1
EXHIBIT 2.3
PROPERTY PURCHASE AGREEMENT
AMONG
STARTIME CINEMA, INC.,
F.S.A. SUPER SAVER CINEMAS NO. 1, LTD.,
STARTIME PROPERTIES, INC.,
THE TRUST FORMED BY THAT CERTAIN
IRREVOCABLE DECLARATION OF TRUST
UNDER DEED DATED MAY 14, 1994
FOR THE BENEFIT OF STARTIME CINEMA, INC.,
▇▇▇▇▇ ▇▇▇▇▇▇
AND
SILVER CINEMAS, INC.
DATED AS OF JANUARY 22, 1998
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TABLE OF CONTENTS
ARTICLE I - DEFINITIONS
1.1 Defined Terms. 1
ARTICLE II - PURCHASE AND SALE OF PROPERTY
2.1 Agreement to Sell and Purchase. 6
2.2 Purchase Price. 6
2.3 Purchase Price Allocation 6
2.4 Purchase Price Adjustments 7
2.5 Escrow Agreement 8
2.6 Offsets Against the Escrow Amount 9
2.7 Seller's Performance At and After Closing 9
2.8 Purchaser Does Not Assume Any of Seller's
Liabilities or Obligations Except for the Assumed Liabilities 9
2.9 Closing. 10
ARTICLE III - REPRESENTATIONS AND WARRANTIES
3.1 Joint and Several Representations and
Warranties of the Seller and the Indemnitors. 10
3.1.1 Corporate Existence and Authority 10
3.1.2 Subsidiaries 11
3.1.3 Execution of Agreement 11
3.1.4 Financial Statements 11
3.1.5 Absence of Certain Liabilities 12
3.1.6 Absence of Changes 12
3.1.7 Taxes 14
3.1.8 Disputes and Litigation 15
3.1.9 Compliance with Laws 15
3.1.10 Insurance 16
3.1.11 Title to Properties 16
3.1.12 Real Property and Real Property Leases 16
3.1.13 Equipment 17
3.1.14 Condition of Tangible Property 17
3.1.15 Inventory 17
3.1.16 Intangible Personal Property 18
3.1.17 Agreements 18
3.1.18 Indebtedness and Guaranties 19
3.1.19 Books and Records 19
3.1.20 ERISA 20
3.1.21 Employees 20
3.1.22 Governmental and Other Consents 21
3.1.23 Environmental Matters 21
3.1.24 Discounts and Gift Certificates 22
3.1.25 Full Disclosure 22
3.1.26 Organization of the Trust 22
3.1.27 Authority of ▇▇▇▇▇▇ 22
3.1.28 Authority of Indemnitors 22
3.1.29 Validity and Enforceability 23
3.1.30 Insolvency 23
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3.1.31 Cash Flow Figures 23
3.2 Representations and Warranties of Purchaser 23
3.2.1 Organization and Good Standing 23
3.2.2 Authority 23
3.2.3 Validity and Enforceability 24
ARTICLE IV - COVENANTS
4.1 The Seller's and the Indemnitors' Covenants 24
4.1.1 Access and Information 24
4.1.2 Notices and Approvals 25
4.1.3 Information for Purchaser's Statements and
Applications 25
4.1.4 Termination of Employees. 25
4.1.5 Conduct of Business 26
4.1.6 Preservation of Business 26
4.1.7 Insurance 26
4.1.8 Contracts and Commitments 26
4.1.9 Actions, Etc. 27
4.1.10 Repairs 27
4.1.11 Reports and Returns 27
4.1.12 Indemnification of Purchaser 27
4.1.13 Compliance with Agreement 31
4.1.14 Title Information 31
4.1.15 [INTENTIONALLY OMITTED.] 31
4.1.16 Actions in the Event of a Noncompliance
Circumstance. 31
4.1.17 Exclusive Dealing 32
4.2 Purchaser's Covenants 32
4.2.1 Nondisclosure of Information 32
4.2.2 Compliance with Agreement; Cooperation 32
4.2.3 Disclosure to the Corporation 32
4.2.4 Indemnification by Purchaser 33
ARTICLE V - CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions Precedent to Obligations of Purchaser 35
5.1.1 Representations and Warranties 35
5.1.2 Performance by the Indemnitors 35
5.1.3 Regulatory Approvals and Consents 35
5.1.4 [INTENTIONALLY OMITTED.] 35
5.1.5 Certificate of the Indemnitors 35
5.1.6 Absence of Regulation Changes 36
5.1.7 Satisfaction with Review of Purchaser 36
5.1.8 Approval of Instruments 36
5.1.9 Good Standing 36
5.1.10 No Actions 36
5.1.11 No Court Orders 36
5.1.12 Officers' Certificate 36
5.1.13 Loan Agreements 37
5.1.14 Deeds and Leases 37
5.1.15 Releases 37
5.1.16 Due Diligence 37
5.1.17 Phase I Environmental Reports and Surveys 37
5.2 Conditions Precedent to Obligations of the Indemnitors 37
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5.2.1 Representations and Warranties 37
5.2.2 Performance by Purchaser 38
5.2.3 Regulatory Approvals and Consents 38
5.2.4 No Court Orders 38
5.2.5 [INTENTIONALLY OMITTED] 38
5.2.6 Certificate of Purchaser 38
5.2.7 Releases 38
ARTICLE VI - CLOSING AND DELIVERY OF DOCUMENTS
6.1 Closing 39
6.1.1 Delivery by the Seller 39
6.1.2 Delivery by Purchaser 40
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER
7.1 Termination 40
7.2 Waiver and Amendment 41
ARTICLE VIII - MISCELLANEOUS
8.1 Expenses 42
8.2 Notices 42
8.3 Entire Agreement 43
8.4 Survival of Representations 43
8.5 Incorporated by Reference 44
8.6 Number and Gender of Words 44
8.7 Specific Performance 44
8.8 Remedies Exclusive 44
8.9 Execution of Additional Documents 44
8.10 Finders' and Related Fees 44
8.11 Titles 44
8.12 No Third Party Beneficiary, Etc. 44
8.13 Reformation; Severability 45
8.14 Binding Effect and Assignment 45
8.15 Counterparts 45
8.16 Governing Law; Attorneys' Fees 45
8.17 Dispute Resolution 46
8.18 Confidentiality. 47
8.19 Bulk Transfer 48
INDEX TO EXHIBITS AND SCHEDULE
EXHIBITS
Fee Owned Theaters EXHIBIT A
Leased Theaters, Market Breakdown, Cash Flow
and Purchase Price Determination EXHIBIT B
Continuing Contracts EXHIBIT C
Escrow Agreement EXHIBIT D
[INTENTIONALLY OMITTED] EXHIBIT E
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[INTENTIONALLY OMITTED] EXHIBIT F
Allocation of Purchase Price EXHIBIT G
[INTENTIONALLY OMITTED] EXHIBIT H
Memorandum of Approved Improvements and Betterments EXHIBIT I
Financial Statements of the Corporation and
Subsidiaries EXHIBIT J
List of Documents Delivered to Purchaser EXHIBIT K
[INTENTIONALLY OMITTED] EXHIBIT M
Assignment and Assumption Agreement
(Continuing Contracts) EXHIBIT O
▇▇▇▇ of Sale EXHIBIT P
Mutual Release EXHIBIT Q
[INTENTIONALLY OMITTED] EXHIBIT R
Cash Flow Figures EXHIBIT S
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DISCLOSURE SCHEDULE
Part 1 -- States in which the Corporation is
qualified to do business
Part 2 -- Information concerning Subsidiaries of
the Corporation
Part 3 -- Effects of execution of Agreement
Part 4 -- Liabilities not reflected on Balance Sheet
Part 5 -- Changes affecting the Corporation and Subsidiaries
between the Balance Sheet Date and the Closing
Part 6 -- Certain information concerning the taxes
of the Corporation and Subsidiaries
Part 7 -- Disputes and litigation pending against
the Corporation and Subsidiaries
Part 8 -- Insurance of the Corporation and
Subsidiaries
Part 9(a) -- Exceptions to good title to the properties
of the Corporation and Subsidiaries
Part 9(b) -- Liens and financing statements filed on
the properties of the Corporation and Subsidiaries
Part 10(a) -- List of real property of the Corporation
and Subsidiaries
Part 10(b) -- Violations by the Corporation and
Subsidiaries with respect to their real properties
Part 11(a) -- List of equipment and equipment leases
of the Corporation and Subsidiaries
Part 11(b) -- List of Property in need of repair
Part 12(a) -- List of intangible personal property of the
Corporation and Subsidiaries
Part 12(b) -- Exceptions to exclusive ownership of the
intangible personal property of the Corporation and
Subsidiaries
Part 12(c) -- List of claims or demands against intangible
personal property, including intellectual property,
of the Corporation and Subsidiaries
Part 13 -- List of agreements of the Corporation and
Subsidiaries
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Part 14(a) -- List of indebtedness of the Corporation and
Subsidiaries
Part 14(b) -- List of guarantees of or by the Corporation and
Subsidiaries
Part 16 -- List of "employee benefit plans"
Part 17 -- Employee agreements of the Corporation and
Subsidiaries
Part 18 -- Consents required in connection with this
Agreement
Part 19 -- Environmental Matters
Part 20 -- Changes in the financial condition of the
Corporation and Subsidiaries
Part 21 -- Prepayment penalties and charges on loan agreements
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PROPERTY PURCHASE AGREEMENT
THIS PROPERTY PURCHASE AGREEMENT (this "AGREEMENT"), dated as of January
22, 1998, is entered into by and among StarTime Properties, Inc., a Nevada
corporation ("SELLER"), StarTime Cinema, Inc., a Nevada corporation (the
"CORPORATION"), F.S.A. Super Saver Cinemas No. 1, Ltd., a Texas limited
partnership ("SUPER SAVER"), the trust formed by that certain Irrevocable
Declaration of Trust under deed dated May 14, 1994 for the benefit of StarTime
Cinema, Inc. (the "TRUST"), ▇▇▇▇▇ ▇▇▇▇▇▇, an individual residing in Texas
("▇▇▇▇▇▇") and Silver Cinemas, Inc., a Delaware corporation ("PURCHASER").
R E C I T A L S:
WHEREAS, Seller, the Corporation and Super Saver own and operate two
theaters described in Exhibit A attached hereto (the "FEE OWNED THEATERS") and
operate certain other theaters described in Exhibit B attached hereto (the
"LEASED THEATERS"), for the exhibition of motion pictures;
WHEREAS, Seller, the Corporation and Super Saver desire to sell and
transfer, and Purchaser desires to purchase, certain of their assets and
liabilities related to the Leased Theaters pursuant to the terms and subject to
the conditions set forth in the Asset Purchase Agreement (as hereinafter
defined); and
WHEREAS, Seller desires to sell and transfer, and Purchaser desires to
purchase, the Seller's assets and liabilities related to the Fee Owned Theaters
pursuant to the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1. - DEFINITIONS
1.1. DEFINED TERMS. THE FOLLOWING TERMS USED HEREIN, UNLESS THE CONTEXT
OTHERWISE REQUIRES, SHALL BE DEFINED AS FOLLOWS:
1.1.1. "AAA" means the American Arbitration Association.
1.1.2. "Act" means the United States Securities Act of 1933, as
amended.
1.1.3. "Affiliate" means, with respect to a specified Person, a
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the Person specified.
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1.1.4. "after due inquiry" means, with respect to any Person,
that such Person has the obligation to affirmatively seek out information on the
relevant subject matter from ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, and
all the District and City Managers of Super Saver and, whether or not such
affirmative inquiry is made, such Person is deemed to have actual knowledge of
all information that could have been reasonably obtained from the people listed
above and the knowledge the people listed above is imputed to and deemed to be
the actual knowledge of such Person.
1.1.5. "Agreement" means this Property Purchase Agreement,
including the Schedule and any exhibits hereto.
1.1.6. "Asset Purchase Agreement" means that certain Asset
Purchase Agreement by and among the parties hereto and certain other parties
that are signatories thereto and dated as of the date hereof related to the
purchase of the Leased Theaters.
1.1.7. "Assignment and Assumption Agreements" has the meaning
ascribed thereto in Section 6.1.11(g).
1.1.8. "Assumed Liabilities" has the meaning ascribed thereto
in Section 2.8.
1.1.9. "Balance Sheet" means in the case of the Corporation and
any consolidated Subsidiary the audited consolidated balance sheet of the
Corporation dated as of December 31, 1996 prepared and certified by the
Corporation's Accountant.
1.1.10. "Balance Sheet Date" means in the case of the
Corporation and any consolidated Subsidiary, December 31, 1996.
1.1.11. "Cash Flow Figures" has the meaning ascribed thereto in
Section 3.1.31.
1.1.12. "Certificate" has the meaning ascribed thereto in
Section 5.1.5.
1.1.13. "Closing" has the meaning ascribed thereto in Section
2.9.
1.1.14. "Closing Date" has the meaning ascribed thereto in
Section 2.9.
1.1.15. "Commitments and Surveys" mean all title insurance
commitments and all surveys requested by Purchaser with respect to any of the
Theaters.
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1.1.16. "Continuing Contracts" means the agreements relating to
the operation and maintenance of the Property (excluding any film exhibition
agreements), which are described on Exhibit C.
1.1.17. [INTENTIONALLY OMITTED].
1.1.18. "Corporation" means StarTime Cinema, Inc., a Nevada
corporation.
1.1.19. "Corporation's Accountant" means Coopers & ▇▇▇▇▇▇▇ LLP,
the independent public accountants of the Corporation.
1.1.20. "▇▇▇▇▇▇" means ▇▇▇▇▇ ▇▇▇▇▇▇.
1.1.21. "Discount Tickets" means reduced admission tickets,
group tickets or so-called other "discount tickets" useable for admission into
any Theater, excluding free tickets issued in the ordinary course of business.
1.1.22. "employee benefit plan" has the meaning ascribed to it
in Section 3.1.20.
1.1.23. [INTENTIONALLY OMITTED].
1.1.24. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.1.25. "Escrow Agent" means the escrow agent under the Escrow
Agreement.
1.1.26. "Escrow Agreement" means the escrow agreement to be
entered into by and among the Indemnitors and Purchaser, pursuant to Section 2.5
and attached hereto as Exhibit D.
1.1.27. "Escrow Agreements" mean the Escrow Agreement and the
Term Sheet Escrow Agreement.
1.1.28. "Escrow Amount" has the meaning ascribed thereto in
Section 2.5.
1.1.29. "Fee Owned Theaters" has the meaning ascribed thereto in
the Recitals.
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1.1.30. "GAAP" means those accounting principles and practices
which are used in the United States and recognized as such by the American
Institute of Certified Public Accountants or any successor institute, acting
through its Accounting Principles Board or through the Financial Accounting
Standards Board or through other appropriate boards or committees thereof
applicable as of the date on which such principles are applied and which are
applied on a consistent basis throughout the periods involved so as to fairly
reflect the financial position, results of operations and operating cash flow on
a consolidated basis of the Corporation and the Subsidiaries.
1.1.31. "HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules promulgated thereunder.
1.1.32. "Impositions" means all real estate taxes, special and
benefit assessments, sewer rents, water rates, personal property taxes, and all
other taxes, assessments and charges of every kind, which may affect the
Property or any part thereof by virtue of any present or future law of any
governmental authority.
1.1.33. "Indemnitors" means Seller, the Corporation, Super Saver
and the Trust.
1.1.34. "Insolvent" means (a) with reference to an entity other
than a partnership, a financial condition such that the sum of such entity's
debts is greater than all of such entity's property, at a fair valuation,
exclusive of property transferred, concealed, or removed with intent to hinder,
delay, or defraud such entity's creditors; and (b) with reference to a
partnership, financial condition such that the sum of such partnership's debts
is greater than the aggregate of, at a fair valuation (i) all of such
partnership's property, exclusive of property of the kind excluded in
subparagraph (a) of this paragraph; and (ii) the sum of the excess of the value
of each general partner's nonpartnership property, exclusive of property of the
kind excluded in subparagraph (a) of this paragraph, over such partner's
nonpartnership debts.
1.1.35. "Intangible Property" means all intangible property now
or on the Closing Date owned by Seller which pertains solely to the Property,
and specifically including all assignable business licenses, assignable
warranties, choses in action (including claims against Seating Concepts, Inc.
and/or its Affiliates), the Continuing Contracts (to the extent such are
assignable), telephone exchange numbers (to the extent such are assignable),
plans and specifications, blueprints, engineering information and reports,
theater names, a perpetual license to use the tradenames "Super Saver Cinema"
and "Budget Cinema" at the Theaters and governmental approvals.
1.1.36. "knowledge" means, with respect to any Person (other
than the Indemnitors), such Person's actual knowledge, and with respect to any
one or more of the Indemnitors, the actual knowledge of ▇▇▇▇▇▇ "after due
inquiry" (as defined herein).
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1.1.37. "Lien" means any mortgage, deed of trust, lien, pledge,
charge, adverse claim, security interest or encumbrance of any nature
whatsoever.
1.1.38. "Loss" has the meaning ascribed thereto in Section
4.1.12(b).
1.1.39. "Lyco" means Lyco Financial, Inc., a Texas corporation.
1.1.40. "Noncompliance Circumstance" has the meaning ascribed
thereto in Section 4.2.3.
1.1.41. "Permitted Liens" means (a) liens, taxes and Impositions
due and payable after the Closing Date which are prorated pursuant to Section
2.4 and (b) the Permitted Title Exceptions.
1.1.42. "Permitted Title Exceptions" means: (a) all matters
reflected in the Commitments and Surveys; and (b) landlord liens, easements,
rights of way and prescriptive rights, in each case, of record; all present
recorded restrictions, reservations, covenants, conditions, oil and gas leases,
mineral severances and other instruments; rights of adjoining owners of any
walls and fences situated on a common boundary; taxes and assessments which are
to be prorated between Purchaser and Seller pursuant to Section 2.4 of this
Agreement; all items of record which affect title; and all items which would be
disclosed by an on the ground survey (ALTA or TLTA, as applicable) not created
by, through or under Seller.
1.1.43. "Person" means an individual, corporation, association,
partnership, proprietorship, joint venture or other entity.
1.1.44. "Personal Property" means all tangible personal property
now or on the Closing Date owned (but excluding tangible personal property
disposed of in the ordinary course of business) by Seller or located at or used
in the operation of the Theaters, including, but not limited to, any supplies,
service and concession equipment, heating, ventilating and cooling equipment,
fixtures, inventory, cleaning equipment and supplies, alarm systems, screens,
projection equipment, theater seats, cash registers, display cases, acoustical
wall panels, sound systems, speakers, office equipment and desks, popcorn
poppers and storage bins, linoleum, carpets, drapes, laundry tubs and trays,
washers, dryers, ice boxes, refrigerators, heating units, stoves, ovens, water
heaters, incinerators, furniture and furnishings, signs, poster boxes, soda
dispensers, Theater stationery and items with Theater logos and communication
systems, now or on the Closing Date affixed or attached to or placed upon or
used in connection with the operation of any of the Theaters; provided, however,
that Personal Property shall not include (a) accounts receivable, (b) cash
(other than ▇▇▇▇▇ cash located at the Theaters at Closing) and cash equivalents
(including certificates of deposit, commercial paper, and investments in
securities) on hand or in banks, (c) the projection television located in the
Green Bay, Wisconsin Theater and (d) office equipment currently used in El Paso,
Texas.
1.1.45. "Property" means the real property described on Exhibit
A, including the Theaters, the Continuing Contracts, the Personal Property and
Intangible Property and all other
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properties, assets and rights, tangible and intangible, owned by Seller and not
otherwise included as Property that are necessary to perform, enforce or realize
the full benefits of the Theaters, rights of the Seller under the Continuing
Contracts, the Personal Property and the Intangible Property.
1.1.46. "Proration Period" means the tax fiscal year in which
the Closing Date occurs.
1.1.47. "Purchase Price" means the difference between (i) the
sum of (y) $4,500,000 plus (z) any increase in the Purchase Price as a result of
the adjustments provided for in Section 2.4, less any decrease in the Purchase
Price as a result of the adjustments provided for in Section 2.4.
1.1.48. "Purchaser" means Silver Cinemas, Inc., a Delaware
corporation.
1.1.49. "Purchaser Indemnitees" has the meaning ascribed thereto
in Section 4.1.12(b).
1.1.50. "Put Agreement" means that certain Put Agreement as of
the date hereof between Purchaser and Super Saver a form of which is attached as
Exhibit F to the Asset Purchase Agreement related to an option of Super Saver to
assign the lease relating to the Forest Fair theater and the rights of Super
Saver under that certain management contract relating to the Eastgate
(Cincinnati, Ohio) theater to Purchaser at a price to be calculated pursuant to
the terms of such Put Agreement.
1.1.51. "Related Parties" means, with respect to a Person, such
Person's officers, directors, assignees designated as a Related Party in writing
by such Person and controlled Affiliates.
1.1.52. "Schedule" means the Disclosure Schedule executed and
delivered by the Indemnitors to Purchaser at or prior to the date of this
Agreement and made a part hereof.
1.1.53. "SCI" means SCI Acquisition Corp., a Delaware
corporation.
1.1.54. "Seller" has the meaning ascribed thereto in the
preamble.
1.1.55. "StarTime Indemnitees" has the meaning ascribed thereto
in Section 4.2.4.
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1.1.56. "Subsidiary" or "Subsidiaries" means all corporations
(including the Seller), partnerships (including Super Saver), associations,
joint ventures or other Persons (including the Trust) of which the Corporation
or any other Subsidiary owns not less than twenty percent (20%) of the voting
securities or other equity but specifically excludes Star Time Entertainment -
Georgia, L.L.C. and any other entity that (i) relates solely to the Roswell,
Georgia operations and (ii) neither owns nor has owned any of the Property or
any of the Property (as defined in the Asset Purchase Agreement).
1.1.57. "Super Saver" means F.S.A. Super Saver Cinemas No. 1,
Ltd., a Texas limited partnership.
1.1.58. "Tax Returns" has the meaning ascribed thereto in
Section 3.1.7(a).
1.1.59. "Term Sheet Escrow Agreement" means that certain escrow
agreement dated July 31, 1997 by and among the Corporation, Purchaser and
Norwest Bank El Paso, a national banking association, as escrow agent.
1.1.60. "Theaters" means a collective reference to the two
locations consisting of 12 screens for the exhibition of motion pictures as
specially set forth on Exhibit A.
1.1.61. "Title Insurance Fees" has the meaning ascribed thereto
in Section 2.4(a).
1.1.62. "Trust" means the trust formed by that certain
Irrevocable Declaration of Trust under deed dated May 14, 1994 for the benefit
of StarTime Cinema, Inc.
ARTICLE 2. - PURCHASE AND SALE OF PROPERTY
2.1. AGREEMENT TO SELL AND PURCHASE. ON THE TERMS AND SUBJECT TO THE
CONDITIONS OF THIS AGREEMENT, ON THE CLOSING DATE, THE SELLER AGREES TO SELL,
CONVEY, TRANSFER, ASSIGN AND DELIVER TO PURCHASER, AND PURCHASER AGREES TO
PURCHASE FROM SELLER, ALL OF THE PROPERTY.
2.2. PURCHASE PRICE. AT CLOSING, PURCHASER SHALL PAY AND DELIVER IN
IMMEDIATELY AVAILABLE FUNDS BY WIRE TRANSFER, PURSUANT TO WIRING INSTRUCTIONS
DELIVERED BY SELLER AT LEAST TWO DAYS PRIOR TO THE CLOSING, THE PURCHASE PRICE
AS FOLLOWS:
----------------------------------------------------------
to Norwest Bank El Paso, N.A. $3,250,000
----------------------------------------------------------
to Corporation $1,250,000
----------------------------------------------------------
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2.3. PURCHASE PRICE ALLOCATION. THE PURCHASE PRICE WILL BE ALLOCATED TO
THE PROPERTY AS SHOWN ON EXHIBIT G, AND EACH OF THE PARTIES HERETO SHALL REPORT
THIS TRANSACTION FOR FEDERAL AND, TO THE EXTENT APPLICABLE, STATE AND LOCAL
INCOME TAX PURPOSES IN ACCORDANCE WITH THE ALLOCATION SHOWN ON EXHIBIT G.
PURCHASER AND SELLER SHALL NOT TAKE ANY POSITION ON ANY TAX RETURN INCONSISTENT
WITH SUCH ALLOCATION. PURCHASER AND SELLER SHALL PREPARE AND TIMELY FILE ALL
SUCH REPORTS AND RETURNS AS MAY BE REQUIRED BY SECTION 1060 OF THE CODE TO
REPORT SUCH ALLOCATION. THE OBLIGATIONS SET FORTH IN THIS SECTION 2.3 SHALL
SURVIVE THE CLOSING.
2.4. PURCHASE PRICE ADJUSTMENTS.
(a) The Purchase Price payable at Closing shall be adjusted as
follows:
(i) downward by the amount of $12,087, representing 50% of title
insurance fees, premiums and expenses incurred in connection with the
procurement of title insurance policies pursuant to Section 4.1.15
hereof up to $32,500 when aggregated with such title insurance fees,
premiums and expenses incurred pursuant to Section 4.1.15 of the Asset
Purchase Agreement and the Put Agreement (the "TITLE INSURANCE FEES");
(ii) upward in accordance with Section 4.2.3 up to a maximum of
$25,000;
(iii) upward by the sum of the amounts noted in the memorandums
listing the costs of certain improvements and betterments signed by both
the Corporation and Purchaser at or prior to Closing, a form of which is
attached hereto as Exhibit H;
(iv) upward for the Seller's ▇▇▇▇▇ cash at each Theater;
(v) upward by a cash amount equal to Seller's cost for all
inventory; and
(vi) downward by the sum of the cash values of accrued vacations
assumed by Purchaser, if any, of employees hired at Closing by
Purchaser, which values will be set forth on an exhibit to be attached
hereto mutually agreed upon by the Corporation and Purchaser.
(b) general real property taxes and other Impositions imposed
upon or assessed against the Property shall be remitted to the
collecting authorities by Seller if the same are due and payable on or
before the Closing Date, and by Purchaser if due and payable thereafter;
provided, however, that such real property taxes and other Impositions
imposed upon or assessed against the Property for the Proration Period
shall be apportioned and prorated between the Seller and Purchaser on
and as of the Closing Date with Purchaser bearing the expense of that
proportion of such Impositions that the number of days in the Proration
Period following, and including the Closing Date bears to 365 and, to
the extent not theretofore paid by Seller, Seller will pay Purchaser
Seller's share thereof within 15 days after Purchaser furnishes Seller
the billing and substantiation thereof received from the collecting
authorities and provided further, that Seller shall be entitled to
likewise participate on a prorata basis in any refund, credit or
reduction of such taxes or other Impositions.
(c) Seller shall pay all utility costs in respect of the
Theaters, and those incurred thereafter shall be paid by Purchaser. If
the utility charges for the last utility period cannot be ascertained on
the Closing Date, then at such subsequent date as all utility bills for
such utility period have been obtained, the parties shall promptly pay
their respective prorated amounts.
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Any deposits of Seller held by utility companies shall be paid to Seller
at Closing by Purchaser, and Purchaser shall be responsible for making
its own deposits with the utility companies. Seller shall cooperate with
Purchaser to make an orderly transition of utilities to Purchaser
without interruption of utility service; provided however, that nothing
herein shall obligate Seller to incur utility costs after the Closing
Date or maintain utility deposits after the Closing Date.
(d) Seller and Purchaser also shall make such other adjustments
or apportionments with respect to the Property as may be necessary to
carry out the intention of the parties hereto so that Purchaser shall
not be liable for matters accruing or occurring prior to the Closing
Date and that Seller shall not be liable for matters accruing or
occurring from and after the Closing Date and that Seller shall bear all
of the expenses and burdens, and shall be entitled to all of the
benefits and income (including any tax refunds or adjustments), of and
from ownership of the Property or operation of the Theaters prior to the
Closing Date and Purchaser shall bear all such expenses and burdens and
shall be entitled to all such benefits and income of and from ownership
of the Property and operation of the Theaters from and after the Closing
Date.
(e) The foregoing prorations shall be determined and payment
made from Purchaser to Seller or from Seller to Purchaser, as the case
may be, on the Closing Date using figures for such charges currently
being paid or charges from the preceding year if actual figures are not
available. Any adjustments to such prorations shall be determined as
soon as reasonably practicable after the Closing Date. When actual
figures for such charges become available, Purchaser shall provide
Seller with all year end reports from the applicable Person and a
corrected and definitive proration of such charges shall be promptly
made. In the event that such net charges for the year of Closing exceed
the amount estimated in such provisional proration, Seller shall pay
Purchaser Seller's prorata net shares of the amount by which the actual
charges exceed the estimated charges. Similarly, in the event that such
net charges from the year of Closing are less than the amount estimated
in such provisional proration, Purchaser shall pay Seller Seller's
prorata net share of the amount by which the estimated charges exceeded
the actual charges. Such payments by Seller or Purchaser, as the case
may be, shall be made within thirty (30) days of receipt of such actual
figures for such charges and substantiation thereof received from each
charging party.
(f) Discount Tickets and gift certificates issued by Seller
prior to the Closing Date and presented by customers for admission to
the Theaters on or after the Closing Date shall be honored by Purchaser.
Purchaser shall (and hereby covenants and agrees to) be bound by all
free admission passes distributed prior to the Closing Date by Seller or
Seller's authorized agents to third parties. Seller shall be required to
promptly reimburse Purchaser for any Discount Tickets or gift
certificates on a quarterly basis upon presentation of such Discount
Tickets or gift certificates.
2.5. ESCROW AGREEMENT. AT THE CLOSING OF THE ASSET PURCHASE AGREEMENT,
PURCHASER SHALL DEPOSIT FIVE HUNDRED THOUSAND DOLLARS ($500,000) IN IMMEDIATELY
AVAILABLE FUNDS IN ESCROW (THE "Escrow Amount") TO BE RELEASED TO THE SELLER,
THE CORPORATION AND SUPER SAVER PURSUANT TO THE TERMS OF THE ESCROW AGREEMENT,
SUBJECT TO THE RIGHT OF PURCHASER TO OFFSET AGAINST THE ESCROW AMOUNT PURSUANT
TO SECTION 2.6 AND TO CERTAIN OTHER PROVISIONS OF THE ESCROW AGREEMENT.
2.6. OFFSETS AGAINST THE ESCROW AMOUNT. PURCHASER SHALL BE ENTITLED TO
OFFSET AGAINST THE ESCROW AMOUNT FOR ANY LIABILITY OF THE INDEMNITORS TO
PURCHASER PURSUANT TO THE PROVISIONS OF
17
SECTION 2.4 OR "FINALLY DETERMINED" UNDER SECTION 4.1.12 HEREOF. ANY AMOUNTS
OFFSET PURSUANT TO THE PROVISIONS OF THIS SECTION 2.6 SHALL BE DEDUCTED FROM THE
ESCROW AMOUNT. ANY AMOUNTS REQUIRED TO BE PAID PURSUANT TO THE ESCROW AGREEMENT
MAY BE WITHHELD FROM THE DATE OF NOTIFICATION OF ANY CLAIM BY PURCHASER FOR
INDEMNIFICATION PURSUANT TO SECTION 4.1.12 HEREOF UNTIL RESOLUTION OF SUCH
CLAIM. AMOUNTS IN EXCESS OF PURCHASER'S CLAIMS FOR OFFSET ON THE DATE OF ANY
PAYMENT PURSUANT TO THE ESCROW AGREEMENT SHALL BE PAID TO SELLER, THE
CORPORATION AND SUPER SAVER. ANY AMOUNT RELEASED FROM THE ESCROW AGREEMENT
WHETHER TO THE SELLER, OR TO PURCHASER AS AN OFFSET, SHALL INCLUDE THE INTEREST
ACCRUED THEREON.
2.7. SELLER'S PERFORMANCE AT AND AFTER CLOSING. SELLER HEREBY COVENANTS
AND AGREES THAT AT OR AFTER THE CLOSING, AS REQUIRED, SELLER SHALL:
(a) at the request of Purchaser, take all action reasonably
necessary to put Purchaser in actual possession of the Property, and execute and
deliver such further instruments of conveyance, sale, transfer and assignment,
and take such other action (including the filing of any UCC-3s) as may be
reasonably necessary to transfer to Purchaser any of the Property and confirm
the title of Purchaser to the Property subject to Permitted Title Exceptions.
Further, after Closing, should Seller be a necessary party in order for
Purchaser to exercise its rights with respect to the Property, Seller will take
reasonable efforts, at Purchaser's expense, to assist Purchaser therein;
(b) for a period of four years following the Closing Date,
provide Purchaser access to any operating records, accounting records,
correspondence, memoranda, and other records and data relating to the ownership
or operation of the Property, which are in Seller's possession;
(c) grant to Purchaser a perpetual license to use the tradenames
"Super Saver Cinema" and "Budget Cinema" at the Theaters;
(d) subject to Section 4.1.12, indemnify and hold Purchaser
harmless from all charges or liabilities, other than the Assumed Liabilities,
incurred by Seller prior to the Closing Date relating to the Property; and
(e) transfer or deliver to Purchaser any and all cash
remittances or property Seller receives in respect of the Property to the extent
that such receipts are in respect of a period after the Closing.
2.8. PURCHASER DOES NOT ASSUME ANY OF SELLER'S LIABILITIES OR
OBLIGATIONS EXCEPT FOR THE ASSUMED LIABILITIES. SELLER, AT CLOSING, WILL
TRANSFER ALL OF THE PROPERTY TO PURCHASER FREE AND CLEAR OF ANY AND ALL LIENS
EXCEPT FOR (EACH OF THE FOLLOWING ITEMS COLLECTIVELY REFERRED TO AS THE "Assumed
Liabilities"):
(a) obligations and liabilities of Seller initially arising, and
related solely to the period, after the Closing Date under and relating to the
Continuing Contracts which are assigned to Purchaser and included in the
Property;
(b) Permitted Title Exceptions;
(c) Permitted Liens; and
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(d) That portion of the prorated items arising post-Closing for
which the Purchaser has agreed to pay in Section 2.4 hereof.
Except as expressly set forth herein, Purchaser shall not assume any
other obligations or liabilities of Seller or of Seller's business or any
liabilities (including contingent liabilities) attendant to, or arising from or
relating to the ownership of, any of the Property which may have occurred prior
to the Closing or any liabilities arising from or related to actions taken or
omitted under the Property and subject to Section 4.1.12 Seller shall indemnify
Purchaser with respect to Seller's liabilities.
2.9. CLOSING. UNLESS THIS AGREEMENT IS TERMINATED AND THE TRANSACTIONS
CONTEMPLATED HEREIN ABANDONED PURSUANT TO SECTION 7.1 AND SUBJECT TO THE
SATISFACTION OR, IF PERMISSIBLE, WAIVER OF THE CONDITIONS SET FORTH IN ARTICLE
V, THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (THE
"Closing") SHALL TAKE PLACE (I) AT THE OFFICES OF C. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, EL PASO,
TEXAS, AT 11:00 A.M. LOCAL TIME ON A DATE TO BE SPECIFIED BY PURCHASER AND
SELLER, BUT THE CLOSING SHALL TAKE PLACE ON AND BE EFFECTIVE AS OF THE CLOSE OF
BUSINESS ON THE FIRST THURSDAY THAT IS A BUSINESS DAY AFTER THE DAY ON WHICH THE
LAST OF THE CONDITIONS SET FORTH IN ARTICLE V IS FULFILLED (OTHER THAN
DELIVERIES OF INSTRUMENTS TO BE MADE AT CLOSING) OR, IF PERMISSIBLE, WAIVED BY
THE RELEVANT PARTY OR (II) AT SUCH OTHER TIME AND PLACE AS PURCHASER AND THE
CORPORATION SHALL AGREE UPON IN WRITING. THE DATE ON WHICH THE CLOSING OCCURS IS
REFERRED TO HEREIN AS THE "Closing Date."
ARTICLE 3. - REPRESENTATIONS AND WARRANTIES
3.1. JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF THE SELLER AND
THE INDEMNITORS. TO INDUCE PURCHASER TO ENTER INTO THIS AGREEMENT AND TO
CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY, THE SELLER AND THE INDEMNITORS,
JOINTLY AND SEVERALLY, REPRESENT AND WARRANT, AS OF THE DATE HEREOF, AS
FOLLOWS:
3.1.1. Corporate Existence and Authority. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. It has all requisite corporate power, franchises,
licenses, permits and authority to own its properties and assets and to carry on
its business as it has been and is being conducted. The Corporation is qualified
to do business as a foreign corporation and is in good standing in each state,
nation or other jurisdiction listed on Part 1 of the Schedule, being each state,
nation or other jurisdiction wherein the character of the properties owned or
held under lease by it or the nature of the business transacted by it makes such
qualification necessary.
3.1.2. Subsidiaries. Part 2 of the Schedule lists each and every
Subsidiary and the Subsidiary's form of business organization, state of
incorporation or other organization, number of shares or nature and extent of
interests outstanding, and the number of shares or extent of interests
outstanding owned by the Corporation or each Subsidiary. Each Subsidiary other
than Super Saver and the Trust is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation and has
all requisite corporate power, franchises, licenses, permits and authority to
own its properties and assets and to carry on its business as it has been and is
being conducted. Super Saver is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Texas and has all
requisite partnership power, franchises, licenses, permits and authority to own
its properties and assets and to carry on its business as it has been and is
being conducted. The Trust is a trust duly formed and validly existing under the
laws of the State of Texas and has all requisite trust power, franchises,
licenses,
19
permits and authority to own its properties and assets and to carry on its
business as it has been and is being conducted. Each Subsidiary is qualified to
do business in the respective states, nations and other jurisdictions listed on
Part 2 of the Schedule, being each state, nation or other jurisdiction in which
the character of the properties owned or held under lease by it or the nature of
the business conducted by it makes such qualification necessary. Except as
indicated on Part 2 of the Schedule, each Subsidiary is a consolidated
Subsidiary for the purposes of the Balance Sheet and the financial statements
referred to in Section 5.1.5 hereof.
3.1.3. Execution of Agreement. Except as disclosed in Part 3 of
the Schedule, the execution and delivery of this Agreement, the Asset Purchase
Agreement and the Escrow Agreements by the each of the Indemnitors does not, and
the consummation by each of the Indemnitors of the transactions contemplated
hereby and thereby will not: (a) violate, conflict with, modify or cause any
default under or acceleration of (or give any party any right to declare any
default or acceleration upon notice or passage of time or both), in whole or in
part, any charter, article of incorporation, certificate of incorporation,
bylaw, Lien, indenture, lease, agreement, instrument, order, injunction, decree,
judgment, law, rule, regulation or any other restriction of any kind or
character to which any of the Indemnitors is a party or by which any of them or
any of their properties is bound (including the Stock Purchase Agreement between
the Corporation and NationsBanc Capital Corporation dated August 15, 1994); (b)
result in the creation of any Lien on any property or asset (whether real,
personal, mixed, tangible or intangible), right, contract, agreement or business
of the Indemnitors; (c) violate any law, rule or regulation applicable to the
Indemnitors or the Indemnitors or (d) permit any federal or state regulatory
agency to impose any restrictions or limitations of any nature on the
Indemnitors or any of their respective activities.
3.1.4. Financial Statements. Attached as Exhibit J hereto are
the following financial statements: (a) the consolidated financial statements of
the Corporation and the Subsidiaries (including, without limitation, statements
of earnings, balance sheets as of the Balance Sheet Date and statements of
changes in financial position, statements of stockholders' equity, and all notes
relating thereto for the fiscal year then ended), which financial statements
have been audited and certified by the Corporation's Accountants; (b) the
consolidated financial statements of the Corporation and the Subsidiaries, for
the ten (10) months ended October 31, 1997, which financial statements shall
have been certified by the chief financial officer of the Corporation and are in
the form normally prepared by such officer for presentation to the board of
directors of the Corporation; and (c) the Balance Sheet. To the Indemnitors'
knowledge, all of the financial statements referred to in this Section present
fairly the financial condition of the Corporation and the Subsidiaries and the
results of their operations at the dates and for the periods covered thereby.
Such financial statements have been prepared in conformity with GAAP, except as
otherwise expressly disclosed in such financial statements. For the periods
covered by the financial statements referred to in subsections (a), (b) and (c)
of this Section, neither the Corporation nor any Subsidiary had any material
nonrecurring items of income.
3.1.5. Absence of Certain Liabilities. To the Indemnitors'
knowledge, as of the Balance Sheet Date, the Corporation and the Subsidiaries
had no liabilities or obligations of any nature (whether absolute, accrued,
contingent, due or to become due) except as and to the extent reflected and
fully reserved against in the Balance Sheet other than those liabilities and
obligations set forth on Part 4 of the Schedule and, except as disclosed in Part
4 of the Schedule, since the Balance Sheet Date, the
20
Corporation and Subsidiaries have incurred no liabilities or obligations of any
nature other than in the ordinary course of business and consistent with past
practice.
3.1.6. Absence of Changes. Except as expressly provided in this
Agreement or as set forth on Part 5 of the Schedule in alphabetical order
corresponding to the following subsections, since the Balance Sheet Date there
has not been:
(a) Any change or aggregate of changes known to the Indemnitors
in the condition (financial or otherwise), business, operations,
liquidity, property, assets, liabilities, obligations or prospects of
the Corporation and Subsidiaries resulting in a reduction of five
percent (5%) of the net worth of the Corporation;
(b) Any merger, consolidation or statutory share exchange or
agreement to merge, consolidate or enter into a statutory share exchange
by the Corporation or any Subsidiary with another Person, or any
purchase of or investment in or agreement to purchase or invest by the
Corporation or any Subsidiary in the business of another Person;
(c) Any amendment to the Articles of Incorporation, Certificate
of Incorporation, partnership agreement or Bylaws of the Corporation or
any Subsidiary;
(d) Any General Increase in the compensation or rate of
compensation payable or to become payable to any of their hourly
employees or salaried employees ("GENERAL INCREASE" for purposes hereof
shall mean any increase applicable to a class or group of employees and
does not include increases granted to individual employees for merit,
length of service, change in position or responsibility or other reasons
applicable to specific employees and not generally to a class or group
thereof);
(e) Any mortgage, pledge or other subjection to any Lien or
option of any property, asset, right or business of the Corporation or
any Subsidiary, other than (i) Liens for taxes not yet due and payable,
(ii) any continuing statutory landlord's Lien for rent not yet due and
payable, (iii) those incurred in the ordinary course of business and
(iv) those identified on Part 5 of the Schedule;
(f) Any incurrence of any indebtedness, obligations or
liabilities (whether absolute, accrued, contingent, known or unknown,
due or to become due) by the Seller except (i) those arising in the
ordinary course of business and consistent with past practice or (ii)
those to be paid in full on or before Closing;
(g) Any assumptions, guarantees or endorsements by the Seller of
the obligations of any Person, except (i) in the ordinary course of
business and consistent with past practice or (ii) those to be paid in
full on or before Closing;
(h) Any actions taken or transactions entered into by the
Corporation or any Subsidiary involving the Theaters and more than
$12,500 per Theater, other than in the ordinary course of business and
consistent with past practice, or any capital expenditures or
commitments therefor in excess of $12,500 per Theater; in each case,
other than indebtedness, obligations or liabilities allowed for in
paragraph (f) above;
21
(i) Any creations, renewals, changes or terminations, or any
notice of any proposed renewal, change or termination of any Continuing
Contract or any contract by which the Property is bound;
(j) To the Indemnitors' knowledge, any action or inaction which
has caused or will cause a breach or default in any contract, agreement,
obligation, lease or license to which the Corporation or any Subsidiary
is a party or by which the Corporation or any Subsidiary or their
property is bound and which is being assumed by Purchaser pursuant
hereto;
(k) Any sale, assignment, lease, abandonment or other
disposition by the Corporation or any Subsidiary of any real property,
or any sale, assignment, transfer, license, lapse, or other disposition
by the Corporation or any Subsidiary of any trademark, trade name,
copyright (or pending application for any trademark or copyright), or
other intangible asset;
(l) Any sale, assignment or transfer of any contract, agreement,
lease, or asset by the Corporation or any Subsidiary, except in the
ordinary course of business and consistent with past practice;
(m) To the Indemnitors' knowledge, any violation by the
Corporation or any Subsidiary of, or any charge against the Corporation
or any Subsidiary for alleged violations of, any governmental laws,
rules, regulations or standards, including, without limitation, unlawful
employment practices, occupational health and safety standards, and
environmental control standards;
(n) To the Indemnitors' knowledge, any labor dispute, or threat
of a labor dispute, or any attempt or threat of any attempt by a union
to organize any employees of the Corporation or any Subsidiary who are
not now covered under an existing union or collective bargaining
agreement;
(o) Any material failure by the Seller to replenish inventories
and supplies in a normal and customary manner consistent with prior
practice; any purchase commitment by the Corporation or any Subsidiary
in excess of the normal, ordinary and usual requirements of business or
at any price in excess of the then current market price or upon terms
and conditions more onerous than those usual and customary in the
Corporation's or any Subsidiary's business;
(p) Any arrangement for Discount Tickets or other similar
arrangements (excluding free passes in the ordinary course of business);
or
(q) Any significant action taken or transaction entered into by
the Corporation or any Subsidiary other than in the ordinary course of
business, which do or could result in material indebtedness or material
liability (including contingent liability) after Closing.
3.1.7. Taxes. Except as set forth on Part 6 of the Schedule in
alphabetical order corresponding to the following subsections:
(a) The Corporation and Subsidiaries have duly filed all
required federal, state, local and other tax returns, notices and
reports (including, without limitation, income, property, sales, use,
franchise, capital stock, excise, value added, employees' income
withholding, social security and unemployment tax returns, notices and
reports) heretofore due
22
(collectively the "TAX RETURNS"), and all such Tax Returns are correct,
accurate and complete in all material respects;
(b) All deposits required to be made by the Corporation and
Subsidiaries with respect to any tax (including, without limitation,
estimated income, franchise and employee withholding taxes) have been
duly made;
(c) No audits of the Tax Returns of the Corporation and
Subsidiaries are currently being conducted or are currently pending by
the United States Internal Revenue Service or any other taxing
authority;
(d) All taxes, assessments, fees, penalties, interest and other
governmental charges with respect to each of the Corporation and
Subsidiaries which have become due and payable by the Balance Sheet Date
have been paid in full or adequately reserved against on the Balance
Sheet, and all taxes, assessments, fees, penalties, interest and other
governmental charges which have become due and payable subsequent to the
Balance Sheet Date have been paid in full or adequately reserved against
on its books of account and the amounts reflected on the Balance Sheet
and such books are sufficient for the payment of all unpaid federal,
state, local, foreign and other taxes, fees and assessments (including,
without limitation, income, property, sales, use, franchise, capital
stock, excise, value added, employees' income withholding, social
security and unemployment taxes), and all interest and penalties thereon
with respect to the periods then ended and for all periods prior
thereto;
(e) There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the assessment of any
tax or deficiency against the Corporation or any Subsidiary, nor are
there any actions, suits, proceedings, investigations or claims now
pending against the Corporation or any Subsidiary in respect of any tax
or assessment, or any matters under discussion with any federal, state,
local or foreign authority relating to any taxes or assess ments, or any
claims for additional taxes or assessments asserted by any such
authority, and, to the Indemnitors' knowledge, there is no basis for the
assertion of any additional taxes or assessments against the Corporation
or any Subsidiary; and
(f) Neither the Corporation nor any Subsidiary has ever filed a
consent pursuant to Section 341(f) of the United States Internal Revenue
Code.
3.1.8. Disputes and Litigation. Except as noted on Part 7 of the
Schedule: (a) there is no suit, action, litigation, proceeding, investigation,
claim, complaint or accusation pending or, to the Indemnitors' knowledge,
threatened against or affecting the Corporation or any Subsidiary or any of
their properties, assets or business or to which the Corporation or any
Subsidiary is a party, in any court or before any arbitrator of any kind or
before or by any governmental agency (including, without limitation, any
federal, state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality), and no facts are known by the
Corporation or any Subsidiary which are reasonably likely to give rise to any
such suit, action, litigation, proceeding, investigation, claim, complaint or
accusation; (b) there is no pending or, to the Indemnitors' knowledge,
threatened change in any environmental, zoning or building laws, regulations or
ordinances which affect or could affect the Corporation or any Subsidiary or any
of their properties, assets or businesses, and the Indemnitors or the
Corporation do not know, and have no reasonable grounds to know, of any basis
for any such change; and (c) there is no outstanding order, writ, injunction,
decree, judgment or award by any court, arbitrator or governmental body against
or affecting the Corporation or any Subsidiary or any of their properties,
assets or business. Except as set forth on Part 7 of the Schedule, none of
23
the items nor aggregate of items listed on Part 7 of the Schedule would, if
adversely determined, materially and adversely affect the business, operations,
properties or financial position of the Corporation or any of the Subsidiaries.
To the Indemnitors' knowledge, there is no litigation, proceeding,
investigation, claim, complaint or accusation, formal or informal, or
arbitration pending, or any of the aforesaid threatened, or any contingent
liability which would give rise to any right of indemnification or similar right
on the part of any director or officer of the Corporation or any Subsidiary or
any such person's heirs, executors or administrators as against the Corporation
or any Subsidiary.
3.1.9. Compliance with Laws. To the Indemnitors' knowledge, the
Corporation and Subsidiaries have at all times been, and presently are, in full
compliance with any applicable federal, state, local, foreign and other laws,
rules and regulations other than those where noncompliance would not have a
material adverse effect on the Corporation, the Subsidiaries or their business,
and the Corporation and Subsidiaries have not received notice of any claimed
violation of any such law, rule or regulation. The Corporation and Subsidiaries
have filed all returns, reports and other documents and furnished all
information required or requested by any federal, state, local or foreign
governmental agency and all such returns, reports, documents and information are
true and complete in all respects. To the Indemnitors' knowledge, all permits,
licenses, orders, franchises and approvals of all federal, state, local and
foreign governmental or regulatory bodies required of the Corporation and
Subsidiaries for the conduct of their businesses have been obtained, no
violations are or have been recorded in respect of any such permits, licenses,
orders, franchises and approvals, and there is no litigation, proceeding,
investigation, arbitration, claim, complaint or accusation, formal or informal,
pending or threatened, which may revoke, limit, or question the validity,
sufficiency or continuance of any such permit, license, order, franchise or
approval. Such permits, licenses, orders, franchises and approvals are valid and
sufficient for all activities presently carried on by the Corporation and
Subsidiaries.
3.1.10. Insurance. Part 8 of the Schedule sets forth a true and
complete list of all insurance policies (including the policy number, the name
of the insurer, the amounts of coverage, the premium rate, the cash value, if
any, the expiration date and the risks and losses insured against) maintained by
the Corporation and Subsidiaries on the Property , and copies of all such
policies, agreements, studies and analyses previously have been delivered to
Purchaser. All of the foregoing insurance policies are in full force and effect
and are fully paid as to all premiums heretofore due. Neither the Corporation
nor any Subsidiary has, to the Indemnitors' knowledge, failed to give any notice
or present any claim under such insurance policies in a timely fashion, nor has
the Corporation or any Subsidiary received any notification of the cancellation
of any of such policies or that any of them will not be renewed. To the
Indemnitors' knowledge and except as set forth on Part 8 of the Schedule, there
is no claim, demand or offset, or any state of facts or occurrence of events
which might form the basis of any claim, demand or offset, which may increase
the premiums or impair the full value of said insurance policies.
3.1.11. Title to Properties. The Property consists of (i) all of
the properties and assets reflected on the Balance Sheet relating to the
Theaters, and (ii) all other properties and assets presently carried on the
Corporation's and the Subsidiaries' books or used in their businesses at any
time since the Balance Sheet Date relating to the Theaters, except, in each
case, properties and assets subsequently disposed of in the ordinary course of
business. Except as set forth in Part 9(a) of the Schedule, the Corporation and
Subsidiaries have title (good and marketable with respect to real property) to
all of the Property, free and clear of all Liens, conditions and covenants,
other than (x)
24
Liens for taxes not yet due and payable, (y) minor imperfections of title, if
any, which do not interfere with the present or proposed use of such Property or
otherwise adversely affect the Corporation or the Subsidiaries in the conduct of
their respective businesses, and (z) such other Liens, charges or encumbrances
contemplated by the terms of this Agreement as set forth on Part 9(a) to the
Schedule. Except as set forth in Part 9(b) of the Schedule or otherwise
specifically disclosed in this Agreement, there have not been filed any Liens or
financing statements under the applicable state Uniform Commercial Code or other
similar statute on the properties or assets, whether real, personal or mixed, of
the Corporation or any Subsidiary, nor has the Corporation or any Subsidiary
signed any security agreement or similar agreement authorizing any secured party
thereunder to file any such Lien or financing statement.
3.1.12. Real Property and Real Property Leases. Part 10(a) of
the Schedule contains a true and complete list of (i) all real property owned by
the Corporation and the Subsidiaries together with a summary description of the
buildings and improvements thereon and the method by which such real property is
depreciated for tax and book purposes, (ii) all real estate leases to which the
Corporation or any Subsidiary is a party together with a summary description of
the buildings and improvements thereon, the address of each property, the name
of each landlord and tenant and the expiration date of each lease, and (iii) all
other interests, if any, in real property owned or claimed by the Corporation or
any Subsidiary. To the Indemnitors' knowledge, the Corporation and Subsidiaries
have all easements and rights, including parking rights and easements for power
lines, water lines, roadways and other access, necessary to conduct the
businesses they now conduct and enjoy peaceful and undisturbed possession of all
properties occupied by them. Neither the whole nor any portion of any real
property owned, occupied or leased to or by the Corporation or any Subsidiary
has been rezoned or condemned or otherwise taken by any public authority and, to
the Indemnitors' knowledge, no such rezoning, condemnation or other taking is
threatened or contemplated. To the Indemnitors' knowledge, none of the real
properties owned, occupied or leased to or by the Corporation or any Subsidiary,
or the occupancy or operation thereof, constitutes a nuisance or violation of
any law or any building, zoning or other ordinance, code or regulation or any
private or public covenant or restriction, and no notice from any governmental
body or other Person has been served upon the Corporation or any Subsidiary
claiming any violation of any such law, ordinance, code, regulation, covenant or
restriction, or requiring or calling attention to the need for any work,
repairs, construction, alterations or installations on or in connection with any
of such properties which has not been complied with except to the extent set
forth in Part 10(b) of the Schedule. All leases of real property to which the
Corporation or any Subsidiary is a party are valid, binding and in full force
and effect, and, to the Indemnitors' knowledge, there exists no default
thereunder by any party thereto, nor any events which, with notice or lapse of
time, or both, would constitute a default, and all amounts heretofore payable
under such leases have been paid in full. True, correct and complete copies of
all deeds to the real property listed on Part 10(a) of the Schedule and true,
correct and complete copies of all real estate leases listed on Part 10(a) of
the Schedule, including all amendments, modifications, letter agreements and
assignments relating thereto have been previously delivered to Purchaser.
3.1.13. Equipment. Part 11(a) of the Schedule contains a true
and complete list of (i) all equipment of the Corporation and the Subsidiaries
(having a cost basis in excess of $5,000 each) presently owned and used by the
Corporation and the Subsidiaries in their businesses; and (ii) all equipment
(including, but not limited to, trade fixtures and motor vehicles) leased by the
Corporation and the Subsidiaries, including the name and address of each lessor
and lessee, the expiration date of each lease, the monthly rent and any
additional rent payable under each such lease. To the Indemnitors' knowledge, no
party to any such lease is in default, each such lease is valid, binding, in
25
full force and effect, and enforceable in accordance with its terms. True,
correct and complete copies of all such leases, including all amendments,
modifications, letter agreements and assignments relating thereto have
previously been delivered to Purchaser.
3.1.14. Condition of Tangible Property. Except as set forth on
Part 11(b) of the Schedule, to the Indemnitors' knowledge, with the exception of
inventory, all tangible properties owned or used by the Corporation and
Subsidiaries, including, without limitation, all buildings, offices, theaters
and other structures owned or occupied by the Corporation and Subsidiaries and
all machinery, equipment, tools, fixtures and motor vehicles owned or used by
them, are in good operating condition, reasonable wear and tear excepted,
reasonably suitable for the purposes for which they are being utilized, and
sufficient for all current operations of the Corporation and the Subsidiaries.
3.1.15. Inventory. The inventories of each of the Corporation
and Subsidiaries shown on the Balance Sheet and inventories acquired by it
subsequent to the Balance Sheet Date consist solely of items of a quality and
quantity usable and salable in the normal course of its business.
3.1.16. Intangible Personal Property. Part 12(a) of the Schedule
contains a true and complete list and summary description of all trademarks,
service marks, trade names, and copyrights and applications for the foregoing,
all franchises, permits and other authorizations owned or used by the
Corporation and Subsidiaries, all licenses to which the Corporation or any
Subsidiary is a licensor or licensee, all non-competition covenants, and all
other intangible personal property owned or used by the Corporation and
Subsidiaries. Each of the Corporation and Subsidiaries validly owns or is
validly licensed under all intangible properties which are required or necessary
for the conduct of its business as now conducted, and except as set forth on
Part 12(b) of the Schedule, is the sole and exclusive owner of said properties,
free and clear of all Liens and has the unrestricted right to use said
properties, having not granted or entered into any agreement, covenant, license
or sublicense with respect thereto.
Except as set forth on Part 12(c) of the Schedule, no claims or
demands have been asserted against the Corporation or any Subsidiary with
respect to any such items of intangible property, and no proceedings have been
instituted, are pending or, to the Indemnitors' knowledge, have been threatened
which challenge the rights of the Corporation or any Subsidiary with respect to
any of such assets. To the Indemnitors' knowledge and except as set forth on
Part 12(c) of the Schedule, the businesses and operations of the Corporation and
Subsidiaries, and the use or publication by them of their trademarks, trade
names, and advertising literature and other intangible personal properties do
not involve infringement or claimed infringement of any United States trademark,
trade name, or copyright.
No director, officer, stockholder, employee, consultant,
distributor, representative, advisor, salesman or agent of the Corporation or
any Subsidiary owns, directly or indirectly, in whole or in part, any
trademarks, trade names, or copyrights, or applications for the foregoing, or
tangible personal property which the Corporation or any Subsidiary is presently
using or the use of which is necessary for the business of the Corporation or
any Subsidiary as now conducted. To the Indemnitors' knowledge, none of the
directors, officers, stockholders, employees, consultants, distributors, agents,
representatives, advisors or salesmen of the Corporation or any Subsidiary has
entered into any agreement regarding know-how, trade secrets, or prohibition or
restriction of
26
competition, or solicitation of customers or any other similar restrictive
agreement or covenant, whether written or oral, with any Persons other than the
Corporation and Subsidiaries.
3.1.17. Agreements. Part 13 of the Schedule contains a true and
complete list of all oral and written contracts, agreements, commitments,
understandings and obligations to which the Corporation or any Subsidiary is a
party or by which any of them or their properties may be bound which are not
otherwise listed in the Schedule and which (a) involve obligations by any party
thereto in excess of $50,000; (b) extend beyond six months from the date of this
Agreement and are not terminable on thirty (30) days' notice or less without any
liability or continuing obligation on the part of the Corporation or any
Subsidiary (including any management, consulting or retainer agreement); (c)
contain any escalator, renegotiation or redetermination clause; (d) require the
consent of any party thereto to the consummation of the transactions
contemplated hereby; (e) contain covenants limiting the freedom of the
Corporation or any Subsidiary to compete in any line of business or with any
Person or in any geographical area; (f) contain any provision or option relating
to the acquisition by the Corporation or any Subsidiary of any business or
relating to the sale by the Corporation or any Subsidiary of any business; (g)
contain an agreement or commitment by the Corporation or any Subsidiary for a
material capital expenditure; (h) are contracts or agreements to which the
United States government is a party; or (i) contain any other agreement,
commitment, understanding or obligation which materially affects the business,
properties or assets of the Corporation or any Subsidiary. All of the aforesaid
agreements and all of the Continuing Contracts were entered into in the ordinary
course of business, are valid and binding agreements, in full force and effect
and enforceable in accordance with their respective terms, and, to the
Indemnitors' knowledge, there exists no breach or default, or any event which,
with notice or lapse of time or both, would constitute a breach or default, by
any party thereto. True and complete copies, including all amendments,
modifications, letter agreements and assignments relating thereto, of all of the
aforesaid written agreements and true and correct summaries of all such oral
agreements have previously been delivered to Purchaser.
To the Indemnitors' knowledge, neither the Corporation nor any
Subsidiary presently has, nor during the last five (5) years has had, directly
or indirectly, any type of contract, agreement, commitment, understanding or
obligation, whether written or oral, (i) with its customers or suppliers for the
sharing of fees, the rebating of the Corporation's or any Subsidiary's charges
to customers, kickbacks from customers or suppliers, or other similar
arrangements, or (ii) with any competitor regarding bidding for movie product or
product splitting; provided, the Corporation and the Subsidiaries have entered
into written video game rental agreements with the suppliers thereof that
provide for shared revenues from their operation and specific written and oral
rebate agreements with concession item suppliers that have been previously
disclosed to Purchaser. To the Indemnitors' knowledge, neither the Corporation
nor any Subsidiary is a party to or otherwise bound by any contract, obligation
or commitment to purchase above the current market price or to sell below its
current list price supplies, equipment, capital assets, inventories or services,
or any contract, obligation or commitment which upon completion will result in a
net loss to the Corporation or Subsidiary of more than $50,000.
3.1.18. Indebtedness and Guaranties. Part 14(a) of the Schedule
sets forth a true and complete list, including the names of the parties thereto
and summary description of the terms thereof, of all debt instruments, loan
agreements, indentures or other obligations, whether written or oral, relating
to indebtedness for borrowed money or money loaned to others to which the
Corporation or any Subsidiary is a party or obligor. Except as set forth on Part
14(b) of the Schedule, the Corporation has not guaranteed any dividend,
obligation or indebtedness of any Subsidiary or any other Person; nor has any
Subsidiary guaranteed any dividend, obligation or indebtedness of the
Corporation, any other Subsidiary or any
27
other Person. All of the aforesaid items were entered into in the ordinary
course of business, are valid and binding, in full force and effect and
enforceable in accordance with their respective terms and, to the Indemnitors'
knowledge, there exists no breach or default, or any event which with notice or
lapse of time or both, would constitute a breach or default by any party
thereto.
3.1.19. Books and Records. Each of the Corporation and
Subsidiaries keeps its books, records and accounts (including, without
limitation, those kept for financial reporting purposes and for tax purposes) in
sufficient detail to accurately and fairly reflect the transactions and
dispositions of its assets, liabilities and equities. The minute books of each
of the Corporation and incorporated Subsidiaries contain complete and accurate
records of all of its stockholders' and directors' meetings and of all action,
with respect to the Corporation and the Subsidiaries, taken by such stockholders
and directors. The meetings of directors and stockholders referred to in such
minute books were duly called and held, and the resolutions appearing in such
minute books were duly adopted. The signatures appearing on all documents
contained in such minute books are the true signatures of the persons purporting
to have signed the same.
3.1.20. ERISA. Neither the Corporation nor any Subsidiary has
any "qualified" plans within the meaning of Section 401(a) of the Internal
Revenue Code of 1986 and, except as set forth in Part 16 of the Schedule, does
not maintain, administer or otherwise contribute to any "EMPLOYEE BENEFIT PLAN",
as defined in Section 3(3) of ERISA, which is subject to any provisions of ERISA
and covers any employee, whether active or retired, of the Corporation or any
Subsidiary.
3.1.21. Employees.
(a) Part 17 of the Schedule sets forth a true and complete list
of: (1) all collective bargaining agreements and other labor agreements
to which the Corporation or any Subsidiary is a party or by which any of
them may be bound; (2) all employment, profit-sharing, deferred
compensation, bonus, stock option, stock purchase, pension, retainer,
consultant, retirement, welfare and incentive plans, agreements or
contracts, whether written or oral, to which the Corporation or any
Subsidiary is a party or by which any of them may be bound; (3) all
agreements and plans, whether written or oral, to which the Corporation
or any Subsidiary is a party and which constitute "fringe benefits" to
their employees or salesmen, including, without limitation, group life
and health insurance, vacation plans or programs, sick leave plans or
programs, termination or severance pay programs and employee discounts;
and (4) the name and current annual compensation of each director and
each officer of the Corporation and the Subsidiaries, and of each
employee or salesman thereof whose current annual salary and/or
estimated current annual commission is $25,000 or more, together with
such person's job title and amounts and forms of compensation and fringe
benefits. True and complete copies of all written, and correct summaries
of all oral, contracts, agreements, plans and programs set forth on Part
17 of the Schedule have previously been delivered to Purchaser.
(b) To the Indemnitors' knowledge, all of the aforesaid
contracts, agreements, plans and programs are in full compliance with
all applicable federal, state and local laws, and the Corporation and
Subsidiaries are in full compliance with all federal, state and local
laws respecting employment, wages and hours. Neither the Corporation nor
any Subsidiary is
28
engaged in any unfair labor practice or discriminatory employment
practice and no complaint of any such practice against the Corporation
or any Subsidiary is filed or, to the Indemnitors' knowledge, threatened
to be filed with or by the National Labor Relations Board or the Equal
Employment Opportunity Commission, nor is any grievance filed or, to the
Indemnitors' knowledge, threatened to be filed against the Corporation
or any Subsidiary by any employee pursuant to any collective bargaining
or other employment agreement to which the Corporation or any Subsidiary
is a party. To the Indemnitors' knowledge, the Corporation and the
Subsidiaries are in full compliance with all applicable federal and
state laws and regulations respecting occupational safety and health
standards other than those where noncompliance would not have a material
adverse effect on the Corporation, the Subsidiaries or their business,
and the Corporation and Subsidiaries have received no complaints from
any federal or state agency or regulatory body alleging violations of
any such laws and regulations.
(c) To the Indemnitors' knowledge, the Corporation and
Subsidiaries are in full compliance with the terms of all contracts,
agreements, plans and programs set forth on Part 17 of the Schedule.
Except as noted in Part 17 of the Schedule, the employment of all
persons and officers employed by the Corporation and the Subsidiaries is
terminable at will, without any penalty or severance obligation of any
kind on the part of the employer, and the consummation of the
transactions contemplated by this Agreement will not trigger any
payments to any officers, directors or employees of the Corporation or
any Subsidiary. All sums due for employee compensation and benefits and
all vacation time owing to any employees have been duly and adequately
accrued on the books of the Corporation and Subsidiaries. To the
Indemnitors' knowledge, all employees of the Corporation and
Subsidiaries are either United States citizens or resident aliens
specifically authorized to engage in employment in the United States in
accordance with all applicable laws. The Indemnitors do not know, and
have not been informed, that any employee, consultant, distributor,
representative, advisor, salesman, agent, customer or supplier of the
Corporation or any Subsidiary will terminate his employment or cease to
do business with the Corporation or any Subsidiary after the Closing.
(d) To the Indemnitors' knowledge, neither the Corporation nor
any Subsidiary has experienced since the Balance Sheet Date, any labor
troubles or strife, work stoppages, slowdowns, or other interference
with or impairment of the businesses of the Corporation and Subsidiaries
by their employees. To the Indemnitors' knowledge, neither the
Corporation nor any Subsidiary has experienced since the Balance Sheet
Date, any union or collective bargaining organization efforts or
negotiations, or requests for negotiations, for any representation or
any labor contract relating to any employees of the Corporation or the
Subsidiaries not covered by a union or collective bargaining agreement
as of the Balance Sheet Date, except to the extent disclosed in Part 17
of the Schedule.
3.1.22. Governmental and Other Consents. Except as set forth on
Part 18 of the Schedule, no consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority or other
Person is required on the part of the Corporation or any Subsidiary, the
stockholders of the Corporation, the Trust, Seller, or the partners of Super
Saver in connection with the execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby.
3.1.23. Environmental Matters. Except as set forth in Part 19 of
the Schedule and to the Indemnitors' knowledge, with respect to the real estate
owned or leased by the Corporation or any
29
of the Subsidiaries, (i) all permits, licenses, filings and approvals necessary
for the lawful construction, occupancy and operation of such real estate
required by any federal, state, county, regional or local authorities whose
jurisdiction includes, in whole or in part, environmental protection or matters
pertaining to health, safety and welfare have been obtained; (ii) none of such
real estate contains any (a) asbestos in any form, (b) urea formaldehyde foam
insulation, (c) transformers or other equipment which contain dielectric fluid
containing levels of polychlorinated biphenyls (PCBs) in excess of fifty parts
per million, or (d) other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any federal, state, county, regional or
local authority, except in compliance with applicable law; and (iii) none of
such real estate has been used at any time in the past for any activities
involving, directly or indirectly, the use, generation, treatment, storage,
spill or disposal of any hazardous or toxic chemical, material, substance or
waste, except in compliance with applicable law.
3.1.24. Discounts and Gift Certificates. Any outstanding
discount or promotional tickets, gift certificates, prepaid tickets or admission
passes or any other arrangements allowing the holder thereof to reduced or free
admission to any of the Theaters will expire on or before December 31, 1998,
other than (i) those issued prior to December 1, 1997 and (ii) free passes
issued in the ordinary course of business.
3.1.25. Full Disclosure. As of the date of this Agreement, the
Indemnitors have, and at the Closing will have, disclosed in writing to
Purchaser all events, conditions or facts which, to the Indemnitors' knowledge,
materially affect the condition (financial or otherwise), business or prospects
of the Theaters. The Indemnitors have not now, and will not have at the Closing,
withheld from Purchaser knowledge of any events, conditions or facts which the
Indemnitors know may materially affect the condition (financial or otherwise),
business or prospects of the Theaters. No representation or warranty by the
Indemnitors in this Agreement, and no information contained in the Schedule, the
exhibits, lists, certificates and other instruments and documents furnished or
to be furnished to Purchaser pursuant hereto, contains or will contain any
untrue statement of material fact or omits or will omit to state any material
fact necessary to make the statements and information contained herein or
therein not misleading. The Indemnitors shall execute and deliver to Purchaser
at Closing the Certificate described in Section 5.1.5. For the purposes of this
Section 3.1.25, events, conditions and facts which have effects aggregating less
than 5% of the transaction value is deemed not material.
3.1.26. Organization of the Trust. The Trust is a duly formed
and validly existing trust under the laws of the State of Texas.
3.1.27. Authority of ▇▇▇▇▇▇. ▇▇▇▇▇▇, in his individual capacity,
has full right, power and authority to enter into this Agreement and the Asset
Purchase and to consummate the transactions contemplated hereby and thereby.
3.1.28. Authority of Indemnitors. Each of the Indemnitors has
full right and power to enter into this Agreement and the Asset Purchase
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution of this Agreement and the Asset Purchase Agreement by each of the
Indemnitors, their delivery to Purchaser and the performance of their respective
terms have been fully authorized by the Board of Directors of the Corporation,
the stockholders and the Board of Directors of Seller, the partners of Super
Saver and the trustee of the Trust, as required, and
30
no further corporate, partnership or trust action will be necessary on their
part to make this Agreement and the Asset Purchase Agreement valid and binding
upon each of the Indemnitors in accordance with their respective terms, other
than the stockholder approval required pursuant to Section 5.2.7. The execution
and delivery of this Agreement and the Asset Purchase Agreement do not, and the
consummation of the transactions contemplated hereby and thereby will not,
result in a violation or breach of any term or provision of, nor constitute a
default under, the Corporation's or Seller's articles of incorporation or
bylaws, Super Saver's partnership agreement, the Trust's formation documents, or
other constituent documents, or any indenture, mortgage, deed of trust or other
material contract or agreement to which the Corporation, Seller, Super Saver or
the Trust is a party.
3.1.29. Validity and Enforceability. This Agreement and the
Asset Purchase Agreement are valid and binding agreements, enforceable against
the Indemnitors and the Subsidiaries to the extent each is ostensibly a party in
accordance with their respective terms by Purchaser, except as enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws and principles of equity affecting the rights of
creditors generally from time to time in effect.
3.1.30. Insolvency. Neither the Seller nor any Indemnitor is now
Insolvent, nor will the Seller or any Indemnitor be rendered Insolvent by the
occurrence of the transactions contemplated hereby.
3.1.31. Cash Flow Figures.
(a) Seller has provided cash flow figures (the "CASH FLOW
FIGURES") indicating gross revenues less direct operating expenses for
the Theaters operated by Seller from November 1, 1996 through October
31, 1997 in Exhibit S attached hereto.
(b) Seller's Cash Flow Figures are in accordance in all material
respects with the books and records of Seller and, except as stated
therein, fairly represent said Cash Flow Figures for said Theaters.
3.2. REPRESENTATIONS AND WARRANTIES OF PURCHASER. TO INDUCE SELLER AND
THE INDEMNITORS TO ENTER INTO THIS AGREEMENT AND TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED HEREBY, PURCHASER REPRESENTS, WARRANTS AND AGREES AS OF THE DATE
HEREOF AS FOLLOWS:
3.2.1. Organization and Good Standing. Purchaser is a duly
organized and validly existing corporation in good standing under the laws of
the State of Delaware.
3.2.2. Authority. The execution of this Agreement and the Asset
Purchase Agreement by Purchaser, their delivery to the Indemnitors and the
performance of their respective terms have been fully authorized by the Board of
Directors of Purchaser and Purchaser's stockholders, if required, and no further
corporate action will be necessary on their part to make this Agreement and the
Asset Purchase Agreement valid and binding upon Purchaser to the extent it is
ostensibly a party in accordance with their respective terms. The execution and
delivery of this Agreement and the Asset
31
Purchase Agreement do not, and the consummation of the transactions contemplated
hereby and thereby will not, result in a violation or breach of any term or
provision of, nor constitute a default under, Purchaser's certificate of
incorporation or bylaws, or any indenture, mortgage, deed of trust or other
material contract or agreement to which Purchaser is a party.
3.2.3. Validity and Enforceability. This Agreement and the Asset
Purchase Agreement are valid and binding agreements, enforceable against
Purchaser to the extent it is ostensibly a party in accordance with their
respective terms by the Seller, the Corporation and Super Saver, except as
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws and principles of equity affecting the
rights of creditors generally from time to time in effect. The execution and
performance of this Agreement and the Asset Purchase Agreement by Purchaser and
the consummation of the transactions contemplated hereby or thereby do not
violate any statutory or common law or rule or regulation or give rise to a
cause of action of any type in any Person (other than the parties to such
agreements, upon a violation hereof or thereof), which will result in any
liability to Seller.
ARTICLE 4. - COVENANTS
4.1. THE SELLER'S AND THE INDEMNITORS' COVENANTS. TO INDUCE PURCHASER TO
ENTER INTO THIS AGREEMENT AND TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED
HEREBY, AND WITHOUT LIMITING ANY COVENANT, AGREEMENT, REPRESENTATION OR WARRANTY
MADE ELSEWHERE IN THIS AGREEMENT, THE SELLER AND THE INDEMNITORS COVENANT AND
AGREE AS FOLLOWS:
4.1.1. Access and Information. Between the date of this
Agreement and the Closing Date, each of the Corporation and Subsidiaries will:
(i) provide to Purchaser and its officers, attorneys, accountants and other
representatives, during normal business hours, or otherwise if Purchaser deems
necessary, free and full access to all of the properties, assets, agreements,
commitments, books, records, accounts, tax returns and documents of the
Corporation and Subsidiaries and permit them to make copies thereof; (ii)
furnish Purchaser and its representatives with all information concerning the
business, properties and affairs of the Corporation and Subsidiaries as
Purchaser requests and certified by the officers of the Corporation, if
requested; (iii) use their best efforts to cause the Corporation's Accountants
to make available to Purchaser and its representatives all financial information
relating to the Corporation and the Subsidiaries requested, including all
working papers pertaining to audits and reviews made heretofore by such
auditors; (iv) furnish Purchaser true and complete copies of all financial and
operating statements of the Corporation and Subsidiaries; (v) permit access to
customers and suppliers for consultation or verification of any information
obtained by Purchaser and use their best efforts to cause such customers and
suppliers to cooperate with Purchaser in such consultation and in verifying such
information; and (vi) cause their employees, accountants and attorneys to make
disclosure of all material facts known to them affecting the financial condition
and business operations of the Corporation and Subsidiaries and to cooperate
fully with any audit, review, investigation or examination made by Purchaser and
its representatives, including, without limitation, with respect to:
(a) The books and records of the Corporation and Subsidiaries;
(b) The reports of state and federal regulatory examinations;
32
(c) Leases, contracts and commitments between the Corporation or
any Subsidiary and any other Person;
(d) Physical examination of any real properties owned by, or
leased to or by the Corporation or any Subsidiary;
(e) Physical examination of any real property upon which the
Corporation or any Subsidiary has a Lien; and
(f) Physical examination of any furniture, fixtures, equipment
or other personal property owned by or leased to or by the Corporation
or any Subsidiary.
4.1.2. Notices and Approvals. Each of the Seller and Indemnitors
agrees: (a) to give, and to cause the Subsidiaries to give, all notices to third
parties (including their respective stockholders and limited and general
partners) which may be necessary or deemed desirable by Purchaser in connection
with this Agreement and the consummation of the transactions contemplated
hereby, (b) to use its best efforts to obtain, and to cause the Subsidiaries to
obtain, all federal and state governmental regulatory agency approvals,
consents, permits, authorizations, and orders necessary or deemed desirable by
Purchaser in connection with this Agreement and the consummation of the
transaction contemplated hereby and (c) to use its best efforts to obtain, and
to cause Subsidiaries to obtain, all consents and authorizations of any
governmental authorities or other third parties (including their respective
stockholders and limited and general partners) and lenders (including Norwest
Bank El Paso, N.A. and Frost National Bank, N.A.) necessary or deemed desirable
by Purchaser in connection with this Agreement and the consummation of the
transactions contemplated hereby. At least ten (10) business days prior to the
submission of any application with respect to any of the foregoing approvals,
consents, permits, authorizations and orders, the Corporation shall, and shall
cause any Subsidiary to, deliver a copy thereof to Purchaser. In the event
Purchaser shall request any modification in the form or content of any such
application, the Corporation shall, or shall cause any Subsidiary to, make such
change or modification and submit the application as modified or changed.
4.1.3. Information for Purchaser's Statements and Applications.
The Seller, the Corporation and Super Saver shall, and shall cause the
Subsidiaries and their employees, accountants and attorneys to, cooperate fully
with Purchaser in the preparation of any statements or applications made by
Purchaser to any federal or state governmental regulatory agency in connection
with this Agreement and the transactions contemplated hereby and to furnish
Purchaser with all information concerning the Corporation and Subsidiaries
necessary or deemed desirable by Purchaser for inclusion in such statements and
applications, including, without limitation, all requisite financial statements
and schedules. At the time any such statement or application is filed and at
such other times as Purchaser may request, the Seller, the Corporation and Super
Saver shall provide Purchaser with a certificate executed by the respective
Corporation's or Subsidiary's executive officers confirming in such detail as
Purchaser may request the information concerning the Corporation or Subsidiary
which is contained in such statement or application.
33
4.1.4. Termination of Employees. On the Closing Date, Seller
shall terminate all of its Theater employees; provided, Purchaser may elect to
hire any of such employees. Seller will pay on or before the Closing Date any
accrued vacation pay earned prior to the Closing by any employees of Seller,
other than those employees set forth on the Exhibit described in Section
2.4(a)(vii).
4.1.5. Conduct of Business.
(a) Except as otherwise specifically contemplated by this
Agreement and disclosed on the Schedule, from the date of this Agreement
and through the Closing, unless Purchaser has given its prior written
consent otherwise, each of the Seller, the Corporation and Super Saver
shall, and shall cause each Subsidiary to, conduct its business and
affairs only in the ordinary and usual course and in the same manner in
which they have heretofore been conducted. Any purchases of equipment or
fixtures from the date of this Agreement through the Closing, shall be
of equipment and fixtures of comparable quality and standards as such
items purchased prior to the date of this Agreement. Without limiting
the generality of the foregoing, absent Purchaser's prior written
consent, the Seller, the Corporation and Super Saver shall not, and
shall not permit any Subsidiary to, take any action or omit to take any
action where such action or omission would by the terms of this
Agreement require an item to be listed on Part 5 of the Schedule in
order to make the representations herein true as of the date of such
action or omission.
(b) From and after the date hereof until the Closing or
termination of this Agreement pursuant to the terms hereof, Seller,
without the prior written consent of Purchaser, shall not:
(i) encumber or permit the encumbrance by Seller of the
Property owned or leased thereby, except for encumbrances that are
discharged on or before Closing;
(ii) dispose of or contract to dispose of any of the
Property owned or leased thereby, except for replacements or substitutes
in the ordinary course of business (but will not sell any of the
Theaters operated thereby); and
(iii) amend or terminate any of the Leases or Continuing
Contracts to which Seller is a party.
4.1.6. Preservation of Business. From the date of this Agreement
and through the Closing, the Seller, the Corporation and Super Saver shall use
commercially reasonable efforts, and shall cause the Subsidiaries to use
commercially reasonable efforts, to preserve and keep intact the respective
business organizations of the Corporation and Subsidiaries, to retain their
respective officers, and to preserve the goodwill of their respective employees,
customers, suppliers and all other persons having business relations with the
Corporation or any Subsidiary.
4.1.7. Insurance. From the date of this Agreement and through
the Closing, the Seller, the Corporation and Super Saver shall, and shall cause
the Subsidiaries to, continue in force all existing insurance now carried by the
Corporation and Subsidiaries.
34
4.1.8. Contracts and Commitments. From the date of this
Agreement and through the Closing, unless Purchaser has given its prior written
approval, the Seller, the Corporation and Super Saver shall not, and shall not
permit any Subsidiary to, enter into any contract or commitment by which any of
the Property is bound except contracts or commitments in the ordinary and usual
course of business not involving (i) an expenditure in any one transaction in
excess of $2,000; and (ii) the purchase of a quantity of materials not
reasonably anticipated (based on current operations) to be consumed in less than
six (6) months; and the Seller, the Corporation and Super Saver shall not, and
shall not permit any Subsidiary to, make or incur any capital expenditures in an
aggregate amount in excess of $3,000, except for items of equipment on order on
the date hereof and set forth on Part 13 of the Schedule.
4.1.9. Actions, Etc. The Seller, the Corporation and Super Saver
shall promptly notify Purchaser of any lawsuits, claims, proceedings or
investigations which are threatened or commenced against the Corporation or any
Subsidiary or against any of their employees, consultants, officers or
directors, or, to the Indemnitors' knowledge, their employees or consultants
between the date of this Agreement and the Closing Date and which may relate to,
or affect, the business or assets of the Corporation or any Subsidiary or the
transactions contemplated hereby. From the date of this Agreement and through
the Closing, the Seller, the Corporation and Super Saver shall, and shall cause
the Subsidiaries to, duly comply with all laws, regulations, ordinances, orders,
injunctions and decrees applicable to them, their properties, and the conduct of
their respective businesses, and with all covenants, terms and conditions upon
or under which any of their properties are held.
4.1.10. Repairs. From the date of this Agreement and through the
Closing, the Seller, the Corporation and Super Saver shall, and shall cause the
Subsidiaries to, maintain, preserve and protect the property used in the conduct
of the business of the Corporation and Subsidiaries and, except as set forth on
Part 11(b) to the Schedule, keep the same in good repair, working order and
condition and, from time to time make, or cause to be made, all needful and
proper repairs, renewals and replacements thereto, subject to the limitation
contained in Section 4.1.8 hereof, so that the business carried on in connection
therewith may be advantageously conducted at all times.
35
4.1.11. Reports and Returns. The Seller, the Corporation and
Super Saver shall, and shall cause the Subsidiaries to, duly and timely file all
reports and returns required to be filed with federal, state, local and other
authorities prior to Closing, including, without limitation, any federal income
tax returns, which returns shall be prepared in accordance with all regulatory
requirements. The Seller, the Corporation and Super Saver shall, and shall cause
the Subsidiaries to, promptly pay all federal, state, foreign and local tax
assessments and governmental charges levied or assessed upon the Corporation and
Subsidiaries or their properties prior to the date on which penalties attach
thereto and all lawful claims which, if unpaid when due and payable, might
become a Lien upon property of the Corporation or any Subsidiary, except taxes,
charges and claims being contested in good faith by appropriate proceedings by
the Corporation or a Subsidiary and for which adequate reserves have been made
on the books of the Corporation or the Subsidiaries. The Seller, the Corporation
and Super Saver shall, and shall cause the Subsidiaries to, duly and timely make
all deposits required of the Corporation and Subsidiaries with respect to any
taxes (including, without limitation, employee withholding taxes).
4.1.12. Indemnification of Purchaser.
(a) The sole remedy of Purchaser, its officers, directors,
representatives, shareholders, stockholders, lenders, assignees and
Affiliates against the Indemnitors and their Related Parties for any
Loss arising out of or related to this Agreement or the transactions
contemplated hereby (it being understood that claims for indemnification
by Purchaser or such other Persons under the (i) Asset Purchase
Agreement shall be made, if at all, pursuant to Section 4.1.12 thereof
and (ii) Put Agreement shall be made, if at all, pursuant to Section
4.1.12 thereof) shall be a claim for indemnity made and enforced in
accordance with this Section 4.1.12. Each and every provision in this
Agreement has been independently bargained for and relied upon by
Purchaser.
(b) The Indemnitors jointly and severally agree to defend and
indemnify, reimburse and hold harmless Purchaser and its Related Parties
(collectively, the "PURCHASER INDEMNITEES") against and in respect of
any and all liability, damage, deficiency, loss, cost or expense
(including attorney's fees and costs of investigation), or diminution of
value, whether or not involving a third party claim (collectively, a
"LOSS") arising from (i) all third party claims to the extent that they
relate to (A) transactions contemplated herein to the extent that they
arise out of or relate to actions or omissions of Curley, Lyco, the
Indemnitors and/or the Subsidiaries, (B) the business currently or ever
conducted by the Seller, the Corporation and Super Saver and the
Subsidiaries to the extent that they arise out of or relate to actions
or omissions of Curley, Lyco, the Indemnitors and/or the Subsidiaries
and (C) the Property prior to Closing to the extent that they arise out
of or relate to actions or omissions of Curley, Lyco, the Indemnitors
and/or the Subsidiaries and (ii) any untrue representation, breach of
warranty or non-fulfillment of any covenant contained herein or in any
document, certificate or instrument delivered to Purchaser hereunder
made by the Indemnitors, even though any such representation, warranty
or covenant may have been made by the Indemnitors in good faith and to
their knowledge; provided, however, that solely with respect to those
representations and warranties contained herein which have been
specifically limited to the Indemnitors' knowledge there shall be no
indemnification obligations under this Section 4.1.12(b) absent such
knowledge. Without limiting the foregoing, the Indemnitors agree to
defend, indemnify, reimburse and hold harmless each Purchaser Indemnitee
against and in respect of any Loss arising out of or related to:
36
(1) any claim for a finder's fee or brokerage or other
commission arising by reason of any services rendered or alleged
to have been rendered to or at the instance of any of the
Indemnitors or any Subsidiary with respect to this Agreement or
any of the transactions contemplated hereby;
(2) any liability to any federal, state or local taxing
authority for income taxes, excise taxes, sales taxes, franchise
taxes or other taxes or penalties incurred by the Corporation or
any Subsidiary on or prior to the Closing Date; and
(3) any and all actions, suits, proceedings, claims,
demands, assessments, judgments, and Losses incident to any of
the foregoing or incurred in investigating or attempting to
avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
(c) Notwithstanding the preceding provisions concerning
indemnification of the Purchaser Indemnitees by the Indemnitors,
Purchaser hereby expressly agrees that the liabilities and obligations
of the Indemnitors under this Section 4.1.12 shall be expressly limited
as follows:
(1) the amount of any damages asserted by any Purchaser
Indemnitee pursuant to any indemnification claim made pursuant
to this Section 4.1.12 shall include the amount of tax
liability, if any, incurred by any Purchaser Indemnitee upon
receipt of such indemnification and be limited in each case to
the total amount of actual damages incurred by any Purchaser
Indemnitee net of the then present value (calculated at 6% per
annum) of any related tax benefit to the Purchaser Indemnitee,
if any, resulting from such claim;
(2) the Indemnitors shall not be liable for any increase
in any tax liability of the Purchaser Indemnitees (including,
without limitation, income, property, sales, use, franchise,
capital stock, excise, value added, employees' income
withholding, social security, unemployment taxes and all
interest and penalties related to any of such taxes) to the
extent such increase in tax liability to the Purchaser
Indemnitees shall result from an audit or enforcement action
that in either case was voluntarily initiated by Purchaser or
its Affiliates;
(3) the Indemnitors shall not be required to defend,
indemnify or hold any Purchaser Indemnitee harmless from any
claim pursuant to Section 4.1.12(b)(ii) based upon any facts or
circumstances which were specifically disclosed by the
Indemnitors to Purchaser in this Agreement or in the Schedule or
any exhibit attached hereto or in any document delivered to
Purchaser which is specifically identified on Exhibit K attached
hereto;
(4) the Indemnitors shall not be required to defend,
indemnify or reimburse or hold any Purchaser Indemnitee harmless
from any claim except to the extent that the total of all such
claims established pursuant to this Section 4.1.12, Section
4.1.12 of the Asset Purchase Agreement and Section 4.1.12 of the
Put Agreement exceeds an aggregate amount of $25,000, subject to
reduction in accordance with Section 4.2.3; and
37
(5) Indemnitors shall not be liable for any breach of
representation, warranty, covenant or any other matter to the
extent that it resulted in an adjustment in the Purchase Price.
(d) In the event the income or other tax returns of the
Purchaser Indemnitee are audited after Closing by any taxing authority,
the Indemnitors shall have the right to participate at their own expense
in such audit and to contest in good faith and on behalf of the
taxpayer/entity any assessments for additional tax, interest or penalty
proposed or imposed by such taxing authority for which the Indemnitors
may be liable or responsible under this Section 4.1.12, providing the
Indemnitors post bond for any liability resulting from such contest.
(e) Each of the Indemnitors shall be so obligated under this
Section 4.1.12 and Section 4.1.12 of the Asset Purchase Agreement and
Section 4.1.12 of the Put Agreement to the extent of an aggregate
maximum of an additional $3,200,000 over and above any and all offsets
against the Escrow Amount; provided, that the maximum aggregate amount
to be recovered by all Purchaser Indemnitees from the Indemnitors
collectively shall not exceed an additional $3,200,000 over and above
any and all offsets against the Escrow Amount and, provided further,
that any amounts paid by the Indemnitors (whether directly or by offset
of other payments due to Indemnitors) pursuant to Section 4.1.12 of the
Asset Purchase Agreement or Section 4.1.12 of the Put Agreement that are
not offset against the Escrow Amount shall be applied towards such
$3,200,000 limitation. Notwithstanding the foregoing, this paragraph (e)
shall not apply to any breach of Sections 3.1.11, 3.1.12 and 8.19
hereof.
(f) In the event any Person not a party to this Agreement shall
make a demand or claim, or file any lawsuit, which demand, claim or
lawsuit is likely to result in any of the forms of liability or Loss
described in this Section 4.1.12, then after prompt written notice by
any Purchaser Indemnitee to the Indemnitors of such demand, claim or
lawsuit, the Indemnitors shall retain counsel reasonably satisfactory to
Purchaser to defend such claim or action. Thereafter, any Purchaser
Indemnitee shall be permitted to participate in such defense at their
own expense. In the event the Indemnitors fail to respond to the prompt
written notice of any such demand, claim or lawsuit, or fail to retain
reasonably satisfactory counsel, then any Purchaser Indemnitee shall be
permitted to retain counsel and to conduct the defense of such demand,
claim or lawsuit as they may reasonably deem fit at the expense of the
Indemnitors. The above agreement of the Indemnitors to defend, indemnify
and hold harmless the Purchaser Indemnitees, shall include the cost and
expense of such counsel and defense as well as any Loss any Purchaser
Indemnitee may suffer arising out of such demand, claim or lawsuit
subject to the limitation set forth above. For the purposes of this
Section 4.1.12, "prompt written notice" shall mean that any Purchaser
Indemnitee, shall give written notice to counsel for the Indemnitors
designated in Section 8.2 of a demand, claim or lawsuit within thirty
(30) days after such demand, claim or lawsuit is brought to the
attention of a Purchaser Indemnitee, and in any event 15 days before any
pleading is due in any litigation.
(g) The Indemnitors agree that their agreement under this
Section 4.1.12 to defend, indemnify, reimburse and hold harmless the
Purchaser Indemnitees will first be accomplished by an offset against
the Escrow Amount as provided in Section 2.6 hereof, if established. For
any and all amounts in excess of the Escrow Amount (or, if no Escrow
Amount exists, $25,000), the Indemnitors agree to indemnify, reimburse
and hold harmless Purchaser Indemnitees from any Loss within thirty (30)
days after any such Loss shall be finally determined. Any Loss under
this Section 4.1.12 shall be deemed "finally determined" on the earlier
of (i) the date upon which the Indemnitors shall acknowledge in writing
to Purchaser that any claim for indemnity under this Section 4.1.12 has
been properly made and
38
is in the correct amount, or (ii) in the event the Indemnitors shall
contest any claim made by a Purchaser Indemnitee or by any third party
on the date any final judgment, decision or award shall have been
rendered by a court, arbitration board or administrative agency of
competent jurisdiction, or a settlement shall have been consummated, or
the parties shall have arrived at a mutually binding agreement with
respect to such claim, as applicable. The indemnity hereunder shall
include any and all costs and expenses incurred by a Purchaser
Indemnitee pending any such final determination.
(h) These indemnification obligations of the Indemnitors shall
survive until, but only until, the first anniversary of the Closing;
provided, that the obligations of the Indemnitors for any claim made by
a Purchaser Indemnitee under this Section 4.1.12 prior to such first
anniversary, shall survive such first anniversary.
4.1.13. Compliance with Agreement. The Seller, the Corporation
and Super Saver shall not, and shall not allow the Subsidiaries to, undertake
any course of action inconsistent with satisfaction of the conditions applicable
to them set forth in this Agreement, and the Seller, the Corporation and Super
Saver shall, and shall cause the Subsidiaries to, do all such acts and take all
such measures as may be reasonably appropriate as early as practicable to comply
with and satisfy (as applicable) the representations, agreements, conditions and
other provisions of this Agreement. The Seller shall give Purchaser prompt
written notice of any change in any information contained in the representations
and warranties made in Section 3.1 hereof and on the Schedule referred to
therein and of any condition or event which constitutes a default of any
covenant or agreement of the Seller, the Corporation and Super Saver made in
Section 4.1 or in any other section hereof and the Seller shall have a
continuing obligation to promptly supplement or amend the Schedule with respect
to any matter thereafter arising or discovered which, if existing or known at
the date of this Agreement, would have been required to be set forth or
described in the Schedule; provided, however, that for the purposes of the
rights and obligations of the parties hereunder, any such supplemental or
amended disclosure shall not be deemed to have been disclosed as of the date of
this Agreement unless so agreed to in writing by Purchaser. For the purposes of
this Section 4.1.13, "prompt written notice" shall mean notice given to
Purchaser within five (5) days after the occurrence of the event which by the
terms of this Agreement requires such change in information or constitutes such
a default, or if such event occurs within five (5) days prior to the Closing,
then "prompt written notice" shall mean written notice given prior to the
Closing.
4.1.14. Title Information. Purchaser, at the Seller's cost and
expense to the extent that the Purchase Price is adjusted as set forth in
Section 2.3, shall cause a title company satisfactory to Purchaser and its
lender to deliver to Purchaser a commitment for owner's and mortgagee's title
insurance policies, naming Purchaser as the insured party in amounts and with
exceptions to title acceptable to Purchaser, for each tract of real property
constituting Property, together with legible copies of all title exceptions
listed therein. If Purchaser or its lender object to the status of title to such
real property, they shall so notify the Seller in writing, and the Seller shall
have the right but not the obligation to cure such title objections prior to the
Closing Date. Purchaser shall have the right to terminate this Agreement in the
event the Seller fails to cure on or before the Closing Date any title objection
which (i) materially interferes or reasonably could materially interfere with
the present use of the properties subject thereto or (ii) its lender does not
waive.
39
4.1.15. [INTENTIONALLY OMITTED.]
4.1.16. Actions in the Event of a Noncompliance Circumstance.
The Indemnitors shall have until the earlier to occur of the Closing Date or
fifteen (15) days following delivery of notice of a Noncompliance Circumstance
to cure and correct any Noncompliance Circumstance prior to Closing and shall
use their reasonable efforts to effect such a cure or correction up to an
aggregate of $100,000 pursuant to Section 4.1.16 of this Agreement less amounts
previously so expended pursuant to Section 4.1.16 of the Asset Purchase
Agreement and the Put Agreement.
4.1.17. Exclusive Dealing. Indemnitors shall not, directly or
indirectly, through any agents, representatives or otherwise, solicit, accept,
or entertain offers from, negotiate with or in any manner encourage, accept or
consider any proposal of, or enter into any agreement with any Person other than
Purchaser relating to, the sale of the Property (or any material portion
thereof), whether through purchase, merger, consolidation or other business
combination.
4.2. Purchaser's Covenants. To induce the Indemnitors to enter into this
Agreement and to consummate the transactions contemplated hereby, and without
limiting any covenant, agreement, representation or warranty made elsewhere in
this Agreement, Purchaser covenants and agrees as follows:
4.2.1. Nondisclosure of Information. Unless and until the
transactions contemplated by this Agreement are fully consummated, Purchaser
shall hold all data and information obtained with respect to the Corporation and
Subsidiaries in such degree of confidence as the Corporation and Subsidiaries
maintain such information and further agrees not to use such data or information
or disclose the same to others (i) except to Purchaser's accountants, attorneys,
lenders, agents and representatives, (ii) except as permitted by the
Corporation, (iii) except to the extent such information is published or is a
matter of public knowledge or used in connection with any securities statement
or offering circular prepared by Purchaser or any Affiliate thereof or (iv)
except as required by law. In the event this Agreement is terminated pursuant to
Section 7.1 hereof for any reason, Purchaser shall, within ten (10) days
following the date of such termination, deliver to the Corporation all written
information and copies thereof obtained by Purchaser or any of its
representatives referenced in (i) above at any time from the beginning of the
discussions between the Corporation and Purchaser of the transactions
contemplated herein.
4.2.2. Compliance with Agreement; Cooperation. Purchaser shall
not undertake any course of action inconsistent with satisfaction of the
conditions applicable to Purchaser set forth in this Agreement, and shall
cooperate and assist the Seller, without expense to Purchaser, in all its
efforts and undertakings as early as practicable to comply with and satisfy (as
applicable) the representations, agreements, conditions and other provisions of
this Agreement applicable to the Purchaser, including, without limitation,
providing the Seller with such financial and other information relating to
Purchaser as the Seller or the Corporation may be required to deliver to the
lenders, lessors and sublessors of the Corporation or any Subsidiary in order to
obtain the releases and other consents contemplated by this Agreement.
40
4.2.3. Disclosure to the Corporation. Purchaser shall give the
Seller prompt written notice of any information or other knowledge obtained by
Purchaser prior to Closing pursuant to its due diligence investigation or
otherwise that Purchaser considers to be either (a) inconsistent with or in
violation of any of the representations and warranties made by the Indemnitors
in Section 3.1 of this Agreement, or inconsistent with any information disclosed
on the Schedule, or (b) a condition or event which may constitute a default by
the Indemnitors or failure to comply with or fully perform any covenant or
agreement of the Indemnitors made in Section 4.1 or any other section of this
Agreement (hereafter referred to as a "NONCOMPLIANCE CIRCUMSTANCE"). Any amounts
previously spent pursuant to Section 4.1.16 of this Agreement, the Asset
Purchase Agreement and the Put Agreement up to an aggregate of $25,000 to effect
such cure or correction will (i) increase the Purchase Price by such amounts and
(ii) reduce the $25,000 deductible referred to in Section 4.1.12(c)(4) of this
Agreement and the Asset Purchase Agreement by such amounts. In the event the
Indemnitors fail to cure or correct such Noncompliance Circumstance, Purchaser
shall have the right to terminate this Agreement in accordance with the
provisions of Section 7.1. In the event Purchaser elects to proceed to Closing,
any such breach or failure to perform by the Indemnitors shall be deemed to be
waived by Purchaser and shall not constitute the basis for any claim of
indemnification or offset by Purchaser against the Indemnitors or the Escrow
Amount after Closing.
4.2.4. Indemnification by Purchaser.
(a) The sole remedy of the Indemnitors and their Related Parties
(collectively, the "STARTIME INDEMNITEES") and any of their officers,
directors, representatives, stockholders, lenders, assignees and
Affiliates against Purchaser, SCI and their Related Parties for any Loss
arising out of or related to this Agreement or the transactions
contemplated hereby (it being understood that claims for indemnification
by the StarTime Indemnitees or such other Persons under the (i) Asset
Purchase Agreement shall be made, if at all, pursuant to Section 4.2.4
thereof and (ii) Put Agreement shall be made, if at all, pursuant to
Section 4.2.4 thereof) shall be a claim for indemnity made and enforced
in accordance with this Section 4.2.4.
(b) Purchaser shall defend, indemnify, reimburse, and hold
harmless, the StarTime Indemnitees from: (i) all third party claims
relating to the business conducted by Purchaser arising out of, or
relating to, actions or omissions of Purchaser after the Closing; and
(ii) any untrue representation, breach of warranty or non-fulfillment of
any covenant contained herein, in each case of Purchaser contained in
this Agreement, even though any such representation, warranty or
covenant may have been made by the Purchaser in good faith.
(c) Notwithstanding the preceding provisions concerning
indemnification by Purchaser, the StarTime Indemnitees hereby expressly
agree that the liabilities and obligations of Purchaser under this
Section 4.2.4 shall be expressly limited as follows:
(1) the amount of any damages asserted by the StarTime
Indemnitees pursuant to any indemnification claim made pursuant
to this Section 4.2.4 shall include the amount of tax liability,
if any, incurred by the StarTime Indemnitees upon receipt of
such indemnification and be limited in each case to the total
amount of actual damages incurred by the StarTime Indemnitees
net of the then present value (calculated at 6% per annum) of
any related tax benefit to the StarTime Indemnitees, if any,
resulting from such claim; and
(2) Purchaser shall not be required to defend,
indemnify, reimburse or hold the StarTime Indemnitees harmless
from any claim except to the extent that the
41
total of all such claims established pursuant to this Section
4.2.4, Section 4.2.4 of the Asset Purchase Agreement and Section
4.2.4 of the Put Agreement exceeds an aggregate amount of
$25,000.
(d) Purchaser shall be so obligated under this Section 4.2.4 and
Section 4.2.4 of the Asset Purchase Agreement and Section 4.2.4 of the
Put Agreement to the extent of an aggregate maximum of $3,700,000;
provided, that the maximum aggregate amount to be recovered by all
StarTime Indemnitees from Purchaser and SCI collectively shall not
exceed $3,700,000 and, provided further, that any amounts paid by
Purchaser or SCI pursuant to Section 4.2.4 of the Asset Purchase
Agreement shall be applied towards such $3,700,000 limitation.
(e) In the event any Person not a party to this Agreement shall
make a demand or claim, or file any lawsuit, which demand, claim or
lawsuit is likely to result in any of the forms of liability or Loss
described in this Section 4.2.4, then after prompt written notice by any
StarTime Indemnitee to Purchaser of such demand, claim or lawsuit, the
Purchaser shall retain counsel reasonably satisfactory to the StarTime
Indemnitees to defend such claim or action. Thereafter, any StarTime
Indemnitee shall be permitted to participate in such defense at their
own expense. In the event Purchaser fails to respond to the prompt
written notice of any such demand, claim or lawsuit, or fails to retain
reasonably satisfactory counsel, then any StarTime Indemnitee shall be
permitted to retain counsel and to conduct the defense of such demand,
claim or lawsuit as they may reasonably deem fit at the expense of
Purchaser. The above agreement of Purchaser to defend, indemnify and
hold harmless the StarTime Indemnitees, shall include the cost and
expense of such counsel and defense as well as any Loss any StarTime
Indemnitee may suffer arising out of such demand, claim or lawsuit
subject to the limitation set forth above. For the purposes of this
Section 4.2.4, "prompt written notice" shall mean that any StarTime
Indemnitee, shall give written notice to Purchaser of a demand, claim or
lawsuit within thirty (30) days after such demand, claim or lawsuit is
brought to the attention of a StarTime Indemnitee, and in any event 15
days before any pleading is due in any litigation.
(f) These indemnification obligations of Purchaser shall survive
until, but only until, the first anniversary of the Closing; provided,
that the obligations of Purchaser for any claim made by the Corporation
under this Section 4.2.4 prior to such first anniversary shall survive
such first anniversary.
(g) Notwithstanding the foregoing, this Section 4.2.4 shall not
apply to Purchaser's failure to deliver the Purchase Price in accordance
with the terms of this Agreement.
ARTICLE 5. - CONDITIONS PRECEDENT TO CLOSING
5.1. Conditions Precedent to Obligations of Purchaser. The obligations
of Purchaser under this Agreement shall be subject to the fulfillment of each
and all of the following conditions at or before the Closing (unless an earlier
time is specified in this Agreement, in which case on or before such earlier
time), each of which is individually hereby deemed material, and any one or more
of which may be waived in writing by Purchaser:
42
5.1.1. Representations and Warranties. Each of the
representations, warranties and statements made by the Indemnitors contained in
this Agreement or in any certificate, schedule, exhibit or other document
delivered to Purchaser pursuant to the provisions hereof or in connection with
the transactions contemplated hereby shall be true and correct in all material
respects as of the date when made and shall be true and correct on and as of the
Closing to the same extent and with the same effect as if made on and as of the
Closing.
5.1.2. Performance by the Indemnitors. The Indemnitors shall
have fully performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by them in all
material respects on or before the Closing (unless an earlier time is specified
in this Agreement, in which case on or before such earlier time), including,
without limitation, the execution and delivery by them of all documents and
instruments required under the terms of Section 6.1.1 of this Agreement.
5.1.3. Regulatory Approvals and Consents. There shall have been
duly and validly obtained all consents, approvals, authorizations, permits and
orders of all federal, state and other governmental regulatory agencies and
other Persons required in connection with this Agreement and the consummation of
the transactions contemplated hereby (including under the HSR Act), and all such
consents, approvals, authorizations, permits and orders shall be in full force
and effect as of the Closing.
5.1.4. [INTENTIONALLY OMITTED.]
5.1.5. Certificate of the Indemnitors. The Indemnitors shall
have provided to Purchaser a certificate (the "CERTIFICATE"), dated the Closing
Date, executed by each of the Indemnitors, and confirming, representing and
warranting to the reasonable satisfaction of Purchaser: (i) the accuracy as of
such date of the Indemnitors' representations and warranties contained in this
Agreement in all material respects or in any statement, deed, schedule or other
document delivered pursuant hereto or in connection with the transactions
contemplated hereby as if such representations and warranties were made as of
the Closing Date, (ii) that the conditions set forth in Section 5.1 of this
Agreement have been satisfied or waived, and (iii) that the Indemnitors have
fully performed all covenants and agreements to be performed by them in all
material respects on or prior to the Closing. The sole remedy of Purchaser, its
officers, directors, representatives, stockholders, lenders, assignees and
affiliates against the Indemnitors and their Related Parties for any Loss
arising out of or related to this Certificate shall be a claim for indemnity
made and enforced in accordance with Section 4.1.12.
5.1.6. Absence of Regulation Changes. There shall not have been
any material adverse change in any federal, state or other laws, rules or
regulations relating to the taxation, business, activities or operations of the
Corporation and the Subsidiaries, and no such change shall be threatened.
5.1.7. Satisfaction with Review of Purchaser. Since September
30, 1997, there shall have been no change or changes in the Corporation's or any
Subsidiary's business, labor relations, financial condition, prospects,
properties, assets, liabilities or results of operations (or the occurrence
43
of any events which might reasonably be expected to result in any such change or
changes), other than seasonal changes historically experienced by the indoor
theater industry, which in the judgment of Purchaser or its lender, made in good
faith, has been or may be materially adverse to the Corporation or the
Subsidiary.
5.1.8. Approval of Instruments. Purchaser and its lender shall
have approved all lists, financial statements, certificates and other documents
to be delivered by the Indemnitors, the Subsidiaries, the stockholders of the
Corporation or Seller, the partners of Super Saver or their representatives
pursuant to the provisions of this Agreement, and such approval by Purchaser
shall not be unreasonably withheld. Furthermore, without limiting the foregoing,
all other instruments and documents delivered to Purchaser pursuant to the
provisions of this Agreement, or incidental to the transactions contemplated
hereby, shall be satisfactory to Purchaser and its lender as to form, scope,
substance and execution and such approval by Purchaser shall not be unreasonably
withheld.
5.1.9. Good Standing. The Seller shall have furnished to
Purchaser at the Closing certificates of the appropriate governmental officials,
dated within fifteen (15) days of the Closing Date, confirming that the Seller
is in good standing, owes no taxes and is duly qualified to transact business in
the State of Nevada and in each jurisdiction listed on Part 1 of the Schedule,
and such certificates shall be accompanied by a certificate executed by the
Secretary of the Seller, dated the Closing Date, stating that such certificates
are true and correct.
5.1.10. No Actions. At and as of the Closing Date, no action,
suit, proceeding or investigation shall have been instituted and be continuing,
or have been threatened and be unresolved, before a court or before or by a
governmental body or agency with respect to the transactions contemplated by
this Agreement or which might have a materially adverse effect on the assets,
properties or businesses of the Corporation and Subsidiaries.
5.1.11. No Court Orders. On the Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or any order of any
nature issued by any court or governmental regulatory agency directing that the
transactions contemplated herein or any of them not be consummated as herein
provided, or awarding damages or any other remedy to any Person with respect to
any of the transactions contemplated hereby.
5.1.12. Officers' Certificate. Purchaser shall have received a
certificate dated the Closing Date and signed by ▇▇▇▇▇▇ and the Secretary of the
Corporation to the effect that except as noted on Part 20 of the Schedule, none
of the events described in Section 3.1.6 shall have occurred and to the further
effect that any liabilities or obligations of the Corporation and Subsidiaries
at the Closing Date, which were not reflected on the Balance Sheet, are set
forth on Part 20 of the Schedule and are liabilities or obligations incurred
only in the ordinary course of business subsequent to the Balance Sheet Date or
are liabilities contemplated by this Agreement.
44
5.1.13. Loan Agreements. The Corporation and the Subsidiaries
shall have previously delivered to Purchaser copies of all loan agreements,
notes, mortgages, deeds of trust, security agreements and other evidences of
indebtedness of the Corporation and Subsidiaries.
5.1.14. Deeds and Leases. The Corporation and the Subsidiaries
shall have previously delivered to Purchaser copies of all deeds and leases to
the real property used by the Corporation and Subsidiaries in the operation of
their businesses, copies of all equipment leases of which the Corporation or any
Subsidiary is a lessee and copies of all licenses of which the Corporation or
any Subsidiary is a licensee, along with certificates of each lessor or licensor
or other party to such agreement that such leases and licenses as of the Closing
Date are in effect, that the Corporation or Subsidiary, as the case may be, is
not in default under such lease or license.
5.1.15. Releases. The Seller shall have delivered into escrow
fully executed releases of any and all items of indebtedness described in
Section 4.1.16 of this Agreement and all other items of indebtedness of the
Corporation and the Subsidiaries arising prior to the Closing and any and all
Liens or guaranties associated therewith. Further, the Indemnitors, ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ and Lyco shall have delivered a release which releases any and
all claims (other than those pursuant to the Transaction Documents (as such term
is defined in the Asset Purchase Agreement) held or to be held by the
Indemnitors, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ and/or Lyco against Purchaser and/or
SCI and their respective successors, assigns, officers, directors, employees and
agents in the form of Exhibit Q.
5.1.16. Due Diligence. Satisfactory completion of Purchaser's
due diligence investigation.
5.1.17. Phase I Environmental Reports and Surveys. Purchaser
shall, at its sole cost and expense, receive, at least five business days prior
to Closing, Phase I Environmental Reports and surveys for each tract of real
property owned by the Seller, in form and substance satisfactory to Purchaser
and its lender.
5.2. Conditions Precedent to Obligations of the Indemnitors. The
obligations of the Indemnitors under this Agreement shall be subject to the
fulfillment of each and all of the following conditions at or before the Closing
(unless an earlier time is specified in this Agreement, in which case on or
before such specified time), each of which is individually hereby deemed
material, and any one or more of which may be waived in writing by the
Corporation:
5.2.1. Representations and Warranties. Each of the
representations, warranties and statements made by Purchaser contained in this
Agreement and in all other documents furnished by Purchaser or its
representatives pursuant to the provisions hereof, or in connection with the
transactions contemplated hereby, shall be true and correct in all material
respects on and as of the Closing to the same extent and with the same effect as
if made on and as of the Closing Date.
5.2.2. Performance by Purchaser. Purchaser shall have fully
performed and complied with all covenants and agreements required by this
Agreement to be performed or complied with by it
45
in all material respects on or before the Closing (unless an earlier time is
specified in this Agreement, in which case on or before such earlier time),
including, without limitation, the execution and delivery by it of all documents
and instruments required under the terms of Section 6.1.2 of this Agreement.
5.2.3. Regulatory Approvals and Consents. There shall have been
duly and validly obtained all consents, approvals, authorizations, permits and
orders of all federal and state governmental regulatory agencies and other
Persons required in connection with this Agreement and the consummation of the
transactions contemplated hereby, and all such consents, approvals,
authorizations, permits and orders shall be in full force and effect as of the
Closing.
5.2.4. No Court Orders. On the Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or any order of any
nature issued by a court or governmental body or authority directing that the
transactions provided for herein or any of them not be consummated as herein
provided, or awarding damages or any other remedy to any Person in connection
with any of the transactions contemplated herein.
5.2.5. [INTENTIONALLY OMITTED].
5.2.6. Certificate of Purchaser. Purchaser shall have provided
to the Corporation a certificate, dated the Closing Date, executed by Purchaser,
and confirming, representing and warranting to the reasonable satisfaction of
the Corporation: (i) the accuracy as of such date of Purchaser's representations
and warranties contained in this Agreement in all material respects or in any
statement, deed, schedule or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby as if such representations
and warranties were made as of the Closing Date, (ii) that the conditions set
forth in Section 5.1 of this Agreement have been satisfied or waived, and (iii)
that Purchaser has fully performed all covenants and agreements to be performed
by it in all material respects on or prior to the Closing. The sole remedy of
the Indemnitors, their officers, directors, representatives, stockholders,
lenders, assignees and affiliates against the Purchaser and their Related
Parties for any Loss arising out of or related to such certificate shall be a
claim for indemnity made and enforced in accordance with Section 4.2.4.
46
5.2.7. Releases. Purchaser and SCI shall have delivered a
release which releases any and all claims (other than those pursuant to the
Transaction Documents) held or to be held by Purchaser and/or SCI against the
Indemnitors, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ and/or Lyco and their respective
successors, assigns, officers, directors, employees and agents in the form of
Exhibit Q.
ARTICLE 6. - CLOSING AND DELIVERY OF DOCUMENTS
6.1. Closing. At the Closing, the following shall occur as a single
integrated transaction:
6.1.1. Delivery by the Seller. The Seller shall deliver, or
cause to be delivered, to Purchaser the following:
(a) all deeds, bills of sale, assignments of licenses, UCC-3s,
and permits (to the extent such are assignable), executory contracts, leases,
easements and rights of way in order to effectively vest in Purchaser good and
indefeasible title to the Property free and clear of all liabilities and Liens,
except for the Permitted Title Exceptions, Permitted Liens and Assumed
Liabilities.
(b) actual possession and operating control of the Property.
(c) the consents of third parties necessary for the transfer and
assignment of the Property.
(d) evidence of the payment of any and all government taxes or
other governmental charges with arise out of or relate to the transfer of the
Property, including any transfer, documentary stamp tax, surtax, gross receipts,
excise and title taxes. The parties agree to cooperate in taking such steps as
may be necessary or appropriate in order to take advantage of any exceptions
from any such governmental taxes, or other charges which may be available with
respect to the transfer of the Property.
(e) [INTENTIONALLY OMITTED.]
(f) assignment and assumption agreements (the "Assignment and
Assumption Agreements") in the form of Exhibit O, as applicable, duly
executed by Seller.
(g) The Certificate identified in Section 5.1.5 hereof.
(h) The good standing certificates identified in Section 5.1.9
hereof.
(i) Copies, certified or otherwise identified to Purchaser's
satisfaction, of all corporate or partnership documents that Purchaser
shall reasonably request, including resolutions of the board of
directors of the Corporation and the Subsidiaries and the general
partner of Super Saver and resolutions of the stockholders of the
Corporation and the Subsidiaries, dated on or before the date hereof to
authorize this Agreement, the related agreements and the transactions
and other acts contemplated either by this Agreement or the related
agreements.
(j) ▇▇▇▇ of Sale from Seller in the form of Exhibit P.
47
(k) The Indemnitors, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ and Lyco
shall execute and deliver a mutual release in the form of Exhibit Q
which releases any and all claims (other than those pursuant to the
Transaction Documents) held or to be held by the Indemnitors, ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ and Lyco against Purchaser and SCI and their
respective successors, assigns, officers, directors, employees and
agents.
(l) All such instruments, documents and certificates as are
required to be delivered by the Indemnitors or their representatives
pursuant to the provisions of this Agreement.
(m) Such other instruments, documents or information that
Purchaser reasonably requests in connection herewith and the
transactions contemplated hereby, in form and substance reasonably
satisfactory to Purchaser.
6.1.2. Delivery by Purchaser.
(a) Purchaser shall deliver the Purchase Price as adjusted
pursuant to Section 2.4.
(b) Purchaser shall deliver, or cause to be delivered, to the
Corporation such instruments, documents and certificates as are required
to be delivered by Purchaser or its representatives pursuant to the
provisions of this Agreement.
(c) [INTENTIONALLY OMITTED].
(d) [INTENTIONALLY OMITTED].
(e) Assignment and Assumption Agreements duly executed by
Purchaser.
(f) Purchaser shall deliver, or cause to be delivered, such
other instruments, documents or information that the Corporation
reasonably requests in connection herewith and the transactions
contemplated hereby, in form and substance reasonably satisfactory to
the Corporation.
(g) Purchaser and SCI shall execute and deliver a mutual release
in the form of Exhibit Q which releases any and all claims (other than
those pursuant to the Transaction Documents) held or to be held by
Purchaser and SCI against the Indemnitors, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
and Lyco and their respective successors, assigns, officers, directors,
employees and agents.
ARTICLE 7. - TERMINATION, AMENDMENT AND WAIVER
7.1. Termination. Notwithstanding anything to the contrary contained in
this Agreement, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned:
(a) at any time prior to the Closing Date by the mutual written
consent of all of the parties;
48
(b) by Purchaser at any time in the event of a breach or default
by the Indemnitors or any one of them in the observance or in the timely
performance of any of their obligations or representations and
warranties hereunder which is not waived by Purchaser and which remains
uncured upon the earlier to occur of (i) fifteen (15) days following
delivery of written notice of such breach or default or (ii) the Closing
Date;
(c) by the Corporation at any time in the event of a breach or
default by Purchaser in the observance or in the timely performance of
any of its obligations or representations and warranties hereunder which
is not waived by the Corporation and remains uncured upon the earlier to
occur of (i) fifteen (15) days following delivery of written notice of
such breach or default or (ii) the Closing Date;
(d) by Purchaser if the Closing shall not have occurred by 5:00
P.M., Dallas time, on March 27, 1998, if Purchaser is not on said date
in default in the observance or in the due and timely performance of any
of its obligations hereunder;
(e) by Seller if the Closing shall not have occurred by 5:00
P.M., Dallas time, on March 27, 1998, if the Seller on said date is not
in default in the observance or in the due and timely performance of any
of its obligations hereunder;
(f) by Purchaser if any of the conditions precedent to
obligations of Purchaser to consummate the transactions provided for
herein shall have become impossible to satisfy (a wilful material breach
of this Agreement by Seller shall be deemed to be one determination that
such conditions are impossible to satisfy for purposes of this
paragraph); or
(g) by Seller if any of the conditions precedent to obligations
of Seller to consummate of the transactions provided for herein shall
have become impossible to satisfy (a wilful material breach of this
Agreement by Purchaser shall be deemed to be one determination that such
conditions are impossible to satisfy for purposes of this paragraph); or
No termination under this Section 7.1 shall be effective unless and
until the terminating party gives written notice of such termination to the
other party. Notwithstanding the foregoing, termination of this Agreement shall
not relieve any party from its liability for the breach hereunder (subject to
all the limitations on liability set forth herein), prior to termination, of its
covenants or agreements or any of its representations or warranties being untrue
prior to termination.
7.2. Waiver and Amendment. Any term, provision, covenant,
representation, warranty or condition of this Agreement may be waived, but only
by a written instrument signed by the party entitled to the benefits thereof.
The failure or delay of any party at any time or times to require performance of
any provision hereof or to exercise its rights with respect to any provision
hereof shall in no manner operate as a waiver of or affect such party's right at
a later time to enforce the same. No waiver by any party of any condition, or of
the breach of any term, provision, covenant, representation or warranty
contained in this Agreement, in any one or more instances, shall be deemed to be
or construed as a further or continuing waiver of any such condition or breach
or a waiver of any other condition or of the breach of any other term,
provision, covenant, representation or warranty. No modification or amendment of
this Agreement shall be valid and binding unless it be in writing and signed by
all the parties hereto.
49
ARTICLE 8. - MISCELLANEOUS
8.1. Expenses. Except as otherwise specifically provided for herein,
whether or not the transactions contemplated hereby are consummated, each of the
parties hereto shall bear all taxes of any nature (including, without
limitation, income, franchise, transfer and sales taxes) and all fees and
expenses relating to or arising from its compliance with the various provisions
of this Agreement and such party's covenants to be performed hereunder, and
except as otherwise specifically provided for herein, each of the parties hereto
agrees to pay all of its own expenses (including, without limitation, attorneys
and accountants' fees and printing expenses) incurred in connection with this
Agreement, the transactions contemplated hereby, the negotiations leading to the
same and the preparations made for carrying the same into effect, and all such
taxes, fees and expenses of the parties hereto shall be paid prior to Closing.
It is specifically understood and agreed that all fees for legal services
rendered by legal counsel for the Corporation, the Subsidiaries, ▇▇▇▇▇▇, the
stockholders of the Corporation and Seller and the partners of Super Saver shall
be paid or accrued prior to the Closing Date by the Corporation. The Corporation
shall pay Purchaser $25,200 annually plus reasonable travel expenses incurred in
connection with, and in exchange for, the consulting services of ▇▇▇▇ ▇▇▇▇▇▇▇▇
for twenty-four hours per week for as long as ▇▇. ▇▇▇▇▇▇▇▇ is employed by
Purchaser and the Corporation wishes to avail itself of his services.
8.2. Notices. Any notice, request, instruction or other document
required by the terms of this Agreement, or deemed by any of the parties hereto
to be desirable, to be given to any other party hereto shall be in writing and
shall be given by prepaid telex or telecopy or delivered or mailed by certified
mail, postage prepaid, with return receipt requested, to the following
addresses:
If to the Seller ▇▇▇▇▇ ▇▇▇▇▇▇
or the Indemnitors: StarTime Cinema, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: 915.542.2945
With a copy to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Counsel to the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇:
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: 512.347.0394
If to ▇▇▇▇▇▇: ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: 915.585.9571
With a copy to C. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Counsel for ▇▇▇▇▇▇: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: 915.532.7073
50
If to Purchaser: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
Silver Cinemas, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇, ▇▇ ▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: 972.503.9013
With a copy to ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Counsel for Purchaser: ▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: 214.651.5940
The persons and addresses set forth above may be changed from time to
time by a notice sent as aforesaid. If notice is given by delivery in accordance
with the provisions of this Section 8.2, said notice shall be conclusively
deemed given at the time of such delivery. If notice is given by mail in
accordance with the provisions of this Section 8.2, such notice shall be
conclusively deemed given upon the third business day following deposit thereof
in the United States mail. If notice is given by telex or telecopy in accordance
with the provisions of this Section 8.2, such notice shall be conclusively
deemed given upon receipt with a confirming fax response.
8.3. Entire Agreement. This Agreement, together with the Schedule and
exhibits hereto, sets forth the entire agreement and understanding of the
parties hereto with respect to the transactions contemplated hereby, and
supersedes all prior agreements, arrangements and understandings related to the
subject matter hereof except for Section 8 of that certain Term Sheet among
Purchaser, the Trust, ▇▇▇▇▇▇, the Corporation, Lyco, Super Saver, ▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇ dated as of July 31, 1997, the Term Sheet Escrow Agreement and the
other Transaction Documents. Except as provided in the preceding sentence, no
understanding, promise, inducement, statement of intention, representation,
warranty, covenant or condition, written or oral, express or implied, whether by
statute or otherwise, has been made by any party hereto which is not embodied in
this Agreement, or in the Schedule or exhibits hereto or the written statements,
certificates, or other documents delivered pursuant hereto or in connection with
the transactions contemplated hereby, and no party hereto shall be bound by or
liable for any alleged understanding, promise, inducement, statement,
representation, warranty, covenant or condition not so set forth.
51
8.4. Survival of Representations. All statements of fact (including
financial statements) contained in the Schedule, the exhibits, the certificates
or any other instrument delivered by or on behalf of the parties hereto, or in
connection with the transactions contemplated hereby, shall be deemed
representations and warranties by the respective party hereunder. All
representations, warranties, agreements and covenants hereunder shall survive
the Closing and remain effective regardless of any investigation or audit at any
time made by or on behalf of the parties or of any information a party may have
in respect thereto. Consummation of the transactions contemplated hereby shall
not be deemed or construed to be a waiver of any right or remedy possessed by
any party hereto. The sole effect of the survival of such representations and
warranties shall be to support a claim for indemnity under Sections 4.1.12 or
4.2.4 for untrue representations or breach of warranty, subject to the
limitations set forth in Sections 4.1.12 and 4.2.4.
8.5. Incorporated by Reference. The Schedule, the exhibits and all
documents (including, without limitation, all financial statements) delivered as
part hereof or incident hereto are incorporated as a part of this Agreement by
reference.
8.6. Number and Gender of Words. When the context so requires in this
Agreement, words of any gender shall include either or both of the other genders
and the singular number shall include the plural.
8.7. Specific Performance. The Indemnitors acknowledge that a breach of
this Agreement by the Indemnitors will cause irreparable harm to Purchaser for
which there may be no adequate remedy at law, and the Indemnitors agree that
Purchaser shall be entitled, in addition to its other remedies specifically
described in this Agreement, to specific performance by the Indemnitors of this
Agreement.
8.8. Remedies Exclusive. The remedies provided in this Agreement are the
sole and exclusive remedies available to Purchaser and the Indemnitors arising
out of or in any way connected with this Agreement.
8.9. Execution of Additional Documents. Each party hereto shall make,
execute, acknowledge and deliver such other instruments and documents, and take
all such other actions as may be reasonably required in order to effectuate the
purposes of this Agreement and to consummate the transactions contemplated
hereby.
8.10. Finders' and Related Fees. Each of the parties hereto is
responsible for, and shall indemnify the other against, any claim by any third
party to a fee, commission, bonus or other remuneration arising by reason of any
services alleged to have been rendered to or at the instance of said party to
this Agreement with respect to this Agreement or to any of the transactions
contemplated hereby.
8.11. Titles. The titles of the articles, sections and subsections of
this Agreement are for convenience of reference only and shall not be considered
a part of or affect the construction or
52
interpretation of any provisions of this Agreement. References to "Sections"
herein are references to sections of this Agreement. The words "herein,"
"hereof," "hereto" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section or other
subdivision.
8.12. No Third Party Beneficiary, Etc. There shall be no third party
beneficiary of this Agreement, other than as provided in Sections 4.1.12 and
4.2.4. Neither the availability of, nor any limit on, any remedy hereunder shall
limit the remedies of any party hereto against third parties.
8.13. Reformation; Severability. In case any provision hereof shall be
invalid, illegal or unenforceable, such provision shall be reformed to best
effectuate the intent of the parties and permit enforcement thereof, and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. If such provision is not capable of
reformation, it shall be severed from this agreement and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8.14. Binding Effect and Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, administrators, legal representatives and assigns. This Agreement,
and the rights and obligations created hereunder, may not be transferred or
assigned by the Indemnitors without the prior consent of Purchaser or by
Purchaser without the prior consent of the Corporation except that Purchaser may
assign its rights under this Agreement to a wholly-owned subsidiary; however, no
assignment shall serve to relieve or release the assigning party from liability
under this Agreement. Notwithstanding anything to the contrary set forth herein,
nothing shall prohibit Purchaser granting a Lien at or after Closing to its
lender in and to Purchaser's rights pursuant to this Agreement and such lender
shall have the right to exercise any and all of Purchaser's rights and remedies
hereunder.
8.15. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. In making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart.
8.16. Governing Law; Attorneys' Fees. This Agreement and any related
agreements shall be governed by, construed, interpreted and applied in
accordance with the laws of the State of Texas, without giving effect to any
conflict of laws rules that would refer the matter to the laws of another
jurisdiction.
Subject to Section 8.17, each party hereto hereby irrevocably submits to
the exclusive jurisdiction of the United States District Court for the Southern
District of Texas and, if such court does not have jurisdiction, of the courts
of the State of Texas in ▇▇▇▇▇▇ County, for the purposes of any action arising
out of this Agreement or any related agreements, or the subject matter hereof or
thereof, brought by any other party.
Subject to Section 8.17, to the extent permitted by applicable law, each
party hereby waives and agrees not to assert, by way of motion, as a defense or
otherwise in any such action, any claim
53
(i) that it is not subject to the jurisdiction of the above-named courts, (ii)
that the action is brought in an inconvenient forum, (iii) that it is immune
from any legal process with respect to itself or its property, (iv) that the
venue of the suit, action or proceeding is improper or (v) that this Agreement
or any related agreement, or the subject matter hereof or thereof, may not be
enforced in or by such courts.
The prevailing party in any action or proceeding relating to this
Agreement or any related agreement shall be entitled to recover reasonable
attorneys' fees and other costs from the non-prevailing parties, in addition to
any other relief to which such prevailing party may be entitled.
8.17. Dispute Resolution.
(a) Arbitration. All disputes and controversies of every kind
and nature between the parties hereto arising out of or in connection
with this Agreement (including without limitation this Article VIII) or
any related agreements (except the Noncompetition Agreements) as to the
construction, validity, interpretation or meaning, performance,
non-performance, enforcement, operation, or breach, shall be submitted
to arbitration pursuant to the following procedures:
(i) Except as modified hereby, the arbitration shall be
governed by the Commercial Arbitration Rules the AAA including
the Supplementary Procedures for Large Complex Disputes. After a
dispute or controversy arises, any party may, in a written
notice delivered to the other party, demand such arbitration.
Such notice shall designate the name of the arbitrator (who
shall be an impartial person who is an attorney with at least 15
years of experience in business law) appointed by such party
demanding arbitration, together with a statement of the matter
in controversy in reasonable detail.
(ii) Within 30 days after receipt of such demand, the
other party shall, in a written notice delivered to the other
party, name such party's arbitrator (who shall be an impartial
person who is an attorney with at least 15 years of experience
in business law). If such party fails to name an arbitrator,
then the second arbitrator shall be named by the AAA. The two
arbitrators so selected shall name a third arbitrator (who shall
be an impartial person who is an attorney with at least 15 years
of experience in business law) within 30 days, or in lieu of
such agreement on a third arbitrator by the two arbitrators so
appointed, the third arbitrator shall be appointed by the AAA.
If any arbitrator appointed hereunder shall die, resign, refuse,
or become unable to act before an arbitration decision is
rendered, then the vacancy shall be filled by the methods set
forth in this Section for the original appointment of such
arbitrator.
(iii) Each party shall bear its own arbitration costs
and expenses. The arbitration hearing shall be held in Houston,
Texas at a location designated by a majority of the arbitrators.
The substantive laws of the State of Texas (excluding conflict
of laws provisions) and the Federal Arbitration Act shall apply.
(iv) The arbitration hearing shall be concluded within
ten (10) days unless otherwise ordered by the arbitrators and
the written award thereon shall be made within fifteen (15) days
after the close of submission of evidence. An award rendered by
a majority of the arbitrators appointed pursuant hereto shall be
final and binding on all parties to the proceeding, shall
resolve the question of costs of the arbitrators, legal
54
fees and expenses and all related matters, and judgment on such
award may be entered and enforced by any party in any court of
competent jurisdiction.
(v) Except as set forth in Section 8.17(b), the parties
stipulate that the provisions of this Section shall be a
complete defense to any suit, action or proceeding instituted in
any federal, state or local court or before any administrative
tribunal with respect to any controversy or dispute arising out
of this Agreement or any related agreements. The arbitration
provisions hereof shall, with respect to such controversy or
dispute, survive the termination or expiration of this Agreement
or any related agreements.
Except as required by law, the parties hereto and the
arbitrators may not disclose the existence or results of any arbitration
hereunder without the prior written consent of the other party; nor will
any party hereto disclose to any third party any confidential
information disclosed by any other party hereto in the course of an
arbitration hereunder without the prior written consent of such other
party.
(b) Emergency Relief. Notwithstanding anything in this Section
8.17 to the contrary and subject to the provisions of Section 8.16, any
party may seek from a court any provisional remedy or injunctive relief
that may be necessary to protect any rights or property of such party
pending the establishment of the arbitral tribunal or its determination
of the merits of the controversy. The prevailing party in any proceeding
based upon this Agreement shall be entitled to reasonable attorney's
fees and arbitral and court costs, in addition to any other recoveries
allowed by law.
55
8.18. Confidentiality. Commencing on the date of this Agreement and
until: (i) the end of the five (5) year period following termination of this
Agreement pursuant to Article VII or (ii) Closing, Purchaser and the Indemnitors
will maintain in confidence, and will cause their respective directors,
officers, employees, agents, and advisors (the "Representatives") to maintain in
confidence, any written, oral, electronic, or other information of every kind
(including all analyses, compilations, forecasts, studies or other documents
prepared by a receiving party that contain or in any way reflect confidential
information) that has been or may be furnished by either party or its
representatives obtained in confidence (the "Confidential Information") from
another party to this agreement (the "Disclosing Party"), and will not use, and
will cause their respective Representatives not to use, any such information
except for the purpose of this Agreement or in connection with any legal
proceedings between any of the parties, unless (a) such information is already
known to such party and such party is not bound by a duty of confidentiality or
such information becomes publicly available through no fault of such party, (b)
the use of such information is necessary in making any release, report, filing
(including filings with the SEC) or obtaining any consent or approval required
for the consummation of the transactions contemplated by the Agreement, (c) the
furnishing or use of such information is required by any legal proceedings or
(d) the furnishing or use of such information is required in connection with a
public offering or private placement of securities. Each party shall only reveal
Confidential Information of the Disclosing Party to the receiving party's
Representatives (a) who reasonably need to have the Confidential Information for
purposes of evaluating the transactions contemplated hereby and (b) who are
aware of the confidential nature of the Confidential Information and of this
Section 8.18. Each party shall cause its Representatives to observe the
restrictions of this Section 8.18 and shall be responsible for any breach of
this Section 8.18 by its Representatives. If this Agreement is terminated for
any reason, each party must promptly return to the Disclosing Party all
Confidential Information obtained from the Disclosing Party that is by nature
returnable, and each receiving party will thereafter continue to comply with its
obligations under this Section 8.18.
8.19. Bulk Transfer. The parties hereby waive the applicable provisions,
if any, of the Uniform Commercial Code relating to Bulk Transfers in the states
in which the Theaters are located, and the Indemnitors hereby indemnify
Purchaser from the Seller's failure to comply with such provisions with respect
to the Seller.
56
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the date first written hereinabove.
STARTIME PROPERTIES, INC.
By:
Name:
Title:
STARTIME CINEMA, INC.
By:
Name:
Title:
F.S.A. SUPER SAVER CINEMAS NO. 1, LTD.
By:
Name:
Title:
THE TRUST FORMED BY THAT CERTAIN
IRREVOCABLE DECLARATION OF TRUST UNDER
DEED DATED MAY 14, 1994, FOR THE BENEFIT
OF STARTIME CINEMA, INC.
By its Trustee:
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
SILVER CINEMAS, INC.
By:
Name:
Title:
57
SCHEDULE
Part 1 States of Business Qualification
Part 2 Subsidiaries
Part 3 Effects of Execution of Agreement
Part 4 Liabilities Not Reflected on Balance Sheet
Part 5 Changes
Part 6 Taxes
Part 7 Disputes and Litigation
Part 8 Insurance
Part 9(a) Title to Properties
Part 9(b) Liens & Financing Statements
Part 10(a) Real Property
Part 10(b) Violations
Part 11(a) Equipment & Equipment Leases
Part 11(b) List of Property in need of repair
Part 12(a) Intangible Personal Property
Part 12(b) Exceptions to Exclusive Ownership
Part 12(c) Adverse Claims
Part 13 Agreements
Part 14(a) Indebtedness
Part 14(b) Guarantees
Part 15 Debts to and from Related Parties
Part 16 Employee Benefit Plans
Part 17 Employee Agreements
Part 18 Consents Required
Part 19 Environmental Matters
Part 20 Changes in Financial Condition
Part 21 Prepayment Penalties and Charges on Loan
Agreements