EXHIBIT
2.3
TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT (the "Agreement") entered
into as of August 10, 1998 by and between WHEREHOUSE
ENTERTAINMENT, INC., a Delaware corporation (the "Purchaser"),
and VIACOM INTERNATIONAL INC., a Delaware corporation (the
"Seller"). Capitalized terms used herein without definition
shall have the same meanings herein as in the Purchase Agreement
(as hereinafter defined).
W I T N E S S E T H:
WHEREAS, the Seller and the Purchaser are parties to a
certain Stock Purchase Agreement (the "Purchase Agreement") dated
as of the date hereof pursuant to which the Purchaser has agreed
to acquire from the Seller all of the outstanding capital stock
of the Holding Subsidiaries (the "Acquisition"); and
WHEREAS, pursuant to the Purchase Agreement, the
Purchaser and the Seller are entering into this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Good Faith Efforts: Transition Teams. (a) The
Blockbuster Entertainment Group family of companies ("BEG") and
the Purchaser shall cooperate in good faith with the other to
effectuate an orderly transition of the Business to the
Purchaser. The Seller shall cause BEG to perform its duties
under this Agreement. The parties agree that such transition will
entail, from BEG personnel, responses to reasonable inquiries of
the Purchaser that would not have been a component of such
personnel's efforts in respect of the Business but for the
transition. In addition, in completing the transition of
Services for which the Purchaser has assumed responsibility BEG
shall provide copies of non-confidential or non-proprietary
information used to support the Business. At the same time the
parties agree that BEG will not be burdened with transition
obligations so in excess of the efforts it currently exerts in
respect of the Business as to unreasonably interfere with BEG's
normal business operations.
(b) The parties agree that promptly following the execution
of this Agreement each of the Purchaser and BEG shall establish
and identify to the other a team of employees reasonably suited
to facilitate the transition that will be responsible for
coordinating the transition of the Business to the Purchaser as
contemplated hereunder. Each team will have a leader, reasonably
acceptable to the other team. The teams will meet on an as
needed basis, as determined by the team leaders, and the team
leaders will be available to meet weekly. The parties anticipate
that promptly following execution hereof the team leaders will
meet to establish an agenda for transition.
2. Services: Liability. (a) During the Term (as
defined below), the Seller agrees to cause BEG to continue to
provide to the Music Subsidiaries the services, facilities and
the financial, inventory and other information systems and
reports currently and customarily being provided to the Music
Subsidiaries by BEG (collectively, the "Services"), and to cause
BEG to use its commercially reasonable efforts to perform and
maintain the Services at a performance, quality and timeliness
level commensurate with the level at which the Services have been
provided for and to the Music Subsidiaries by BEG on the date
hereof
(b) Exhibit A attached hereto sets forth a list of
transition efforts that Purchaser has requested and BEG will
provide whether or not they constitute Services.
(c) From the date hereof to the Closing Date, BEG will
provide such access during business hours as is reasonably
necessary to enable the Purchaser to install (but not operate)
its POS system next to the existing POS system in any store
included in the Business; provided that such placement shall not
interfere in the day-to-day operations of any location at which
it has been placed. The Purchaser shall remain solely
responsible for the security and condition of any such installed
POS system. In the event Purchaser utilizes the Services for
advertising, the Purchaser shall pay all third party costs
incurred with respect thereto, including, without limitation, the
cost of ad space or time.
(d) The Purchaser shall hold harmless the Seller, BEG, each
of their Affiliates and each of Seller's, BEG's and such
Affiliate's officers, directors, employees, agents, shareholders
and representatives (collectively "BEG Indemnitees") from and
against any and all damages, losses, claims, costs, expenses,
liabilities and obligations of any kind (including reasonable
attorney's fees and other legal costs and expenses (collectively
"Claims") which may be incurred or suffered by such BEG
Indemnitee, Purchaser or any Affiliate of Purchaser, arising
from, out of, or in connection with the provision of any (i)
Service involving the provision of consultation or advice
(whether legal or otherwise) in respect of the operation of the
Business, (ii) the installation of the Purchaser's POS system in
any store or (iii) any errors or omissions contained in any
advertisement placed by BEG as part of the Services, in each such
case except to the extent such Claim is determined in a final non-
appealable judgement of a court of competent jurisdiction to have
resulted directly from such BEG Indemnity's willful misconduct or
gross negligence.
3. Costs. During the four month period commencing on the
Closing Date, there will be no charge for transition efforts as
contemplated hereunder. Thereafter, the Purchaser shall pay to
BEG, by wire transfer to an account designated by BEG, monthly in
advance, the sum of $150,000 for the provision of the Services
throughout the remainder of the Term, except to the extent
Exhibit A sets forth a separate charge, in which event such
charge shall be additional. Such fee shall be subject to
adjustment pursuant to Section 5 below.
4. Term. The term of this Agreement shall commence on the
date hereof and terminate, subject to Section 5 below, not later
than the first anniversary of the Closing Date (the "Term"). BEG
shall have no obligation whatsoever to perform any Service beyond
the end of the Term. Unless otherwise identified with an
asterisk, the efforts indicated on Exhibit A shall commence
promptly following the Closing Date. Those efforts identified
with an asterisk shall commence promptly following the date
hereof.
5. Right to Terminate Services. If the Purchaser desires
to terminate this Agreement in whole or in part with respect to
any Services, the Purchaser shall give BEG 30 days prior written
notice thereof (a "Reduction Notice"), which shall include
reasonable details relating to the request. Any requested
termination of Services pursuant to this Section 5 shall become
effective at the end of such 30-day period. The Purchaser and
the Seller shall negotiate in good faith a reasonable reduction
in the monthly charge to reflect such termination
6. General Conduct of Services. (a) To the extent BEG
may be requested to provide or cause to be provided to the
Purchaser access to files or information, BEG shall provide such
access only to existing records, files and information systems of
BEG, and only to the extent such information is reasonably
available in BEG's records, files and information systems and
only in the form and format so available at the time of the
Purchaser's request. All access shall be provided where such
information is customarily situated. To the extent BEG may be
requested to provide the Purchaser with reports or information,
BEG shall provide same only to the extent such information exists
in BEG's records, files and information systems and in such form
and format as is customarily generated by BEG.
(b) Subject to the terms hereof, BEG shall cause the
following employees to continue to provide Services as provided
by them on the date hereof and subject to the performance
criteria in Section 2 (a) hereof:
BEG Employees
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System)
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(c) BEG retains the right to terminate or reassign any of
the employees listed above. If any such employee has been
reassigned or is no longer employed by BEG, BEG shall consult
with the Purchaser regarding the appropriate individual to
perform the Services previously performed by such reassigned or
departed employee.
(d) The Provisions of this Section 6 shall apply to all
items listed on Exhibit A.
(e) From and after the Closing, the Seller shall be liable
for any shrink of any inventory of the Purchaser or any Acquired
Subsidiary which is stored at BEG's distribution center.
7. Warranties. EXCEPT AS PROVIDED IN SECTIONS 1 AND 2,
NEITHER SELLER NOR BEG MAKE ANY WARRANTY, EXPRESS OR IMPLIED,
WITH RESPECT TO THE SERVICES PROVIDED HEREUNDER.
8. Confidentiality. (a) BEG's materials and/or
information that may be provided to the Purchaser concerning
BEG's business or operations and the Purchaser's materials and/or
information provided to BEG concerning the Purchaser's business
and operations, are proprietary trade secrets and confidential
information ("Confidential Information") of BEG and the
Purchaser, respectively; provided, however, that nothing herein
shall serve to affect any proprietary or confidential information
transferred to the Purchaser under the Purchase Agreement. Each
party agrees not to (i) disclose the Confidential Information of
the other party to any third party, (other than its
Representatives) or (ii) use the Confidential Information except
as necessary to perform its obligations under this Agreement, in
either case without the express written consent of the other
party, and each party shall be responsible for any breaches of
this Section 8 by its directors, officers, employees,
representatives (including, without limitation, financial
advisors, attorneys and accountants) or agents (the
"Representatives").
(b) The term Confidential Information will not, however,
include information which (i) is or becomes publicly available
other than as a result of a disclosure by the party receiving the
Confidential Information ("Receiving Party") or its
Representatives or (ii) is or becomes available to the Receiving
Party on a nonconfidential basis from a source (other than the
party providing, directly or indirectly, its Confidential
Information ("Providing Party") or its Representatives) which, to
the best of the Receiving Party's knowledge after due inquiry, is
not prohibited from disclosing such information to it by a legal,
contractual or fiduciary obligation to the Providing Party.
(c) Upon the earliest to occur of termination of this
Agreement, such time as any Confidential Information ceases to be
required by the Receiving Party to perform or receive Services
hereunder or at the request of a Providing Party when such
Confidential Information is not necessary for BEG to perform the
Services hereunder, a Receiving Party shall promptly return, and
cause to be returned, all or any requested portion of such
Confidential Information and shall destroy, or cause to be
destroyed, all copies (including electronic versions) of any
compilations, analyses, studies or other documents prepared by
the Receiving Party or its Representatives containing or
reflecting any such Confidential Information.
9. No License. Nothing contained in this Agreement shall
be construed as conferring by implication, estoppel or otherwise
any license of any intellectual property owned or controlled by a
party following consummation of the Acquisition.
10. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be
given or made (and shall be deemed to have been duly given or
made upon receipt) by delivery in person, by overnight courier
service, by cable, by facsimile, by telegram, by telex or by
registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a
notice given in accordance with this Section 10):
If to the Purchaser:
Wherehouse Entertainment, Inc.
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Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
If to BEG:
Blockbuster Entertainment Group
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Attention: General Counsel
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Viacom International Inc.
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Attention: Deputy General Counsel
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
11. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by
any Law or public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.
12. Entire Agreement. This Agreement constitutes the
entire agreement of the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and
undertakings with respect to the subject matter hereof.
13. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of all parties and their
respective successors and assigns. This Agreement may not be
assigned by the Purchaser without the prior written consent of
the Seller. The Seller may assign all or any portion of its
rights and obligations pursuant to this Agreement to one or more
of Viacom's direct or indirect Affiliates and/or in connection
with a merger, consolidation or sale of substantially all of the
stock or assets of the Seller. Any assignment in violation of
this section 13 shall be void ab initio.
14. No Third Party Beneficiaries. Nothing in this
Agreement is intended to confer any rights or remedies under or
by reason of this Agreement on any persons other than the parties
and their respective successors and permitted assigns.
15. Relationship of the Parties. The parties hereto are
independent contractors and neither party is an employee, agent,
partner or joint venture of the other. Under no circumstances
shall any of the employees of a party hereto be deemed to be
employees of the other party for any purpose. Neither party
shall have the right to bind the other to any agreement with a
third party nor to represent itself as an agent, partner or joint
venturer of the other or to incur any obligation or liability on
behalf of the other party.
16. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the Laws of the State of New
York. All actions and proceedings arising out of or relating to
this Agreement shall be heard and determined in a New York state
or federal court sitting in the City of New York, and the parties
hereto hereby irrevocably submit to the exclusive jurisdiction of
such courts in any such action or proceeding and irrevocably
waive the defense of an inconvenient forum to the maintenance of
any such action
17. Certain Remedies. It is specifically understood and
agreed that any breach of this Agreement by any of the parties
hereto will result in irreparable injury to the aggrieved party,
that the remedy at law alone will be an inadequate remedy for
such breach and that, in addition to any other remedy for such
breach, such aggrieved party shall be entitled to seek to enforce
the specific performance of this Agreement by the breaching party
through both temporary and permanent injunctive relief, without
the necessity of proving actual damages, but without limitation
of their rights to recover such damages.
18. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be
deemed to be an original but all of which taken together shall
constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telecopier
shall be effective as delivery of a manually executed counterpart
of this Agreement.
19. Purchaser Remedies. The Purchaser's sole and exclusive
remedy for any and all breaches of this Agreement by the Seller
prior to Closing shall be to exercise its rights under the
Purchase Agreement. Except to the extent any BEG Indemnitee may
be entitled to receive indemnification hereunder, Seller shall
indemnify and hold harmless each Purchaser Indemnified Party
against any and all Claims arising out of, from or in connection
with a failure by Seller or BEG to perform in all material
respects its obligations hereunder following the Closing. The
Purchaser's sole and exclusive remedy for breaches hereunder
shall be in accordance with this Section 19.
20. Reliance on Instructions. To the extent any Service
requires BEG to exercise discretion, BEG may request instructions
from the Purchaser with respect to the exercise of such
discretion. The Purchaser shall promptly provide such
instruction in reasonable detail and BEG shall not be deemed to
have breached this Agreement if it relies upon such written
instruction. Notwithstanding anything in this Agreement to the
contrary, neither the Seller nor BEG shall be responsible or
liable for their failure to perform under this Agreement form any
event beyond the reasonable control of Seller or BEG including
labor strikes, acts of war or terrorism or acts of God.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
VIACOM INTERNATIONAL INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice
President
WHEREHOUSE ENTERTAINMENT, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇
Title: Chief Executive
Officer
and Chairman
AGREED:
BLOCKBUSTER ENTERTAINMENT GROUP
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President
and Chief Operations Officer