Exhibit 10.2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 1st day of January, 1998, by and among CD WAREHOUSE, INC., a Delaware
corporation ("Buyer"); ZDTMAC, a general partnership (the "Partnership") the
general partners of which are Compact Discs Management, Inc., a Delaware
corporation ("CDMI"), and Texas ZDT Management, Ltd., a Texas limited
partnership ("TEXAS ZDT"); CDMI; TEXAS ZDT; and the general and limited partners
of TEXAS ZDT listed on Exhibit "A" attached hereto (collectively, the "TEXAS ZDT
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PARTNERS" and, together with ZDTMAC, CDMI and TEXAS ZDT, the "Sellers").
WHEREAS, the Partnership is engaged in the business (the "Partnership
Business") of buying, selling and trading new and used audio compact discs, by
acting as a franchisee of Buyer and, as such franchisee, operating the stores
(the "CD Warehouse Stores") listed on Exhibit "B" attached hereto; and
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WHEREAS, CDMI and TEXAS ZDT own, respectively, a 15% and 85% interest in
the Partnership as general partners thereof; and
WHEREAS, it is the intent of CDMI and TEXAS ZDT, as the sole partners of
the Partnership, to sell to Buyer all of the assets comprising the Partnership
Business and, immediately upon receipt by each of CDMI and TEXAS ZDT of their
respective portion of the Purchase Price (as defined herein), to mutually
dissolve the Partnership.
NOW THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements and upon the terms and subject to the conditions
hereinafter set forth, the parties hereby agree as follows:
ARTICLE I
TERMS OF PURCHASE AND SALE
1.1 Purchase and Sale of Assets. Subject to and upon the terms and
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conditions contained herein, at the Closing (as defined in Section 9.1), Sellers
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will sell, transfer, assign, convey and deliver to Buyer, and Buyer will
purchase, accept and acquire from Sellers, free and clear of all liens, claims,
security interests and encumbrances of any nature, except as set forth on
Schedule 3.1 ("Encumbrances"), all of the following properties and assets
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(whether real or personal, tangible or intangible) of the Partnership related to
the Partnership Business (collectively, the "Assets"):
(a) all of the Sellers' right, title and interest in the Partnership
Business' inventory of new and used audio compact discs (the
"Inventory");
(b) All of Sellers' right, title and interest in and to all receivables as
of the Closing Date arising out of the operation of the Partnership
Business, including, without limitation, accounts receivable, notes
receivable, and warranty receivables (collectively, the
"Receivables");
(c) All of Sellers' right, title and interest in and to all franchise
agreements and franchise and area development agreements to which the
Partnership is a party, as listed on Schedule 1.1 (collectively, the
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"Contracts");
(d) All records relating to the Partnership and the Partnership Business,
including, without limitation, customer lists, vendor lists, franchise
files, accounting and tax records concerning the same and sales
literature and promotional materials;
(e) All of Sellers' right, title and interest in the Partnership's
furniture, equipment, files and other assets currently located at the
CD Warehouse Stores.
1.2 Treatment of Certain Obligations. The term "Payables" means all of
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the Partnership's accounts payable outstanding as of 12:01 a.m. on the day
preceding the Closing Date (as defined hereinafter), for Inventory purchased by
the Partnership or the CD Warehouse Stores in the ordinary course of Partnership
Business. The term "Assumed Obligations" means the Payables and all of Sellers'
obligations arising after the Closing Date under the Contracts listed on
Schedule 1.1; provided, however, the Assumed Obligations shall not include any
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obligation for performance or obligation or liability of the Sellers for default
or nonperformance under the Contracts or Payables arising prior to the Closing
Date. AT CLOSING, BUYER WILL ASSUME THE ASSUMED OBLIGATIONS PURSUANT TO AN
ASSIGNMENT AND ASSUMPTION AGREEMENT ACCEPTABLE TO BUYER AND SELLERS (THE
"ASSIGNMENT AND ASSUMPTION AGREEMENT") EFFECTIVE AS OF THE CLOSING DATE. BUYER
WILL NOT ASSUME OR HAVE ANY RESPONSIBILITY, HOWEVER, WITH RESPECT TO ANY OTHER
OBLIGATION OR LIABILITY OF THE SELLERS NOT INCLUDED WITHIN THE ASSUMED
OBLIGATIONS.
1.3 Transfer and Conveyance. Sellers shall execute and deliver to Buyer
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at the Closing (i) a ▇▇▇▇ of sale (the "▇▇▇▇ of Sale") in substantially the form
attached hereto as Exhibit "C," and (ii) all such other assignments,
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endorsements and instruments of transfer as shall be necessary or appropriate to
carry out the intent of this Agreement and as shall be sufficient to vest in
Buyer title to all of the Assets and all right, title and interest of Sellers
thereto.
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ARTICLE II
PURCHASE PRICE
2.1 Purchase Price
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(a) The purchase price for the Assets shall be Five Hundred Eighty-eight
Thousand Two Hundred Thirty-six Dollars ($588,236) (the "Purchase
Price"), of which 15%, or Eighty-eight Thousand Two Hundred Thirty-six
Dollars ($88,236) (the "CDMI Portion of the Purchase Price"), shall be
paid to CDMI in cash, and 85%, or Five Hundred Thousand Dollars
($500,000) (the "TEXAS ZDT Portion of the Purchase Price"), shall be
paid to TEXAS ZDT in cash and securities of Buyer, as described below.
By the execution of this Agreement, TEXAS ZDT hereby directs Buyer to
remit the TEXAS ZDT Portion of the Purchase Price directly to the
TEXAS ZDT PARTNERS, pro rata to their respective partnership interests
in TEXAS ZDT.
(b) One Hundred Thousand Dollars ($100,000) of the TEXAS ZDT Portion of
the Purchase Price shall be paid in cash. The remaining Four Hundred
Thousand Dollars ($400,000) of the TEXAS ZDT Portion of the Purchase
Price shall be paid in the form of 110,345 shares (the "Stock Portion
of the Purchase Price") of the common stock, par value $.01 ("Common
Stock"), of Buyer, valued for the purposes of such computation at
$3.625 per share.
2.2 Registration Rights Attributable to the Common Stock Comprising the
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Stock Portion of the Purchase Price. (i) For a period of three years
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following the Closing Date, the TEXAS ZDT PARTNERS will be entitled to
register (with certain limitations) all of the Common Stock comprising
the Stock Portion of the Purchase Price for sale or distribution in
the event that Buyer files (or causes to be filed) a registration
statement with the United States Securities and Exchange Commission
relating to any of the Common Stock; and (ii) if any such TEXAS ZDT
PARTNER elects to participate as a selling shareholder therein, all
registration costs and expenses will be borne by the issuer and any
participating selling shareholders on a pro rata basis in accordance
with the number of shares being registered for sale.
2.3 Voting Rights to the Common Stock Comprising the Stock Portion of the
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Purchase Price. During the three year pendency of the TEXAS ZDT
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PARTNERS' registrations rights, as described in Section 2.2 above, the
TEXAS ZDT PARTNERS jointly and severally agree and do hereby grant to
Buyer's designated representative or proxy, all of the TEXAS ZDT
PARTNERS' voting rights and powers with respect to the Common Stock
received by them hereunder, to vote in the Buyer's nominee proxy's
sole discretion to authorize or approve any corporate or stockholders'
action
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regarding: (i) the election of directors or other officers of
the Buyer; (ii) the amendment of the Certificate of Incorporation or
By Laws of the Buyer; and (iii) any resolution or proposed action
presented at any meeting or requiring the consent of the Buyers
stockholders.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby represent and warrant as follows:
3.1 Title. Sellers have, and upon conveyance of the Assets to Buyer by
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Sellers at the Closing, Buyer will acquire and hold, good and marketable title
to all Assets being conveyed hereby, free and clear of any and all Encumbrances,
except as set forth on Schedule 3.1.
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3.2 Contract Defaults Except as disclosed on Schedule 3.2, none of
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Sellers is aware of any default in any material respect under any of the
Partnership Contracts, the Contracts are legal, valid and binding obligations of
the respective parties thereto in accordance with their terms and to the best of
each such party's knowledge have not been amended, no defenses, offsets or
counterclaims thereto have been asserted or may be made by any party thereto.
3.3 Litigation To the best of each Seller's knowledge, set forth on
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Schedule 3.3 is a list of all actions, suits, proceedings, investigations or
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grievances pending against the Partnership or any other Seller or threatened
against the Partnership, any other Seller, the Partnership's business or any
property or rights of the Partnership or any other Seller, at law or in equity
or admiralty or before or by and court or federal, state municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign (each an "Agency").
3.4 Power and Authority. The execution, delivery and performance of this
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Agreement by Sellers, and all other agreements executed in connection herewith,
and the consummation by it of the transactions contemplated hereby and thereby,
have been duly authorized by all requisite action and no further action or
approval is required in order to permit Sellers to consummate the transactions
contemplated hereby and thereby. This Agreement constitutes, and all other
agreements by and among the parties, when executed and delivered in accordance
with the terms thereof, will constitute the legal, valid and binding obligations
of Sellers, enforceable in accordance with their terms (subject, as to the
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights from time to time in
effect). Each of Sellers has full power, authority and legal right to enter
into this Agreement, and all other agreements by and among the parties, and to
consummate the transactions contemplated hereby and thereby.
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3.5 True, Correct and Complete Information The information furnished to
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Buyer by Sellers prior to or on the date of this Agreement and in any Schedule
referred to herein is true, correct and complete in all material respects. Such
information states all material facts required to be stated therein or with
respect thereto or necessary to make the statements therein or with respect
thereto, in light of the circumstances under which such statements are made,
true correct and complete.
3.6 Representations by the TEXAS ZDT PARTNERS with respect to the Stock
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Portion of the Purchase Price. Each of the TEXAS ZDT PARTNERS hereby agrees,
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represents and warrants that:
(a) Such partner is acquiring such shares of Common Stock for his own
account (and not for the account of others) for investment and not
with a view to the distribution or resale thereof;
(b) Such partner understands that he may not sell or otherwise dispose of
such shares of Common Stock in the absence of either a registration
statement under the Securities Act of 1933, or an exemption from the
registration provisions of the Securities Act of 1933; and
(c) The certificate representing such shares of Common Stock will contain
a legend to the effect of paragraph 3.6(b) above.
(d) Such partner understands that the foregoing representations and
warranties are to be relied on by Buyer as a basis for the exemption
of the sale of the Common Stock under the registration requirements of
the Securities Act of 1933, as amended.
(e) Such partner acknowledges that the sale of the Common Stock hereunder
has not and will not be registered under the Securities Act of 1933,
as amended, and that said shares of Common Stock must be held
indefinitely unless they are subsequently registered thereunder or an
exemption from such registration is available. Such partner
understands that Buyer is under no obligation to register the Common
Stock or to comply with any exemption available for the resale of the
Common Stock without registration.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties to Sellers.
4.1 Due Organization and Qualification Buyer is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate
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power and authority to own or lease its properties and to carry on its business
as it is presently being operated and in the place where such properties are
owned or leased and such business is conducted.
4.2 Corporate Power and Authority The execution, delivery and
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performance of this Agreement by Buyer, and all other agreements referred to
herein or executed in connection herewith, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly authorized by all
requisite corporate action and no further action or approval is required in
order to permit Buyer to consummate the transactions contemplated hereby and
thereby. This Agreement constitutes, and all other agreements by and among the
parties, when executed and delivered in accordance with the terms thereof, will
constitute, the legal, valid and binding obligations of Buyer, enforceable in
accordance with their terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights from time to time in effect). Buyer has full power,
authority and legal right to enter into this Agreement and all other agreements
by and among the parties and to consummate the transactions contemplated hereby
and thereby.
ARTICLE V
COVENANTS OF SELLERS
Each of Sellers, jointly and severally, hereby covenants and agrees with
Buyer as follows:
5.1 Affirmative Covenants. Prior to the Closing Date (as hereinafter
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defined), Sellers will operate the Partnership Business in the usual, regular
and ordinary course of business consistent with past business practices, and,
with respect to the Partnership and each of the CD Warehouse Stores comprising
the Partnership Business, will use their best efforts to (i) preserve intact its
business organization and the Assets; (ii) maintain its properties, machinery
and equipment in good operating condition and repair; (iii) continue all
existing policies of insurance (or comparable insurance) in full force and
effect up to and including the Closing Date (and will not cancel any such
issuance or take (or fail to take) any action that would enable the insurers
under such policies to avoid liability for claims arising out of any occurrence
on or prior to the Closing Date without the prior written consent of Buyer);
(iv) use its best efforts to preserve its present relationships with lending and
other financial institutions, suppliers, customers, and franchisees; (v)
maintain its books, accounts and records in the usual, regular and ordinary
manner on a basis consistently applied; .and (vi) accumulate and preserve any
and all revenues received for Buyer at Closing.
5.2 Negative Covenants. Prior to the Closing Date Sellers will operate
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the Partnership and each of the CD Warehouse Stores comprising the Partnership
Business in the usual, regular and ordinary course of business consistent with
past business practices.
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5.3 Approvals of Third Parties. As soon as practicable after the date
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hereof, Sellers will use their best efforts to secure all necessary consents,
approvals and clearances of third parties that shall be required to consummate
the transactions contemplated hereby.
5.4 Notices. Sellers will timely give all notices required to be given
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relating to the transactions contemplated hereby, including without limitation,
(i) notices to employees of the CD Warehouse Stores, and (ii) any notices
required or requested to be given to all creditors and claimants against Sellers
arising out of the Partnership Business or the operation of the CD Warehouse
Stores.
5.5 Covenant Not to Compete. Each of Sellers covenants and agrees that
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(i) neither he nor it will not, at any time during the period of ten (10) years
from the Closing Date, directly or indirectly, in or pertaining to any location
in the United States, own, manage, operate, join, control or participate in the
ownership, management, operation or control of, any business which, or any
businesses organization any part of which, engages in the business of buying,
selling or trading of new and/or used audio compact discs, including without
limitation the selling of, or investing in, franchises which engage in the
business of buying, selling or trading of new and/or used audio compact discs of
the type and kind and sold by the CD Warehouse Stores in the United States,
except as a franchisee of Buyer or an affiliate of Buyer or owner of up to 5% of
the outstanding common stock of a corporation so engaged, and (ii) neither he
nor it will, at any time during the period of ten (10) years from the Closing
Date, directly or indirectly own, manage, operate join, control of participate
in the ownership, management, operation or control of any business which, or any
business organization any part of which engages in the businesses of buying,
selling or trading audio compact discs via the "Internet," the "World Wide Web,"
or any other "on-line" computer communication networks, except as a franchisee
of the Buyer; PROVIDED, HOWEVER, the parties hereto acknowledge that CDMI is the
wholly owned subsidiary of Buyer and, accordingly, further acknowledge and agree
that, for the purposes of this Section 5.5 only, the term "Sellers" shall not be
deemed to include CDMI. The remedy at law for any breach or attempted breach by
Sellers of the provisions of this Section 5.5 will be inadequate and Buyer shall
be entitled to temporary or permanent injunctive relief against any breach or
attempted breach of such provision without the necessity of posting bond or
proving actual damages. It is the express intention of the parties hereto to
comply with all laws which may be applicable to this Section 5.5. Should any
restriction contained in this Section 5.5 be found to exceed in duration or
scope the restriction permitted by law, it is expressly agreed that the covenant
not to compete contained in this Section 5.5 may be reformed or modified by the
final judgment of a court of competent jurisdiction to reflect a lawful and
enforceable duration or scope. If any one or more of the provisions contained in
this Section 5.5 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 of this Agreement, but any inconsistency in
the provisions of this Agreement shall be construed as if such invalid, illegal
or unenforceable provision had never been contained herein. The terms and
conditions of this Section 5.5 will be governed by and construed in accordance
with the laws of the State of Delaware; the
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foregoing clause will not, however, affect the forum or venue of any dispute
resolution proceeding arising in connection with this Agreement or any other
term or condition of this Agreement whatsoever.
ARTICLE VI
COVENANTS OF BUYER
Buyer hereby covenants and agrees with Sellers as follows:
6.1 Approvals of Third Parties. As soon as practicable after the date
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hereof, Buyer will use its best efforts to secure all necessary consents,
approvals and clearances of third parties that shall be required to enable it to
consummate the transactions contemplated hereby and will otherwise use its best
efforts to cause the consummation of such transactions in accordance with the
terms and conditions of this Agreement.
6.2 Buyer's Best Efforts. Buyer will use its best efforts, acting in good
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faith, to cause the consummation of the transactions contemplated by this
Agreement in accordance with their terms and conditions.
6.3 Retention of Records. For a period of six years after the Closing,
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Buyer will retain all books and records that Buyer receives from Sellers.
During such period, Sellers and their representatives will have access to all
such books and records during normal business hours. Buyer will, upon request
of Sellers, furnish to such party, without charge, copies of any such books or
records.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer hereunder shall be subject to the satisfaction of
each of the following conditions precedent on or prior to the Closing Date,
except such conditions as Buyer may waive in writing.
7.1 Representations and Warranties of Sellers. All of the representations
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and warranties of Sellers contained in this Agreement and in any Schedule from
Sellers were true and correct when made, and shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though such representations and warranties had been made on and as of the
Closing Date.
7.2 Covenants of Sellers. All of the covenants and agreements herein on
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the part of Sellers to be complied with or performed on or before the Closing
Date shall have been fully complied with and performed.
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7.3 Certificate of Sellers. There shall be delivered to Buyer
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certificates dated as of the Closing Date and signed by each of the Sellers to
the effect set forth in Sections 7.1 and 7.2, which certificate shall have the
effect of a representation and warranty made by Sellers on and as of the Closing
Date.
7.4 No Casualty Losses. The Assets shall not have suffered any
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destruction or damage by fire, explosion or other casualty or any taking by
eminent domain which has materially impaired the operation of the Assets or
otherwise had a material adverse effect upon the Partnership Business conducted
by Sellers.
7.5 Litigation. At the Closing Date, there shall not be pending or
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threatened any litigation in any court or any proceeding before any Agency, (i)
in which it is sought to restrain, invalidate, set aside or obtain damages in
respect of the consummation of the purchase and sale of the Assets or the other
transactions contemplated hereby, (ii) which could, if adversely determined,
result in any material adverse change in the Partnership Business, operations or
Assets or the condition, financial, or otherwise, or results of operations of
Sellers, (iii) which could, if adversely determined, have a material adverse
effect on the right or ability of Sellers to carry on the Partnership Business
as now conducted or (iv) as a result of which, in the reasonable judgment of
Buyer, Buyer would be deprived of the material benefits of its ownership of the
Assets.
7.6 Due Diligence.
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(a) (i) Buyer shall have completed its "due diligence" review of the
Assets, books, records, files, contracts, leases, arrangements,
commitments, documents, tax returns, business operations, financial
statements, offices, buildings, and any other items or matter that
Buyer deems relevant which pertain to the Partnership Business or the
transactions contemplated hereby, and (ii) the results of such due
diligence review shall be acceptable, in all respects, to Buyer, in
its sole discretion.
(b) All actions, proceedings, instruments and documents required to carry
out this Agreement or incidental thereto and all other related matters
shall have been satisfactory to Day, Edwards, Federman, Propester &
▇▇▇▇▇▇▇▇▇▇▇, P.C., counsel for Buyer.
7.7 Consents. Sellers shall have obtained all orders, approvals or
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consents of third parties, including without limitation, any consents or
approvals deemed necessary by counsel to Buyer that shall be required to
consummate the transactions contemplated hereby, including, without limitation,
any landlord's consents.
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7.8 Non-Competition Agreements of Sellers. Each of Sellers shall have
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executed and delivered a Non-Competition Agreement substantially in the form
attached hereto as Exhibit "D."
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7.9 Further Assurances. Sellers shall take all such further action as may
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be reasonably requested by Buyer in order to effectuate the consummation of the
transactions contemplated by this Agreement. If Buyer shall reasonably
determine that any further conveyance, assignment or other document or any
further action is necessary to vest in it full title to the Assets, Sellers
shall cause the appropriate person or entity to execute and deliver all such
instruments and take all such action as Buyer may reasonably determine to be
necessary.
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ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of Sellers to cause the sale of the Assets and the other
transactions contemplated hereby to occur at Closing shall be subject to the
satisfaction on or prior to the Closing Date of all of the following conditions,
except such conditions as Sellers may waive in writing:
8.1 Representations and Warranties of Buyer. All of the representations
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and warranties of Buyer contained in this Agreement and in any Schedule or other
disclosure in writing from Buyer shall have been true and correct when made, and
shall be true and correct in all material respects on and as of the Closing Date
with the same force and effect as though such representations and warranties had
been made on and as of the Closing Date.
8.2 Covenants of Buyer. All of the covenants and agreements herein on the
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part of the Buyer to be complied with or performed on or before the Closing Date
shall have been fully complied with and performed.
8.3 Buyer's Certificate. There shall be delivered to Sellers a
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certificate dated as of the Closing Date and signed by the President or a Vice
President of Buyer to the effect set forth in Sections 8.1 and 8.2, which
certificate shall have the effect of a representation and warranty made by Buyer
on and as of the Closing Date.
ARTICLE IX
DATE AND PLACE OF CLOSING
9.1 Date and Place of Closing. Subject to satisfaction or waiver of the
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conditions to the obligations of the parties, the purchase and sale of the
Assets pursuant to this Agreement shall be effective as of January 1, 1998. The
closing (the "Closing") shall be held in the offices of Day, Edwards, Federman,
Propester & ▇▇▇▇▇▇▇▇▇▇▇, Inc. at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ Tower, 29th Floor, in
Oklahoma City, Oklahoma or such other place as is mutually agreed to by the
parties, at 10:00 a.m., CST, January _____, 1998 (the "Closing Date").
Notwithstanding the Closing Date, however, title to the Assets shall pass from
Sellers to Buyer as of 12:01 a.m., on January 1, 1998.
ARTICLE X
CLOSING
10.1 Sellers' Performance. At the Closing, concurrently with performance
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by Buyer of its obligations to be performed at the Closing:
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(a) Conveyances. Sellers shall execute and deliver to Buyer, in form and
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substance acceptable to Buyer (i) the ▇▇▇▇ of Sale, and (ii) all other
assignments, endorsements and instruments of transfer as shall be
necessary or appropriate to carry out the intent of this Agreement and
as shall be sufficient to vest in Buyer title to all of the Assets and
all right, title and interest of Sellers thereto. If requested by
Buyer, such documents shall be in form suitable for recording.
(b) Records. Sellers shall deliver to Buyer all documents, agreements,
reports, books, records and accounts pertaining specifically to the
Assets which are in their possession, including without limitation any
and all files and documents relating to any litigation described in
Schedule 3.3.
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(c) Certificates. Sellers shall execute and deliver the certificates
referred to in Section 7.3.
(d) Sellers and the Partners Non-Competition Agreement. Each of Sellers
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shall execute and deliver the Non-Competition Agreement required by
Section 5.5.
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(f) Other Actions. Sellers shall take all such other steps as may be
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necessary or appropriate to put Buyer in actual and complete ownership
and possession of the Assets.
(g) Consents. Sellers shall deliver to Buyer the consents and approvals
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required by Section 7.7.
10.2 Buyer's Performance. At the Closing, concurrently with the
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performance by Sellers of its obligations to be performed at the Closing:
(a) Purchase Price. Buyer shall deliver the following:
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(i) To CDMI, with respect to the CDMI Portion of the Purchase Price,
certified or bank cashier's checks or wire transfers of funds for
Eighty-eight Thousand Two Hundred Thirty-six Dollars ($88,236); and
(ii) To each of the TEXAS ZDT PARTNERS, with respect to the TEXAS ZDT
Portion of the Purchase Price, (A) certified or bank cashier's checks
or wire transfers of funds for One Hundred Thousand Dollars ($100,000)
in an amount payable to each such TEXAS ZDT PARTNER equal to such
partner's percentage interest in TEXAS ZDT multiplied by One Hundred
Thousand Dollars ($100,000); and (B) stock certificates representing
the number of shares of Common Stock equal to such TEXAS ZDT Partner's
percentage interest in TEXAS ZDT multiplied by the
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aggregate number of shares of Common Stock comprising the Stock
Portion of the Purchase Price.
(b) Certificates. Buyer shall execute and deliver the certificate
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referred to in Section 8.3.
10.3 Expenses; Other Instruments. In addition to the foregoing, Buyer and
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each of Sellers agree as follows:
(a) Further Action by Sellers. At any time and form time to time, at or
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after the Closing, upon request of Buyer, each of Sellers shall do,
execute, acknowledge and deliver or shall cause to be done, executed,
acknowledged and delivered all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and assurances as may
reasonably be required in order to vest in and confirm to Buyer full
and complete title to, possession of, and the right to use and enjoy,
the Assets.
(b) Further Action by Buyer. At any time and from time to time, at or
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after the Closing, upon request of Sellers, Buyer shall do, execute,
acknowledge and deliver or shall cause to be done, executed,
acknowledged and delivered all such further acts and assurances as may
reasonably be required in order to better assure and confirm to
Sellers the assumption by Buyer of the obligations to render
performance which are to be assumed by Buyer pursuant to this
Agreement.
(c) Expenses of 1998 Tax Return Preparation. Any expenses incurred by
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Buyer in connection with the preparation of tax or information returns
for the Partnership for the 1997 and 1998 tax years shall be borne pro
rata by CDMI and TEXAS ZDT or, if TEXAS ZDT shall have been dissolved,
by each of the TEXAS ZDT PARTNERS in proportion to their partnership
interests in TEXAS ZDT.
ARTICLE XI
SURVIVAL AND INDEMNIFICATION
11.1 Survival. All representations, warranties, covenants and agreements
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made in the Agreement shall survive and shall not be extinguished by the Closing
or any investigation made by or on behalf of any party hereto.
11.2 Buyer's Losses. Each of Sellers hereby agrees, jointly and severally
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subject to Section 11.7 below, to indemnify Buyer and save and hold Buyer
harmless from, against, for and in respect of any and all damages (including,
without limitation, amounts paid in settlement with Sellers' consent), losses,
obligations, liabilities, liens, deficiencies, costs and expenses, including,
without limitation, reasonable attorneys' fees and other costs and expenses
incident to any suit,
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action, investigation, claim or proceeding (hereinafter referred to collectively
as "Buyer's Losses"), including without limitation, any and all of Buyer's
Losses suffered, sustained, incurred or required to be paid by Buyer by reason
of (i) the breach by Sellers of any provisions of this Agreement, including any
representation or warranty made by Sellers in or pursuant to this Agreement
being untrue or incorrect in any material respect; (ii) any material failure by
Sellers to observe or perform their respective covenants and agreements set
forth in this Agreement; (iii) any liability for product warranties or defective
products arising from sales of Inventory sold by the CD Warehouse Stores prior
to the Closing Date; (iv) any failure by Sellers to satisfy and discharge any
other liability or obligation not expressly assumed by Buyer pursuant to this
Agreement; or (v) any and all claims made by employees of the Sellers for
workmen's compensation, medical insurance, disability, vacation, severance, sick
benefits or other compensation arrangements to the extent the same are based on
injury or sickness occurring prior to the Closing Date or based on employment
service rendered to Sellers prior to the Closing Date.
11.3 Sellers' Losses. Buyer agrees to indemnify Sellers and save and hold
---------------
Sellers harmless from, against, for and in respect of any and all damages
(including, without limitation, amounts paid in settlement with Buyer's
consent), losses, obligations, liabilities, claims, deficiencies, cost and
expenses, including, without limitation, reasonable attorneys' fees and other
costs and expenses incident to any suit, action, investigation, claim or
proceeding (hereinafter referred to collectively as "Sellers' Losses") suffered,
sustained, incurred or required to be paid by Sellers by reason of (i) any
representation or warranty made by Buyer in or pursuant to this Agreement being
untrue or incorrect in any material respect; (ii) any material failure by Buyer
to observe or perform its covenants and agreements set forth in this Agreement;
(iii) any liability for product warranties or defective products arising from
sales of Inventory sold by Buyer after the Closing Date; (iv) any failure by
Buyer to satisfy and discharge any liability or obligation expressly assumed by
Buyer pursuant to this Agreement; or (v) any and all claims made by employees of
Buyer for workmen's compensation, medical insurance, disability, vacation,
severance, sick benefits or other compensation arrangements to the extent the
same are based on injury or sickness occurring after the Closing Date or based
on employment service rendered to Buyer after the Closing Date.
11.4 Notice of Loss. Notwithstanding anything herein contained Buyer,
--------------
Sellers shall not have any liability under the indemnity provisions of this
Agreement with respect to a particular matter unless a notice setting forth in
reasonable detail the breach which is asserted has been given to the
Indemnifying Party (hereafter defined) and, in addition, if such matter arises
out of a suit, action, investigation or proceeding, such notice is given
promptly after the Indemnified Party (hereafter defined) shall have been given
notice of the commencement of a suit, action, investigation or proceeding. With
respect to Buyer's Losses pursuant to Section 11.2, hereof, Sellers shall be the
Indemnifying Party and Buyer shall be the Indemnified Party. With respect to
Sellers' Losses, Buyer shall be the Indemnifying Party and Sellers shall be,
jointly or severally, the Indemnified Party.
14
11.5 Right to Defend. Upon receipt of notice of any suit, action,
---------------
investigation, claim or proceeding for which indemnification might be claimed by
an Indemnified Party, the Indemnifying Party shall be entitled promptly to
defend, contest or otherwise protect against such suit, action, investigation,
claim or proceeding or its own cost and expense, including the right to invoke
any arbitration proceeding available in the dispute. The Indemnified Party
shall have the right, but not the obligation, to participate at its own expense
in a defense thereof by counsel of its own choosing, but the Indemnifying Party
shall be entitled to control the defense unless the Indemnified party has
relieved the Indemnifying Party from liability with respect to the particular
matter or the Indemnifying Party fails to assume defense of the matter. In the
event the Indemnifying Party shall fail to defend, contest or otherwise protect
in a timely manner against any such suit, action, investigation, claim or
proceeding, the Indemnified Party shall have the right, but not the obligation,
to defend, contest or otherwise protect against the same and make any compromise
or settlement thereof and recover the entire cost thereof from the Indemnifying
Party including reasonable attorneys' fees, disbursements and all amounts paid
as a result of such suit, action, investigation, claim or proceeding or the
compromise or settlement thereof. However, if the Indemnifying Party undertakes
the defense of such matters, the Indemnified Party shall not be entitled to
recover from the Indemnifying Party any legal or other expenses incurred by the
Indemnified Party in connection with the defense thereof other than the
reasonable costs of investigation undertaken by the Indemnified Party with the
prior written consent of the Indemnifying Party.
11.6 Request to Allocate Responsibility. Buyer and Sellers agree that if
-----------------------------------
they are jointly named as parties after Closing in any suit, claim or proceeding
that they will jointly request that the arbitrator, panel of arbitrators or
court specify in their judgment or order in the event that any liability is
determined as to the Buyer or Sellers whether the liability is attributable to
an act, omission or occurrence before or after the Closing Date or, if the
liability is attributable to acts, omissions or occurrences both before and
after the Closing Date, the proportionate degree of fault and damages reflected
in the judgment or order, attributable to the Buyer or Sellers.
ARTICLE XII
POST-CLOSING COVENANTS
12.1 Dissolution of the Partnership. By the execution hereof, each of
------------------------------
CDMI and TEXAS ZDT hereby agrees to dissolve the Partnership immediately upon
the conveyance to Buyer by the Partnership of the Assets. Immediately upon such
occurrence the Partnership shall be deemed dissolved, without further action by
either CDMI or TEXAS ZDT, and neither CDMI nor TEXAS ZDT (including the TEXAS
ZDT PARTNERS) shall have any liability or responsibility for the acts of the
other, except as expressly provided in this Agreement.
15
ARTICLE XIII
TERMINATION
13.1 Termination. This Agreement may be terminated and abandoned at any
-----------
time on or prior to the Closing Date.
(a) By the mutual consent in writing of Buyer and Sellers;
(b) By Buyer in writing if any of the material conditions to the
obligations of Buyer contained herein shall not have been satisfied
or, if unsatisfied, waived as of the Closing Date or if the results of
Buyer's due diligence investigation of the Assets and Partnership
Business are not satisfactory to Buyer in all respects.
(c) By Sellers in writing if any of the material conditions to the
obligations of Sellers contained herein shall not have been satisfied
or, if unsatisfied, waived as of the Closing Date.
(d) By Buyer or Sellers in writing if the Closing shall not have occurred
by February 1, 1998, except that no party shall have the right to
terminate this Agreement if the failure to close shall be the result
of such party's failure to perform, in any material respect, its
obligations hereunder.
13.2 No Further Force or Effect. In the event of termination and
--------------------------
abandonment of this Agreement pursuant to the provisions of Section 13.1, this
Agreement shall be of no further force or effect, except for the last sentences
of Sections 5.3 and 6.1 and Section 14.1 which shall not be affected by
termination of this Agreement.
ARTICLE XIV
MISCELLANEOUS
14.1 Expenses. Except as otherwise expressly provided herein, each of
--------
Sellers and Buyer shall each pay their own expenses in connection with the
preparation of this Agreement, and the consummation of the transactions
contemplated hereby, including, without limitation, fees of its own counsel,
auditors and other experts, whether or not such transactions be consummated.
14.2 Entire Agreement. This Agreement, together with the Schedules and
----------------
other agreements contemplated herein, constitutes the entire contract and shall
supersede all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter hereof and no
party shall be liable or bound to the other in any manner by any representations
or warranties except as specifically set forth herein or in any Schedule hereto
or agreement executed in connection herewith or expressly required to be made or
delivered pursuant thereto.
16
14.3 Successors and Assigns. The terms and conditions of this Agreement
----------------------
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties hereto. Nothing in this Agreement, express or implied,
is intended to confer upon any party, other than the parties and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of such agreements.
14.4 Identical Counterparts. This Agreement may be executed in one or
----------------------
more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
14.5 Headings. The headings of the paragraphs and subparagraphs of this
--------
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
14.6 Use of Certain Terms. As used in this Agreement, the words "herein,"
--------------------
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular paragraph, subparagraph or other
subdivision.
14.7 Modification and Waiver. Any of the terms or conditions of this
-----------------------
Agreement may be waived in writing at any time, whether before or after action
thereon by the party which is entitled to the benefits thereof; and this
Agreement may be modified or amended at any time, whether before or after action
thereon by the parties. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by all of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not similar)
nor shall such waiver constitute a continuing waiver.
14.8 Other Remedies. Except as otherwise provided herein, any and all
--------------
remedies expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby or by law on such party, and the
exercise of any one remedy will not preclude the exercise of any other.
14.9 Notices. All notices, consents, requests, instructions, approvals
-------
and/or communications provided for herein, shall be validly given, made or
served if in writing and delivered personally or sent by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
(i) If to Sellers: ZDTMAC
c/o
________________________
________________________
17
with copy to: ________________________
________________________
________________________
(ii) If to Buyer: CD Warehouse, Inc.
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
with copy to: Day, Edwards, Federman, ▇▇▇▇▇▇▇▇▇▇▇ & Propester,
P.C.
Attn: ▇▇▇▇▇ ▇. Day
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
The designation of the person to be so notified or the address of such person
for the purposes of such notice may be changed from time to time by a similar
notice. Any notice which is delivered personally in the manner provided herein
shall be deemed to have been duly given to the party to whom it is directed upon
actual receipt by such party (or its agent for notices hereunder). Any notice
which is addressed and mailed in the manner herein provided shall be
conclusively presumed to have been duly given to the party to which it is
addressed at the close of business, local time of the recipient, on the third
business day after the day it is so placed in the mail.
14.10 Governing Law. This Agreement has been executed and delivered in
-------------
the State of Oklahoma and, except as otherwise provided in Section 5.5 of this
Agreement, shall be construed and enforced in accordance with and governed by
the laws of the State of Oklahoma. This Agreement will not be construed for or
against a party merely because that party prepared it, but will at all times be
construed according to its fair meaning.
14.11 No Agent's Fees. Buyer represents to Sellers, and each of Sellers
---------------
represents to Buyer, that there is no agent's broker's or finder's fees or
commission payable or that will be payable in connection with the transactions
contemplated hereby by virtue of or resulting from any action or agreement by
it. Buyer hereby agrees to indemnify and hold harmless Sellers, and Sellers
agree to indemnify and hold harmless Buyer, from and against any claim, demand,
liability, loss, cost or expense (including reasonable attorneys' fees and
expenses) on account of or in connection with any agent's, broker's or finder's
fees or commissions payable or alleged to be payable in connection with this
Agreement or the transactions contemplated hereby virtue of or resulting from
any action or agreement on the part of such indemnifying party.
14.12 Binding Arbitration. Each party to this Agreement agrees that any
-------------------
dispute or controversy arising between any of the parties to this Agreement, or
---------
any person or entity in privity
18
therewith, out of the transactions effected and relationships created pursuant
to this Agreement and each other agreement created in connection herewith,
including any dispute or controversy regarding the formation, terms, or
construction of this Agreement, regardless of kind or character, must be
resolved through binding arbitration. Each party to this Agreement agrees to
submit such dispute or controversy to arbitration before the American
Arbitration Association in Oklahoma City, Oklahoma, and further agrees to be
bound by the determination of any arbitrator or arbitration panel empanelled by
the American Arbitration Association to adjudicate the dispute. Judgment on any
arbitration award may be entered in any court of competent jurisdiction. Any
party to this Agreement may bring an action, including a summary or expedited
proceeding, to compel arbitration of any such dispute or controversy in a court
of competent jurisdiction and, further, may seek provisional or ancillary
remedies including temporary or injunctive relief in connection with such
dispute or controversy in a court of competent jurisdiction, provided that the
dispute or controversy is ultimately resolved through binding arbitration
conducted in accordance with the terms and conditions of this Section.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed in counterparts all as of the date first above written.
SELLERS:
ZDTMAC, A GENERAL PARTNERSHIP
BY:
COMPACT DISCS MANAGEMENT, INC., A GENERAL PARTNER OF ZDTMAC
BY: __________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President and Chief Executive Officer
AND:
TEXAS ZDT MANAGEMENT, LTD., A GENERAL PARTNER OF ZDTMAC
By: ZDT MANAGEMENT, L.L.C., THE GENERAL PARTNER OF TEXAS
ZDT MANAGEMENT, LTD.
By: _________________________________________
▇▇▇▇ ▇▇▇▇▇▇, Member
_________________________________________
▇▇▇▇▇ Pulling, Member
19
TEXAS ZDT PARTNERS:
ZDT MANAGEMENT, L.L.C., THE GENERAL PARTNER OF TEXAS ZDT MANAGEMENT, LTD.
By: _________________________________________
▇▇▇▇ ▇▇▇▇▇▇, Member
_________________________________________
▇▇▇▇▇ Pulling, Member
NATICO INTEREST, L.P.
By: _________________________________________
Name:
Title:
▇▇▇▇▇ PULLING
_____________________________________
▇▇▇▇▇ Pulling
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
_____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
_____________________________________
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
______________________________________
▇▇▇▇ ▇▇▇▇▇▇
20
AMP ▇▇▇▇▇▇, JR.
_______________________________________
Amp ▇▇▇▇▇▇, Jr.
▇▇▇ ▇▇▇▇▇
_______________________________________
▇▇▇ ▇▇▇▇▇
21
AMP ▇▇▇▇▇▇ III
_______________________________________
Amp ▇▇▇▇▇▇,III
▇▇▇▇ ▇▇▇▇▇▇▇
_______________________________________
▇▇▇▇ ▇▇▇▇▇▇▇
BUYER:
-
CD WAREHOUSE, INC.
By: ___________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President and Chief Executive Officer
22
ASSET PURCHASE AGREEMENT
List of Schedules and Exhibits
SCHEDULES
---------
1.1 Contracts
2.2 Allocation of Purchase Price
3.1 Encumbrances
3.2 Contract Defaults
3.3 Litigation
EXHIBITS
--------
A List of General and Limited Partners of Texas ZDT
B List of ZDTMAC-Owned CD Warehouse Stores
C ▇▇▇▇ of Sale
D Noncompetition Agreement
23