EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
BY AND AMONG
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
AND
CD WAREHOUSE, INC.
DATED AS OF OCTOBER 10, 1996
TABLE OF CONTENTS
ARTICLE I - TERMS OF PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . 1
1.1 Purchase and Sale of Assets . . . . . . . . . . . . . . . . . . . . . 1
1.2 Transfer and Conveyance . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II - PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER2
3.1 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Physical Properties . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Contract Defaults. . . . . . . . . . . . .. . . . . . . . . . . . . . 3
3.5 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.6 True, Correct and Complete Information. . . . . . . . . . . . . . . . 3
3.7 Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.8 Financial Condition and Result of Operations. . . . . . . . . . . . . 4
3.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.11 Absence of Certain Changes or Events. . . . . . . . . . . . . . . . . 4
3.12 Broker's and Finder's Fees. . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . 5
4.1 Corporate Power and Authority . . . . . . . . . . . . . . . . . . . . 5
4.2 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V - COVENANTS OF SELLER. . . . . . . . . . . . . . . . . . . . . . . . 6
5.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . 6
5.2 Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.3 Access to Properties and Records. . . . . . . . . . . . . . . . . . . 7
5.4 Approvals of Third Parties. . . . . . . . . . . . . . . . . . . . . . 8
5.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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ARTICLE VI - COVENANTS OF BUYER. . . . . . . . . . . . . . . . . . . . . . . . 9
6.1 Furnishing of Information . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Approvals of Third Parties. . . . . . . . . . . . . . . . . . . . . . 9
6.3 Buyer's Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . 9
6.4 Retention of Records. . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VII - CONDITIONS TO OBLIGATIONS OF BUYER . . . . . . . . . . . . . . 10
7.1 Representations and Warranties of Seller. . . . . . . . . . . . . . 10
7.2 Covenants of Seller . . . . . . . . . . . . . . . . . . . . . . . . 10
7.3 No Casualty Losses. . . . . . . . . . . . . . . . . . . . . . . . . 10
7.4 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.5 No Material Adverse Changes . . . . . . . . . . . . . . . . . . . . 10
7.14 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VIII - CONDITIONS TO OBLIGATIONS OF SELLER . . . . . . . . . . . . . 11
8.1 Representations and Warranties of Buyer . . . . . . . . . . . . . . 11
8.2 Covenants of Buyer. . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IX - DATE AND PLACE OF CLOSING. . . . . . . . . . . . . . . . . . . . 11
9.1 Date and Place of Closing. . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE X - CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.1 Seller's and Buyer's Performance . . . . . . . . . . . . . . . . . . 12
10.2 Buyer's Performance . . . . . . . . . . . . . . . . . . . . . . . . 12
10.3 Expenses: Other Instruments . . . . . . . . . . . . . . . . . . . . 12
ARTICLE XI - POST-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . 13
11.1 Transition Period. . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE XII - TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.2 No Further Force or Effect . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE XIII - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 14
13.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 14
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13.4 Identical Counterparts . . . . . . . . . . . . . . . . . . . . . . . 14
13.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13.6 Use of Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . 14
13.7 Modification and Waiver. . . . . . . . . . . . . . . . . . . . . . . 15
13.8 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
13.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
13.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
13.11 No Agent's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
13.12 Binding Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . 16
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 10th day of October, 1996, by and among ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, an
individual ("Seller") and CD WAREHOUSE, INC., a Delaware corporation with its
principal address at ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ("Buyer").
WHEREAS, Seller is engaged, as a franchisee of CD International, Inc. in
the business of buying, selling and trading new and used audio compact discs,
at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the "CD Warehouse Store" or
"Business"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to buy from
Seller, substantially all of the assets of the Business.
NOW THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements and upon the terms and subject to the conditions
hereinafter set forth, the parties hereby agree as follows:
ARTICLE I
TERMS OF PURCHASE AND SALE
1.1 PURCHASE AND SALE OF ASSETS. Subject to and upon the terms and
conditions contained herein, at the Closing (aS defined in Section 9.1), Seller
will sell, transfer, assign, convey and deliver to Buyer, and Buyer will
purchase, accept and acquire from Seller, free and clear of all liens, claims,
security interests and encumbrances of any nature, all of the following
properties and assets (whether real or personal) of Seller related to the
Business (collectively, the "Assets"):
(a) all of the Seller's inventory of new and used audio compact discs (the
"Inventory");
(b) All of Seller's right, title and interest in and to the leasehold
agreements to which Seller is a party, as listed on SCHEDULE 1.1 (the
"Contract");
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(c) All information and all of Seller's records relating to the Business,
including, without limitation, customer lists, vendor lists, franchise
files, accounting and tax records concerning the same and sales
literature and promotional materials;
(d) All software programs, source and object codes, computer printouts,
data bases and related items created, originated or modified by Seller
and relating to the Assets or to the Business;
(e) The furniture, fixtures, equipment, files and other assets currently
located at the CD Warehouse Store.
1.2 TRANSFER AND CONVEYANCE. Seller shall execute and deliver to Buyer at
the Closing (i) a ▇▇▇▇ of sale (in substantially the form of Exhibit A), and
(iii) all such assignments, endorsements and instruments of transfer as shall be
necessary or appropriate to carry out the intent of this Agreement and as shall
be sufficient to vest in Buyer title to all of the Assets and all right, title
and interest of Seller thereto.
ARTICLE II
PURCHASE PRICE
2.1 PURCHASE PRICE. The purchase price for the Assets shall be
Twenty-Eight Thousand (28,000) shares of Buyer's common stock, to be issued
pursuant to a Subscription Agreement in the form of Exhibit B attached hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
3.1 TITLE. Seller has, and upon conveyance of the Assets to Buyer by
Seller at the Closing, Buyer will acquire and hold, good and indefeasible title
in fee simple to all Assets, free and clear of any and all Encumbrances except
as set forth on SCHEDULE 3.1.
3.2 INVENTORY. Set forth on SCHEDULE 3.2 is a description of all the
Inventory as of the date stated thereon, which consists of current items of a
quality and quantity that are usable or marketable in the ordinary course of the
business of Seller, and items not usable in the
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business of Seller have been written down in value in accordance with the
normal business practice of Seller to estimated net realizable market values.
3.3 PHYSICAL PROPERTIES. Set forth on SCHEDULE 3.3 is a description of
(i) all office furniture, equipment and supplies owned and to be conveyed by
Seller and (ii) all physical properties (other than the types of properties
referred to in (i) above), real, personal or mixed, owned and to be conveyed by
Seller and included among the Assets. Seller enjoys peaceable possession of all
properties owned or leased by it.
3.4 CONTRACT DEFAULTS. Seller is not in default in any material respect
under the Contract. The Contract is a legal, valid and binding obligation of
the respective parties thereto in accordance with its terms and have not been
amended, no defenses, offsets or counterclaims thereto have been asserted or may
be made by any party thereto other than Seller, and Seller has waived no
substantial rights thereunder.
3.5 LITIGATION. Except as set forth on SCHEDULE 3.5 there are no
actions, suits, proceedings, investigations or grievances pending against Seller
or, to the best of Seller's knowledge, threatened against Seller, Seller's
business or any property or rights of Seller, at law or in equity or admiralty
or before or by and court or federal, state municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign (each an "Agency") which to the best of Seller's knowledge either (i)
results or would, if adversely determined, result in any material adverse change
in the business, operations or assets or the condition, financial or otherwise,
or results of operations of Seller or (ii) affects or would, if adversely
determined, affect the right or ability of Seller to carry on its business
substantially as now conducted. Seller is not subject to any continuing court
or Agency order, writ, injunction or decree applicable specifically to the
Assets, the business operations of Seller or employees of Seller, or in default
with respect to any order, writ, injunction or decree of any court or Agency
with respect to the Assets, its business, operations or employees.
3.6 TRUE, CORRECT AND COMPLETE INFORMATION. The information furnished to
Buyer by Seller prior to or on the date of this Agreement and in any Schedule
referred to herein is true, correct and complete in all material respects. Such
information states all material facts required to be stated therein or with
respect thereto or necessary to make the statements therein or with respect
thereto, in light of the circumstances under which such statements are made,
true correct and complete.
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3.7 CONSENT. To the best of Seller's knowledge no consent, approval,
authorization or order of any court, Agency or any other person is required in
order to permit Seller to consummate the transactions contemplated by this
Agreement.
3.8 FINANCIAL CONDITION AND RESULT OF OPERATIONS. Seller has previously
delivered to Buyer true, correct and complete copies of the balance sheet of
Seller's business as of December 31, 1994, and 1995, and the related statement
of cash flows for the year then ended. Seller has also previously delivered
true correct and complete copies of the balance sheet of Seller's business as of
August 31, 1996, and the related statement of cash flows for the period. The
financial statements provided (i) are in accordance with the books and records
and accounting methods of Seller's business, (ii) present fairly the financial
position and results of operations of Seller's business as of the dates and for
the periods indicated, and (iii) have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved except as noted therein, except that there is no disclosure of items
customarily contained in footnotes, the depreciation has been accelerated as
permitted under Section 179 of the Internal Revenue Code of 1986, as amended,
and such financial statements are unaudited.
3.9 INSURANCE. Set forth on SCHEDULE 3.9 is a brief description of all
policies of fire, casualty, liability and other forms of insurance and all
fidelity bonds held by Seller.
3.10 TAXES. Seller has duly filed all federal, state, county, local and
other excise, franchise, property, payroll, income, capital stock, sales and use
and other tax returns which are required to be filed and such returns are true,
correct and complete in all respects. Except as set forth on SCHEDULE 3.10,
Seller has paid all taxes which have become due or have been assessed and all
taxes, penalties and interest which any taxing authority has proposed or
asserted to be owing. All tax liabilities to which the properties of Seller may
have been subjected have been discharged except for taxes assessed but not yet
payable. There are no tax claims presently being asserted against Seller and
Seller knows of no basis for any such claim. Seller has not granted any
extension to any taxing authority of the limitation period during which any tax
liability may be asserted thereby.
3.11 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on Schedule
3.11, since August 31, 1996, Seller has not (i) suffered any extraordinary
losses or waived any rights of substantial value; (ii) made any change in its
mode of management or any change in its method of operation or method of
accounting; (iii) made or become obligated to make any capital expenditures
other than such expenditures or commitments not exceeding $5,000 in the
aggregate; (iv) experienced or suffered any adverse change in its business,
operations or assets
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(whether or not covered by insurance) condition, financial or otherwise, or
results of operations; (v) entered into any transaction, except in the
ordinary course of its business consistent with past business practice; (vi)
received any notice of any claim asserted against it by any Agency which
could have a material adverse effect on the business or financial condition
of Seller; or (vii) incurred or agreed to incur any material obligation
outside the ordinary course of business which has not heretofore been
disclosed in writing to Buyer.
3.12 BROKER'S AND FINDER'S FEES. Seller has not made any agreement with
any person, or taken any action which would cause any person, to become entitled
to an agent's, broker's or finder's fee or commission in connection with the
transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties to Seller:
4.1 CORPORATE POWER AND AUTHORITY. The execution, delivery and
performance of this Agreement by Buyer, and all other agreements referred to
herein or executed in connection herewith, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly authorized by all
requisite corporate action and no further action or approval is required in
order to permit Buyer to consummate the transactions contemplated hereby and
thereby. This Agreement constitutes, and all other agreements by and among the
parties, when executed and delivered in accordance with the terms thereof, will
constitute, the legal, valid and binding obligations of Buyer, enforceable in
accordance with their terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights from time to time in effect). Buyer has full power,
authority and legal right to enter into this Agreement and all other agreements
by and among the parties and to consummate the transactions contemplated hereby
and thereby. The making and performance of this Agreement, and all other
agreements by and among the parties and the consummation of the transactions
contemplated hereby and thereby in accordance with the terms hereof and thereof
will not (i) conflict with the Certificate of Incorporation or by the Bylaws of
Buyer, (ii) result in any breach or termination of, or constitute a default
under, or constitute an event which with notice or lapse of time, or both, would
become a default under, or result in the creation of any Encumbrance upon any
asset of Buyer under, or create any rights of termination, cancellation or
acceleration in any person under, any contract, lease, arrangement or
commitment, or violate any order, writ, injunction or decree, to which Buyer is
a party or
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by which Buyer or its assets, business or operations may be bound or affected
or under which Buyer or its assets, business or operations receive benefits,
(iii) result in the loss or adverse modification of any material license,
franchise, permit or other authorization granted to or otherwise held by
Buyer which is material to the business or financial condition of Buyer, or
(iv) result in the violation of any provisions of law applicable to Buyer,
the violation of which could have a material adverse effect upon the
business, operations or assets of Buyer.
4.2 CONSENTS. No consent, approval, authorization or order of any court,
Agency or any other person is required in order to permit Buyer to consummate
the transactions contemplated by this Agreement.
4.3 LITIGATION. There is no pending or threatened litigation in any court
or any proceeding before any Agency (i) in which it is sought to restrain,
prohibit, invalidate or obtain damages in respect of the consummation of the
purchase and sale of the Assets or the other transactions contemplated hereby,
(ii) which could, if adversely determined, result in any material adverse change
in the business, operations or assets or the condition, financial or otherwise,
or results of operations of Buyer or (iii) which could, if adversely determined,
have a material adverse effect on the right or ability of Buyer to carry on its
business substantially as now conducted.
4.4 COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 4.4, Buyer (i)
has complied with all laws, regulations, licensing requirements and orders
applicable to its business the breach or violation of which could have a
material adverse effect on said business, (ii) has filed with the proper
authorities all statements and reports required by the laws, regulations,
licensing requirements and order to which it is subject and (iii) possesses all
necessary licenses, franchises, permits and governmental authorizations to
conduct its business in the manner in which and in the jurisdictions and places
where such business is now conducted.
ARTICLE V
COVENANTS OF SELLER
Seller hereby covenants and agrees with Buyer as follows:
5.1 AFFIRMATIVE COVENANTS. Prior to the Closing Date (as hereinafter
defined), Seller will operate his Business in the usual, regular and ordinary
course of business consistent with past business practices, and will use his
best efforts to (i) preserve intact his business and the Assets; (ii) maintain
his properties, machinery and equipment in good operating condition and
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repair; (iii) continue all existing policies of insurance (or comparable
insurance) in full force and effect up to and including the Closing Date (and
will not cancel any such issuance or take (or fail to take) any action that
would enable the insurers under such policies to avoid liability for claims
arising out of any occurrence on or prior to the Closing Date without the
prior written consent of Buyer); (iv) use its best efforts to preserve its
present relationships with lending and other financial institutions,
suppliers, customers, and franchisees; and (v) maintain its books, accounts
and records in the usual, regular and ordinary manner on a basis consistently
applied.
5.2 NEGATIVE COVENANTS. Prior to the Closing Date Seller will operate
its Business in the usual, regular and ordinary course of business consistent
with the past business practices, and will not, without the prior written
consent of Buyer: (i) make any increase in the compensation payable or to
become payable by it to any employee or contribute or make any commitment to
contribute or represent that it will contribute any amounts to any bonus or
other employee benefit plan for employees of Seller except as required by law or
by the terms of any such plan in the ordinary course of business; (ii) make any
material change in the character of its Business; (iii) incur any obligation or
liability (fixed or contingent) except in the ordinary course of business; (iv)
discharge or satisfy any Encumbrance or pay any obligation or liability (fixed
or contingent) other than in the ordinary course of business; (v) mortgage,
pledge, transfer or otherwise dispose of or subject to any Encumbrance any of
the Assets, except in the ordinary course of business; (vi) acquire any assets
or properties, except in the ordinary course of business; (vii) cancel or
compromise any material debt or claim that comprises a part of the assets to be
transferred to Buyer; (viii) waive or release any rights of material value that
comprise a part of the assets to be transferred to Buyer; (ix) transfer, grant
or terminate contract, lease, arrangement or commitment rights under any
concessions, leases, licenses, agreements, patents, patent licenses, inventions,
trademarks, trade names, service marks, trade dress or copyrights or
registrations or licenses thereof or applications therefore or with respect to
any know-how or other proprietary or trade rights; (x) modify or change in any
material respect or terminate any Contract; (xi) undertake any material
borrowing of any nature whatsoever other than in the ordinary course of
business; (xii) make any loans or extensions of credit, except in the ordinary
course of business and (xiii) make or become obligated to make any capital
expenditures or enter into commitments therefor exceeding $5,000.
5.3 ACCESS TO PROPERTIES AND RECORDS. Seller will keep Buyer advised of
all material developments relevant to the consummation of the transactions
contemplated hereby and will cooperate fully in permitting Buyer to make a full
investigation of the Business, properties, financial condition and investments
of Seller during regular business hours and upon reasonable notice and in
bringing about the consummation of the transactions contemplated hereby. Seller
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will, during regular business hours and upon reasonable notice, afford to Buyer
and its representatives full access to the offices, buildings, real properties,
machinery and equipment, inventory and supplies, records, files, books of
account, tax returns, agreements and commitments, partnership record books and
personnel of Seller. Seller will, upon request by Buyer afford to Buyer and its
representatives access to the working papers relating to the Financial
Statements. Seller will furnish to Buyer all such further information
concerning the business and affairs of Seller as Buyer may reasonably request.
Seller will update by amendment or supplement each of the Schedules referred to
herein and any other disclosure in writing from Seller required by this
Agreement to be disclosed in writing by Seller to Buyer promptly upon any change
in the information set forth in such Schedules or other disclosures, and Seller
hereby represents and warrants that such Schedules and such written disclosures,
as so amended or supplemented, shall be true, correct and complete as of the
date or dates thereof; provided, however, that the inclusion of any information
in any such amendment or supplement, not included in the original Schedule or
other disclosure at or prior to the date of this Agreement, shall not limit or
impair any right which Buyer might otherwise have respecting the representations
or warranties of Seller continued in this Agreement. No investigation pursuant
to this Section 5.3 shall affect any representations or warranties or the
conditions to the obligations of Buyer to consummate the transactions
contemplated hereby. In the event of the termination of this Agreement, Buyer
will deliver to Seller all documents, work papers and other material (including
copies thereof) obtained by Buyer or on its behalf from Seller as a result of
this Agreement or in connection herewith, whether so obtained before or after
the execution hereof and, if the transactions contemplated hereby are not
consummated, Buyer will hold such information in strict confidence and will not
use or disclose, or permit any other person or entity to use or disclose, such
information until such time as such information is otherwise publicly available.
Regardless of whether the transactions contemplated by this Agreement are
consummated, Buyer will hold all information acquired from Seller in strict
confidence except to the extent that Buyer is required by applicable law to
disclose information in connection with the anticipated public offering of
Buyer's common stock; further, Buyer will act in good faith with respect to all
information acquired from Seller and will not use, and will not permit any
other person or entity, to use any information acquired from Seller in any
manner that is detrimental to Seller's operation of the Business or is otherwise
inconsistent with Seller's best interests or Buyer's obligations pursuant this
Agreement.
5.4 APPROVALS OF THIRD PARTIES. As soon as practicable after the date
hereof, Seller will use its best efforts to secure all necessary consents,
approvals and clearances of third parties that shall be required to consummate
the transactions contemplated hereby.
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5.5 NOTICES. Seller will timely give all notices required to be given
relating to the transactions contemplated hereby, including without limitation,
(i) notices to employees, and (ii) any notices required or requested to be given
to all creditors and claimants against Seller.
ARTICLE VI
COVENANTS OF BUYER
Buyer hereby covenants and agrees with Seller as follows:
6.1 FURNISHING OF INFORMATION. Buyer will keep Seller advised of all
material developments relevant to the consummation of the transactions
contemplated hereby and will cooperate fully with Seller in bringing about the
consummation of the transactions contemplated hereby. In the event of the
termination of this Agreement, Seller will deliver to the Buyer all documents,
work papers and other material (including copies thereof) obtained by Seller or
on its behalf from Buyer as a result of this Agreement or in connection
herewith, whether so obtained before or after the execution hereof and, if the
transactions contemplated hereby are not consummated, Seller will hold such
information in confidence until such time as such information is otherwise
publicly available.
6.2 APPROVALS OF THIRD PARTIES. As soon as practicable after the date
hereof, Buyer will use its best efforts to secure all necessary consents,
approvals and clearances of third parties that shall be required to enable it to
consummate the transactions contemplated hereby and will otherwise use its best
efforts to cause the consummation of such transactions in accordance with the
terms and conditions of this Agreement.
6.3 BUYER'S BEST EFFORTS. Buyer will use its best efforts, acting in good
faith, to cause the consummation of the transactions contemplated by this
Agreement in accordance with their terms and conditions.
6.4 RETENTION OF RECORDS. For a period of six years after the Closing,
Buyer will retain all books and records that Buyer receives from Seller. During
such period, Seller and its representatives will have access to all such books
and records during normal business hours. Buyer will, upon request of Seller,
furnish to Seller, without charge, copies of any such books or records.
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ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer hereunder shall be subject to the satisfaction of
each of the following conditions precedent on or prior to the Closing Date,
except such conditions as Buyer may waive in writing.
7.1 REPRESENTATIONS AND WARRANTIES OF SELLER. All of the representations
and warranties of Seller contained in this Agreement and in any Schedule from
Seller were true and correct when made, and shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though such representations and warranties had been made on and as of the
Closing Date.
7.2 COVENANTS OF SELLER. All of the covenants and agreements herein on
the part of Seller to be complied with or performed on or before the Closing
Date shall have been fully complied with and performed.
7.3 NO CASUALTY LOSSES. The Assets shall not have suffered any
destruction or damage by fire, explosion or other casualty or any taking by
eminent domain which has materially impaired the operation of the Assets or
otherwise had a material adverse effect upon the Business conducted by Seller.
7.4 LITIGATION. At the Closing Date, there shall not be pending or
threatened any litigation in any court or any proceeding before any Agency, (i)
in which it is sought to restrain, invalidate, set aside or obtain damages in
respect of the consummation of the purchase and sale of the Assets or the other
transactions contemplated hereby, (ii) which could, if adversely determined,
result in any material adverse change in the Business, operations or Assets or
the condition, financial, or otherwise, or results of operations of Seller,
(iii) which could, if adversely determined, have a material adverse effect on
the right or ability of Seller to carry on its Business as now conducted or (iv)
as a result of which, in the reasonable judgment of Buyer, Buyer would be
deprived of the material benefits of its ownership of the Assets.
7.5 NO MATERIAL ADVERSE CHANGES. There shall not have occurred (i) any
material adverse change in the Business or the operations of Seller or the
Assets or (ii) any material loss or damage to any of the Assets (whether or not
covered by insurance) of Seller. Buyer shall receive a certificate from Seller,
dated as of the Closing Date and in form and substance satisfactory to Buyer, as
to fulfillment of the conditions set forth in Section 7.11.
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7.6 FURTHER ASSURANCES. Seller shall take all such further action as
may be reasonably requested by Buyer in order to effectuate the consummation of
the transactions contemplated by this Agreement. If Buyer shall reasonably
determine that any further conveyance, assignment or other document or any
further action is necessary to vest in it full title to the Assets, Seller shall
cause the appropriate person or entity to execute and deliver all such
instruments and take all such action as Buyer may reasonably determine to be
necessary.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to cause the sale of the Assets and the other
transactions contemplated hereby to occur at Closing shall be subject to the
satisfaction on or prior to the Closing Date of all of the following conditions,
except such conditions as Seller may waive in writing:
8.1 REPRESENTATIONS AND WARRANTIES OF BUYER. All of the representations
and warranties of Buyer contained in this Agreement and in any Schedule or other
disclosure in writing from Buyer shall have been true and correct when made, and
shall be true and correct in all material respects on and as of the Closing Date
with the same force and effect as though such representations and warranties had
been made on and as of the Closing Date.
8.2 COVENANTS OF BUYER. All of the covenants and agreements herein on
the part of the Buyer to be complied with or performed on or before the Closing
Date shall have been fully complied with and performed.
ARTICLE IX
DATE AND PLACE OF CLOSING
9.1 DATE AND PLACE OF CLOSING. Subject to satisfaction or waiver of the
conditions to the obligations of the parties, the purchase and sale of the
Assets pursuant to this Agreement shall be consummated at a closing (the
"Closing") to be held in the offices of Day, Edwards, Federman, Propester &
▇▇▇▇▇▇▇▇▇▇▇, Inc. at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ Tower 29th Floor in Oklahoma
City, Oklahoma or such other place as is mutually agreed to by the parties, at
10:00 A.M. on the __ day of ____, 19__. Title to the Assets shall pass from
Seller to Buyer as of 12:01 A.M., Dallas, Texas time, on the day following the
Closing Date.
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ARTICLE X
CLOSING
10.1 SELLER'S AND BUYER'S PERFORMANCE. At the Closing, concurrently with
performance by Buyer of its obligations to be performed at the Closing:
(a) CONVEYANCES. Seller shall execute and deliver to Buyer, in
form and substance acceptable to Buyer, (i) the ▇▇▇▇ of Sale; and (ii) all other
assignments, endorsements and instruments of transfer as shall be necessary or
appropriate to carry out the intent of this Agreement and as shall be sufficient
to vest in Buyer title to all of the Assets and all right, title and interest of
Seller thereto. If requested by Buyer, such documents shall be in form suitable
for recording.
(b) RECORDS. Seller shall deliver to Buyer all documents,
agreements, reports, books, records and accounts pertaining specifically to the
Assets which are in Seller's possession, including without limitation any and
all files and documents relating to any litigation.
10.2 BUYER'S PERFORMANCE. At the Closing, concurrently with the
performance by Seller of its obligations to be performed at the Closing:
(a) PURCHASE PRICE. Buyer shall convey and deliver to Seller the
common stock described in Section 2.3, and shall execute the Subscription
Agreement.
10.3 EXPENSES: OTHER INSTRUMENTS. In addition to the foregoing, Buyer
and Seller agree as follows:
(a) FURTHER ACTION BY SELLER. At any time and form time to time,
at or after the Closing, upon request of Buyer, Seller shall do, execute,
acknowledge and deliver or shall cause to be done, executed, acknowledged and
delivered all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney and assurances as may reasonably be required in order to vest
in and confirm to Buyer full and complete title to, possession of, and the right
to use and enjoy, the Assets.
(b) FURTHER ACTION BY BUYER. At any time and from time to time, at
or after the Closing, upon request of Seller, Buyer shall do, execute,
acknowledge and deliver or shall cause to be done, executed, acknowledged and
delivered all such further acts and assurances as may reasonably be required in
order to better assure and confirm to Seller the assumption by
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Buyer of the obligations to render performance which are to be assumed by
Buyer pursuant to this Agreement.
ARTICLE XI
POST-CLOSING COVENANTS
11.1 TRANSITION PERIOD. Seller shall use good-faith efforts for a period
of up to one hundred eighty (180) days after the Closing to cooperate and assist
Buyer in connection with the operations of the Business and the Assets purchased
by Buyer under this Agreement.
ARTICLE XII
TERMINATION
12.1 TERMINATION. This Agreement may be terminated and abandoned at any
time on or prior to the Closing Date:
(a) By the mutual consent in writing of Buyer and Seller;
(b) By Buyer in writing if any of the material conditions to the
obligations of Buyer contained herein shall not have been satisfied or, if
unsatisfied, waived as of the Closing Date or if the results of Buyer's due
diligence investigation of the Assets and business of Seller are not
satisfactory to Buyer in all respects;
(c) By Seller in writing if any of the material conditions to the
obligations of Seller contained herein shall not have been satisfied or, if
unsatisfied, waived as of the Closing Date;
(d) By Buyer or Seller in writing if the Closing shall not have
occurred by February 28, 1997, except that no party shall have the right to
terminate this Agreement if the failure to close shall be the result of such
party's failure to perform, in any material respect, its obligations hereunder.
12.2 NO FURTHER FORCE OR EFFECT. In the event of termination and
abandonment of this Agreement pursuant to the provisions of Section 13.1, this
Agreement shall be of no further force or effect, except for the last sentences
of Sections 5.3 and 6.1 and Section 14.1 which shall not be affected by
termination of this Agreement.
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ARTICLE XIII
MISCELLANEOUS
13.1 EXPENSES. Except as otherwise expressly provided herein, Seller and
Buyer shall each pay their own expenses in connection with the preparation of
this Agreement, and the consummation of the transactions contemplated hereby,
including, without limitation, fees of its own counsel, auditors and other
experts, whether or not such transactions be consummated.
13.2 ENTIRE AGREEMENT. This Agreement, together with the Schedules and
other agreements contemplated herein, constitutes the entire contract and shall
supersede all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter hereof and no
party shall be liable or bound to the other in any manner by any representations
or warranties except as specifically set forth herein or in any Schedule hereto
or agreement executed in connection herewith or expressly required to be made or
delivered pursuant thereto.
13.3 SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties hereto. Nothing in this Agreement, express or implied,
is intended to confer upon any party, other than the parties and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of such agreements.
13.4 IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
13.5 HEADINGS. The headings of the paragraphs and subparagraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
13.6 USE OF CERTAIN TERMS. As used in this Agreement, the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular paragraph, subparagraph or other
subdivision.
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13.7 MODIFICATION AND WAIVER. Any of the terms or conditions of this
Agreement may be waived in writing at any time, whether before or after action
thereon by the party which is entitled to the benefits thereof; and this
Agreement may be modified or ▇▇▇▇▇▇ at any time, whether before or after action
thereon by the parties. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by all of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not similar)
nor shall such waiver constitute a continuing waiver.
13.8 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby or by law on such party, and the
exercise of any one remedy will not preclude the exercise of any other.
13.9 NOTICES. All notices, consents, requests, instructions, approvals
and/or communications provided for herein, shall be validly given, made or
served if in writing and delivered personally or sent by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
(i) If to Seller: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇-▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
with copy to: ▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(ii) If to Buyer: CD Warehouse, Inc.
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
with copy to: ▇▇▇▇▇ ▇. Day, Esq.
Day, Edwards, Federman, ▇▇▇▇▇▇▇▇▇▇▇ & Propester, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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The designation of the person to be so notified or the address of such person
for the purposes of such notice may be changed from time to time by a similar
notice. Any notice which is delivered personally in the manner provided herein
shall be deemed to have been duly given to the party to whom it is directed
upon actual receipt by such party (or its agent for notices hereunder). Any
notice which is addressed and mailed in the manner herein provided shall be
conclusively presumed to have been duly given to the party to which it is
addressed at the close of business, local time of the recipient, on the third
business day after the day it is so placed in the mail.
13.10 GOVERNING LAW. This Agreement has been executed and delivered
in the State of Texas and will be construed and enforced in accordance with and
governed by the laws of the State of Texas. This Agreement will not be construed
for or against a party merely because that party prepared it, but will at all
times be construed according to its fair meaning.
13.11 NO AGENT'S FEES. Buyer represents to Seller, and Seller
represents to Buyer, that there is no agent's broker's or finder's fees or
commission payable or that will be payable in connection with the transactions
contemplated hereby by virtue of or resulting from any action or agreement by
it. Buyer hereby agrees to indemnify and hold harmless Seller, and Seller
agrees to indemnify and hold harmless Buyer, from and against any claim, demand,
liability, loss, cost or expense (including reasonable attorneys' fees and
expenses) on account of or in connection with any agent's, broker's or finder's
fees or commissions payable or alleged to be payable in connection with this
Agreement or the transactions contemplated hereby virtue of or resulting from
any action or agreement on the part of such indemnifying party.
13.12 BINDING ARBITRATION. EACH PARTY TO THIS AGREEMENT AGREES THAT
ANY DISPUTE OR CONTROVERSY ARISING BETWEEN ANY OF THE PARTIES TO THIS AGREEMENT,
OR ANY PERSON OR ENTITY IN PRIVITY THEREWITH, OUT OF THE TRANSACTIONS EFFECTED
AND RELATIONSHIPS CREATED PURSUANT TO THIS AGREEMENT AND EACH OTHER AGREEMENT
CREATED IN CONNECTION HEREWITH, INCLUDING ANY DISPUTE OR CONTROVERSY REGARDING
THE FORMATION, TERMS, OR CONSTRUCTION OF THIS AGREEMENT, REGARDLESS OF KIND OR
CHARACTER, MUST BE RESOLVED THROUGH BINDING ARBITRATION. EACH PARTY TO THIS
AGREEMENT AGREES TO SUBMIT SUCH DISPUTE OR CONTROVERSY TO ARBITRATION BEFORE THE
AMERICAN ARBITRATION ASSOCIATION IN DALLAS, TEXAS, AND FURTHER AGREES TO BE
BOUND BY THE DETERMINATION OF ANY ARBITRATOR OR ARBITRATION PANEL EMPANELED BY
THE AMERICAN ARBITRATION ASSOCIATION TO ADJUDICATE THE DISPUTE. JUDGMENT ON ANY
ARBITRATION AWARD MAY BE ENTERED IN ANY COURT OF COMPETENT JURISDICTION. ANY
PARTY TO THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY SUCH DISPUTE OR CONTROVERSY IN A COURT
OF COMPETENT JURISDICTION AND, FURTHER, MAY SEEK
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PROVISIONAL OR ANCILLARY REMEDIES INCLUDING TEMPORARY OR INJUNCTIVE RELIEF IN
CONNECTION WITH SUCH DISPUTE OR CONTROVERSY IN A COURT OF COMPETENT
JURISDICTION, PROVIDED THAT THE DISPUTE OR CONTROVERSY IS ULTIMATELY RESOLVED
THROUGH BINDING ARBITRATION CONDUCTED IN ACCORDANCE WITH THE TERMS AND
CONDITIONS OF THIS SECTION.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed in counterparts all as of the date first above written.
SELLER:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
BUYER:
CD WAREHOUSE, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
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ASSET PURCHASE AGREEMENT
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
1.1 Contract - Assumed and Assigned
3.1 Encumbrances
3.2 Inventory
3.3 Physical Properties
3.5 Litigation
3.9 Insurance
3.10 Taxes
3.11 Certain Changes or Events
4.4 Compliance with Laws and Licenses, Franchises Permits and
Governmental Authorization
EXHIBITS
A ▇▇▇▇ of Sale
B Subscription Agreement