internal
laws (and not the law of conflicts) of the State of Delaware.
8.5 ENTIRE AGREEMENT; MODIFICATION. This Agreement embodies the
entire agreement and understanding of the parties hereto and supersedes any
and all prior agreements, arrangements and understandings relating to the
matters provided for herein. No modification, alteration, waiver,
amendment, change or supplement hereto shall be binding or effective unless
the same is set forth in writing signed by a duly authorized representative
of each party to this Agreement.
8.6 SURVIVAL AND BINDING AGREEMENT. The terms and conditions hereof
shall survive the Closing and shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, personal
representatives, successors and assigns.
8.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.8 ASSIGNMENT. Neither party to this Agreement may assign any of
its rights or delegate any of its responsibilities under this Agreement,
except that Purchaser may assign this Agreement to any wholly owned
subsidiary of Purchaser or its parent corporation, Movie Gallery, Inc., or
to any person or entity that succeeds to all or substantially all of the
business of Purchaser through a purchase of assets, merger or otherwise.
8.9 NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by personal delivery, by overnight
carrier, or by facsimile transaction, as follows:
If to the Seller: Copy to:
Blowout Entertainment. Inc. Xxxxxxx & Xxxxx
Xxx Xxxxxxx Xxxxxx, 0{xx} Xxxxx 000 X. XxXxxxx Xx., Xxxxx 0000
0000 X.X. Xxxxxxxxxx Xxxxx Xxxxxxx, Xxxxxxxx 00000-0000
Xxxxxxxx, Xxxxxx 00000 Fax No.: 000-000-0000
Fax No.: 000-000-0000
Attn.: Xxxx Xxxxxxxxx and Xxxx Xxxxxxxx
Attn.: Xxxxx Xxxxx and Xxx Xxxxxxxxx
If to the Purchaser: Copy to:
M.G.A., Inc. Xxxx & Xxxxx Professional
000 Xxxx Xxxx Xx. Xxxxxxxxxxx
Xxxxxx, Xxxxxxx 00000 0000 Xxxxxxx Xxxx Xxxx
Fax No.: 000-000-0000 Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn.: S. Page Xxxx Fax No.: 000-000-0000
Attn.: Xxxxxx Xxxxx Xxxxxxx
10.3 TERMINATION. In addition to the rights of the parties to
terminate this Agreement as set forth elsewhere herein, this Agreement may
be terminated:
8.10.1 At any time, by the mutual agreement of Seller and
Purchaser.
8.10.2 At any time by Purchaser, and subject to the "notice
and cure" provisions contained in 7.1.2 herein, if Seller is in
breach of any of the representations, warranties or covenants set forth
herein.
8.10.3 At any time by Seller, provided Seller pays to
Purchaser the Default Break-up Fee.
8.10.4 By either Seller or Purchaser, if the Closing Date has
not occurred by June 24, 1999.
No termination pursuant to 8.11.2 or 8.11.4 shall relieve any
breaching party of its obligations to the non-breaching party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PURCHASER:
ATTEST M.G.A., INC.
/S/ S. PAGE XXXX By:/S/ XXXXX XXX
Its SECRETARY Its CHIEF FINANCIAL OFFICER
SELLER:
ATTEST BLOWOUT ENTERTAINMENT, INC.
/S/ XXXXXX X. XXXXXXXXX By: /S/ XXXXX XXXXX
Its CHIEF FINANCIAL Its PRESIDENT
OFFICER
TABLE OF CONTENTS
PAGE
ARTICLE I PURCHASE AND SALE OF ASSETS; ASSUMPTION AND ASSIGNMENT OF
LEASES AND EXECUTORY CONTRACTS.....................3
1.1 Purchased Assets 3
1.2 Assumed and Assigned Leases and Executory Contracts 4
1.2.3 Assumed Liability 5
1.2.5 Seller's Discount Booklets, Coupons and
Marketing Programs...................5
1.2.6 Credit Card Runs 5
1.2.7 Taxes and Prorations 5
1.2.8 Certain Employee Benefits 6
1.2.9 Other Closing Costs 6
1.3 Excluded Assets 6
ARTICLE II PURCHASE PRICE 7
2.1 Purchase Price 7
2.1.1 Certain Employee Benefits Price Reduction 7
2.1.2 K-Mart Price Reduction 7
2.1.3 Ralph's Price Reduction 7
2.1.4 Xxxx Xxxxxx Price Reduction 8
2.2 Payment 8
2.3 [Intentionally left blank] 8
2.4 [Intentionally left blank] 8
2.5 Allocation of the Purchase Price Among the Purchased
Assets.......................................8
2.6 Employment of Seller's Personnel 8
2.7 [Intentionally Left Blank] 8
ARTICLE III BANKRUPTCY COURT APPROVAL; CLOSING 9
3.1 Filings with Bankruptcy Court 9
3.2 Bidding Procedures 9
3.3 No Shop 10
3.4 Administrative Expense 11
3.5 Closing 11
3.6 Closing Documents 11
3.7 Rentrak Closing Documents 12
ARTICLE IV LIEN-FREE SALE 12
ARTICLE V REPRESENTATIONS AND WARRANTIES 12
5.1 Representations and Warranties of Seller 12
5.1.1 Title 12
5.1.2 Leased Assets 12
5.1.3 Intellectual Property 12
5.1.4 Leases 13
5.1.5 Violations, Suits, Etc 13
5.1.6 Financial Statements 14
5.1.7 Events Subsequent to Most Recent Fiscal Year End
14
5.1.8 Present Status 15
5.1.9 Operations Until Closing 15
5.1.10 Operations after Closing 16
5.1.11 Organizational Representations and Warranties of
Seller..............................16
5.1.12 [Intentionally left blank] 17
5.1.13 Access to Records 17
5.1.14 Compliance 17
5.1.15 Financial Reports 17
5.1.16 Environment, Health and Safety 17
5.2 Representations and Warranties of Purchaser 19
ARTICLE VI CONDITIONS TO OBLIGATION TO CLOSE 19
6.1 Conditions to Obligation To Close 19
6.1.1 Conditions to Obligation of the Purchaser 19
6.1.2 Conditions to Obligation of the Seller 21
ARTICLE VII ADDITIONAL PROVISIONS 21
7.1 Default 21
7.2 [Intentionally left blank] 22
7.3 Continued Inspection 22
ARTICLE VIII MISCELLANEOUS PROVISIONS 22
8.1 [Intentionally left blank] 22
8.2 Risk of Loss 22
8.3 Severability and Operations of Law 23
8.4 Choice of Law 23
8.5 Entire Agreement; Modification 23
8.6 Survival and Binding Agreement 23
8.7 Counterparts 23
8.8 Assignment 23
8.9 Notices 23
8.10 Termination 24
