EXHIBIT 10(a)
ASSET PURCHASE AGREEMENT
By and Among
West Coast Entertainment Corporation
and
Choices Entertainment Corporation
TABLE OF CONTENTS
Section Page
1. Sale and Delivery of the Assets . . . . . . . . . . . . . 1
1.1 Delivery of the Assets . . . . . . . . . . . . . . . 1
1.2 Further Assurances . . . . . . . . . . . . . . . . . 3
1.3 Base Purchase Price. . . . . . . . . . . . . . . . . 3
1.4 Assumption of Liabilities; Etc.. . . . . . . . . . . 4
1.5 Allocation of Base Purchase Price and
Assumed Liabilities. . . . . . . . . . . . . . . . . 4
1.6 The Closing. . . . . . . . . . . . . . . . . . . . . 4
1.7 Apportionment. . . . . . . . . . . . . . . . . . . . 5
1.8 Purchase Price Adjustments . . . . . . . . . . . . . 5
1.9 Option to Purchase Newtown Store . . . . . . . . . . 7
1.10 Buyer Loan . . . . . . . . . . . . . . . . . . . . . 8
2. Representations of the Seller . . . . . . . . . . . . . . 8
2.1 Organization . . . . . . . . . . . . . . . . . . . . 8
2.2 Capitalization of the Seller and the
Subsidiaries . . . . . . . . . . . . . . . . . . . . 9
2.3 Authorization. . . . . . . . . . . . . . . . . . . . 9
2.4 Ownership of the Assets. . . . . . . . . . . . . . . 10
2.5 Financial Statements . . . . . . . . . . . . . . . . 10
2.6 Absence of Undisclosed Liabilities . . . . . . . . . 12
2.7 Litigation . . . . . . . . . . . . . . . . . . . . . 12
2.8 Insurance. . . . . . . . . . . . . . . . . . . . . . 12
2.9 Inventory. . . . . . . . . . . . . . . . . . . . . . 13
2.10 Fixed Assets . . . . . . . . . . . . . . . . . . . . 13
2.11 Leases . . . . . . . . . . . . . . . . . . . . . . . 13
2.12 Change in Financial Condition and Assets . . . . . . 14
2.13 Tax Matters. . . . . . . . . . . . . . . . . . . . . 14
2.14 Accounts Receivable. . . . . . . . . . . . . . . . . 15
2.15 Books and Records. . . . . . . . . . . . . . . . . . 15
2.16 Contracts and Commitments. . . . . . . . . . . . . . 15
2.17 Compliance with Agreements and Laws. . . . . . . . . 17
2.18 Employee Relations . . . . . . . . . . . . . . . . . 18
2.19 Absence of Certain Changes or Events . . . . . . . . 19
2.20 Suppliers. . . . . . . . . . . . . . . . . . . . . . 20
2.21 Prepayments and Deposits . . . . . . . . . . . . . . 20
2.22 Trade Names and Other Intangible Property. . . . . . 20
2.23 Employee Benefit Plans . . . . . . . . . . . . . . . 21
2.24 Regulatory Approvals . . . . . . . . . . . . . . . . 21
2.25 Indebtedness to and from Officers, Directors and
Shareholders . . . . . . . . . . . . . . . . . . . . 21
2.26 Powers of Attorney and Suretyships . . . . . . . . . 22
2.27 Disclosure . . . . . . . . . . . . . . . . . . . . . 22
3. Representations of the Buyer. . . . . . . . . . . . . . . 22
3.1 Organization and Authority . . . . . . . . . . . . . 22
3.2 Capitalization of the Buyer. . . . . . . . . . . . . 22
3.3 Authorization. . . . . . . . . . . . . . . . . . . . 23
3.4 Regulatory Approvals . . . . . . . . . . . . . . . . 23
3.5 Disclosure . . . . . . . . . . . . . . . . . . . . . 23
4. Access to Information; Public Announcements . . . . . . . 23
4.1 Access to Management, Properties and Records . . . . 23
4.2 Confidentiality. . . . . . . . . . . . . . . . . . . 25
4.3 Public Announcements . . . . . . . . . . . . . . . . 25
5. Pre-Closing Covenants of the Seller . . . . . . . . . . . 25
5.1 Conduct of Business. . . . . . . . . . . . . . . . . 25
5.2 Absence of Material Changes. . . . . . . . . . . . . 26
5.3 Taxes . . . . . . . . . . . . . . . . . . . . . . . 28
5.4 Delivery of Financial Statements
and Payroll Information . . . . . . . . . . . . . .. 28
5.5 Compliance with Laws . . . . . . . . . . . . . . . . 28
5.6 Continued Truth of Representations
and Warranties of the Seller . . . . . . . . . . . . 28
5.7 Continuing Obligation to Inform. . . . . . . . . . . 28
5.8 Exclusive Dealing. . . . . . . . . . . . . . . . . . 29
5.9 No Publicity . . . . . . . . . . . . . . . . . . . . 29
5.10 Approval of Shareholders . . . . . . . . . . . . . . 29
5.11 Breakup Fee. . . . . . . . . . . . . . . . . . . . . 30
6. Satisfaction of Conditions; Liquidated Damages. . . . . . 30
6.1 Satisfaction of Conditions . . . . . . . . . . . . . 30
6.2 Liquidated Damages . . . . . . . . . . . . . . . . . 30
7. Conditions to Obligations of the Buyer. . . . . . . . . . 31
7.1 Continued Truth of Representations
and Warranties of the Seller; Compliance with
Covenants and Obligations . . . . . . . . . . . . . 31
7.2 Corporate Proceedings. . . . . . . . . . . . . . . . 31
7.3 Governmental Approvals . . . . . . . . . . . . . . . 32
7.4 Consents of Lenders, Lessors and Other
Third Parties. . . . . . . . . . . . . . . . . . . . 32
7.5 Adverse Proceedings. . . . . . . . . . . . . . . . . 32
7.6 Opinion of Counsel . . . . . . . . . . . . . . . . . 32
7.7 Board of Directors and Shareholder Approval. . . . . 32
7.8 The Assets . . . . . . . . . . . . . . . . . . . . . 32
7.9 Update . . . . . . . . . . . . . . . . . . . . . . . 32
7.10 Cash on Hand at Stores . . . . . . . . . . . . . . . 33
7.11 Payables . . . . . . . . . . . . . . . . . . . . . . 33
7.12 Tax Lien Waivers . . . . . . . . . . . . . . . . . . 33
7.13 Closing of Offering. . . . . . . . . . . . . . . . . 33
7.14 Closing Deliveries . . . . . . . . . . . . . . . . . 33
8. Conditions to Obligations of the Seller . . . . . . . . . 34
8.1 Continued Truth of Representations and
Warranties of the Buyer; Compliance
with Covenants and Obligations . . . . . . . . . . . 34
8.2 Corporate Proceedings. . . . . . . . . . . . . . . . 35
8.3 Governmental Approvals . . . . . . . . . . . . . . . 35
8.4 Consents of Lenders, Lessors and Other
Third Parties. . . . . . . . . . . . . . . . . . . . 35
8.5 Adverse Proceedings. . . . . . . . . . . . . . . . . 35
8.6 Opinion of Counsel . . . . . . . . . . . . . . . . . 35
8.7 Closing Deliveries . . . . . . . . . . . . . . . . . 35
9. Indemnification . . . . . . . . . . . . . . . . . . . . . 36
9.1 By the Buyer and the Seller. . . . . . . . . . . . . 36
9.2 By the Seller. . . . . . . . . . . . . . . . . . . . 37
9.3 Claims for Indemnification . . . . . . . . . . . . . 37
9.4 Defense by Indemnifying Party. . . . . . . . . . . . 38
9.5 Payment of Indemnification Obligation. . . . . . . . 38
9.6 Survival of Representations; Claims for
Indemnification... . . . . . . . . . . . . . . . . . 38
10. Post-Closing Agreements . . . . . . . . . . . . . . . . . 39
10.1 Proprietary Information. . . . . . . . . . . . . . . 39
10.2 No Solicitation or Hiring of Former Employees. . . . 39
10.3 Non-Competition Agreement. . . . . . . . . . . . . . 40
10.4 Sharing of Data. . . . . . . . . . . . . . . . . . . 40
10.5 Use of Name. . . . . . . . . . . . . . . . . . . . . 41
10.6 Cooperation in Litigation. . . . . . . . . . . . . . 41
11. Termination of Agreement. . . . . . . . . . . . . . . . . 42
11.1 Termination by Lapse of Time . . . . . . . . . . . . 42
11.2 Termination by Agreement of the Parties. . . . . . . 42
11.3 Termination by Reason of Breach. . . . . . . . . . . 42
11.4 Survival of Certain Obligations. . . . . . . . . . . 42
12. Transfer and Sales Tax. . . . . . . . . . . . . . . . . . 42
13. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 42
13.1 For the Seller . . . . . . . . . . . . . . . . . . . 42
13.2 For the Buyer. . . . . . . . . . . . . . . . . . . . 43
14. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 43
15. Arbitration . . . . . . . . . . . . . . . . . . . . . . . 44
16. Successors and Assigns. . . . . . . . . . . . . . . . . . 44
17. Entire Agreement; Amendments; Attachments . . . . . . . . 44
18. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 45
19. Legal Fees. . . . . . . . . . . . . . . . . . . . . . . . 45
20. Governing Law . . . . . . . . . . . . . . . . . . . . . . 45
21. Section Headings. . . . . . . . . . . . . . . . . . . . . 45
22. Severability. . . . . . . . . . . . . . . . . . . . . . . 46
23. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 46
Exhibits
A - Form of Escrow Agreement
B - Instrument of Assumption of Liabilities
C - Substance of Opinion of Seller's Counsel
D - ▇▇▇▇ of Sale
E - Substance of Opinion of ▇▇▇▇ and ▇▇▇▇
ASSET PURCHASE AGREEMENT
Agreement made as of December 16, 1996 between West Coast
Entertainment Corporation, a Delaware corporation with its principal office at
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Buyer"), and Choices
Entertainment Corporation, a Delaware corporation with its principal office at
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Seller").
Preliminary Statement
The Buyer desires to purchase, and the Seller desires to sell,
substantially all of the assets and business of the Seller, for the
consideration set forth below and the assumption of certain of the Seller's
liabilities set forth below, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree as follows:
1. Sale and Delivery of the Assets
1.1 Delivery of the Assets.
(a) Subject to and upon the terms and conditions of this
Agreement, at the closing of the transactions contemplated by this Agreement
(the "Closing"), the Seller shall sell, transfer, convey, assign and deliver to
the Buyer, and the Buyer shall purchase from the Seller, the following
properties, assets and other claims, rights and interests, all of which relate
to the nine retail video stores owned and operated by Seller as listed on
Schedule A attached hereto (collectively, the "Stores" and individually, a
"Store"):
(i) all inventories, videotapes, finished goods, office
supplies, maintenance supplies, packaging materials, spare parts and similar
items of the Seller (collectively, the "Inventory") which exist on the Closing
Date (as defined below);
(ii) all accounts, accounts receivable, notes and notes
receivable existing on the Closing Date which are payable to the Seller,
including any security held by the Seller for the payment thereof (the "Accounts
Receivable");
(iii) all prepaid expenses, security and other deposits, bank
accounts and other similar assets of the Seller existing on the Closing Date,
including the cash represented by such assets;
(iv) all rights of the Seller under the contracts,
agreements, leases, licenses and other instruments set
forth on Schedule 2.16 attached hereto other than such rights under contracts,
agreements, leases, licenses and other instruments included on Schedule 1.1(ii)
(collectively, the "Contract Rights");
(v) all books, records and accounts, correspondence,
manuals, customer lists, employment records, studies, reports or summaries
incident to the Seller's retail store operations;
(vi) all rights of the Seller under express or implied
warranties from the suppliers of the Seller;
(vii) the motor vehicles and other rolling stock owned by the
Seller on the Closing Date;
(viii) all of the machinery, equipment, furniture, leasehold
improvements and construction in progress owned by the Seller on the Closing
Date whether or not reflected as capital assets in the accounting records of the
Seller (collectively, the "Fixed Assets");
(ix) all of the Seller's right, title and interest in and to
all intangible property rights, including but not limited to inventions,
discoveries, trade secrets, processes, formulas, know-how, United States and
foreign patents, patent applications, trade names, or any derivation thereof,
trademarks, trademark registrations, applications for trademark registrations,
copyrights, copyright registrations, owned or, where not owned, used by the
Seller in its business and all licenses and other agreements to which the Seller
is a party (as licensor or licensee) or by which the Seller is bound relating to
any of the foregoing kinds of property or rights to any "know-how" or disclosure
or use of ideas (collectively, the "Intangible Property"); provided, however,
that the Intangible Property shall not include the name "Choices Entertainment"
(and provided, further, that the Seller shall grant to Buyer a perpetual,
nonexclusive license to use the name "Choices Entertainment" as provided in
Section 10.5 below); and
(x) except as specifically provided in Subsection 1.1(b)
hereof, all other assets, properties, claims, rights and interests of the Seller
which exist on the Closing Date, of every kind and nature and description,
whether tangible or intangible, real, personal or mixed.
(b) Notwithstanding the provisions of paragraph (a) above, the
assets to be transferred to the Buyer under this Agreement shall not include (i)
Seller's cash in bank accounts or at the Stores (except for the $600 per Store
required to be left at the Stores on the Closing Date, as required by Section
7.10 below); (ii) the outstanding shares of capital stock of the subsidiaries of
the Seller set forth on Schedule 1.1(i) attached hereto (collectively, the
"Subsidiaries"); and (iii) those assets listed on Schedule 1.1(ii) attached
hereto (the "Excluded Assets").
(c) The Inventory, Accounts Receivable, Contract Rights, Fixed
Assets, Intangible Property and other properties, assets and business of the
Seller described in paragraph (a) above, other than the Excluded Assets, shall
be referred to collectively as the "Assets."
1.2 Further Assurances. At any time and from time to time after the
Closing, at the Buyer's request and without further consideration, the Seller
promptly shall execute and deliver such instruments of sale, transfer,
conveyance, assignment and confirmation, and take such other action, as the
Buyer may reasonably request to more effectively transfer, convey and assign to
the Buyer, and to confirm the Buyer's title to, all of the Assets, to put the
Buyer in actual possession and operating control thereof, to assist the Buyer in
exercising all rights with respect thereto and to carry out the purpose and
intent of this Agreement.
1.3 Base Purchase Price.
(a) In addition to the Buyer's assumption of liabilities as
provided in Section 1.4 below, the purchase price for the assets shall be
$2,430,000 (the "Base Purchase Price") subject to the adjustments provided in
Subsection 1.8 hereof.
(b) At the Closing, the Buyer shall deliver to the Seller 90% of
the Base Purchase Price in cash, by cashiers or certified check or by wire
transfer of immediately available funds to an account designated by the Seller.
The outstanding amount of principal and interest due under the Buyer Loan (as
defined in Section 1.10 below) shall be credited towards the portion of the Base
Purchase Price payable at the Closing.
(c) At the Closing, an amount of cash equal to 10% of the Base
Purchase Price shall be held by the Buyer as escrow agent (the "Escrow Agent")
in an escrow account in accordance with the Escrow Agreement attached hereto as
Exhibit A.
1.4 Assumption of Liabilities; Etc.
(a) At the Closing, the Buyer shall execute and deliver an
Instrument of Assumption of Liabilities (the "Instrument of Assumption")
substantially in the form attached hereto as Exhibit B, pursuant to which it
shall assume and agree to perform, pay and discharge the following liabilities,
obligations and commitments of the Seller (the "Assumed Liabilities"):
(i) The obligations of the Seller relating to periods after
the Closing under the Leases specified on Schedule 1.4 which become due and
payable after the Closing Date;
(ii) The other liabilities and obligations of the Seller
specifically set forth in Schedule 1.4 attached hereto.
(b) The Buyer shall not at the Closing assume or agree to
perform, pay or discharge, and the Seller shall remain unconditionally liable
for, all obligations, liabilities and commitments, fixed or contingent, of the
Seller other than the Assumed Liabilities.
(c) If the Buyer, in its sole and absolute discretion, agrees
(after provision of reasonable notice to and consultation with the Seller), to
perform, pay or discharge any obligations, liabilities or commitments (fixed or
contingent) of the Seller, the dollar amount of all such obligations,
liabilities and commitments shall reduce, on a dollar for dollar basis, the
Purchase Price.
1.5 Allocation of Base Purchase Price and Assumed Liabilities. The
aggregate amount of the Base Purchase Price and the Assumed Liabilities shall be
allocated among the Assets as set forth on Schedule 1.5 attached hereto. Such
allocation shall be subject to adjustment to the extent that the Base Purchase
Price is adjusted pursuant to Subsections 1.8 hereof in the manner specified in
such Subsection.
1.6 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇ and ▇▇▇▇,
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, on a date specified by the Buyer
to the Seller on not less than two business days notice (which may be given
orally), which date shall be on or after February 28, 1997, but before the
Termination Date (as hereinafter defined) or on such later date as may be
mutually agreeable to the Buyer and the Seller (the "Closing Date"). The
transfer of the Assets by the Seller to the Buyer shall be deemed to occur at
9:00 a.m., Boston time, on the date of the Closing (the "Closing Date"). As
used herein, "Termination Date" shall mean the earlier to occur of (x) the date
which is 30 days after the date of closing of a public offering or private
placement of Buyer's debt or equity securities to third parties, resulting in
gross proceeds to the Buyer in an amount sufficient to enable the Buyer to
consummate the transactions contemplated hereby and certain additional
acquisitions (the "Offering"), and (y) April 30, 1997. The Buyer hereby
covenants and agrees to use commercially reasonable efforts to consummate the
Offering on or before March 31, 1997.
1.7 Apportionment. The Purchase Price shall not be adjusted for
prepaid expenses of any type or kind, including without limitation, prepaid
premiums on insurance, water and sewer use charges, transfer taxes and recording
fees, if any, incurred in connection with the transfer of the Assets
contemplated hereby, or real property taxes for the then current tax period.
1.8 Purchase Price Adjustments. The Base Purchase Price set forth in
Subsection 1.3 hereof shall be subject to adjustment on or after the Closing
Date as follows:
(a) After the Closing Date, the Seller shall cause its
independent public accountants (the "Accountants"), to conduct an audit of the
books and records of the Seller as of December 31, 1996 (the "Audit Date"), and
the Accountants shall, on or before March 31, 1997 deliver an audited balance
sheet of the Seller as of the Audit Date (the "1996 Audited Balance Sheet") and
the related statement of income for the twelve-month period then ended (the
"Audit Period") to each of the Buyer and the Seller. The 1996 Audited Balance
Sheet and the related statement of income (collectively, the "1996 Audited
Statements") shall be prepared in accordance with generally accepted accounting
principles ("GAAP") applied consistently with the Seller's past practice, and
shall be certified without qualification by the Accountants (except for a "going
concern" qualification substantially similar to that contained in Seller's
audited financial statements for Seller's 1995 fiscal year, copies of which have
been provided to the Buyer (the "Going Concern Qualification")).
(b) The 1996 Audited Statements delivered pursuant to paragraph
(a) above shall be accompanied by a statement prepared by the Seller, setting
forth the Cash Flow Adjustment (as defined in Section 1.8(g) below), if any,
together with the calculation showing the basis for the determination thereof.
(c) In the event that the Buyer or the Seller dispute the 1996
Audited Statements or the calculation of the Cash Flow Adjustment, the disputing
party shall notify the other parties hereto in writing (the "Dispute Notice") of
the amount, nature and basis of such dispute, within 10 calendar days after
delivery of the Adjustment Statements. In the event of such a dispute, the
parties hereto shall first use their best efforts to resolve such dispute among
themselves. If the parties are unable to resolve the dispute within 10 calendar
days after delivery of the Adjustment Statements, the dispute shall be submitted
to the Accountants and Price Waterhouse LLP, independent accountants for the
Buyer (the "Buyer's Accountants"), for resolution. The Accountants and Buyer's
Accountants shall use their best efforts to resolve the dispute within 10 days
after submission. If they are unable to agree upon a resolution of the dispute
within such 10-day period, the dispute shall be submitted for arbitration in
accordance with Section 15.
(d) The fees and expenses of the Accountants in connection with
the preparation of 1996 Audited Balance Sheet and the resolution of disputes
pursuant to paragraph (c) above shall be borne by the Seller and the fees and
expenses of the Buyer's Accountants in connection with the resolution of
disputes pursuant to paragraph (c) above shall be borne by the Buyer.
(e) Immediately upon the expiration of the 10-day period for
giving the Dispute Notice, if no Dispute Notice is given, or immediately upon
the resolution of disputes, if any, pursuant to paragraph (c) above, the Base
Purchase Price shall be
adjusted by the Cash Flow Adjustment (as so adjusted, the "Adjusted Base
Purchase Price").
(f) For purposes of this Subsection 1.8, "net operating cash
flow" shall be equal to Store net income, plus film amortization, plus used tape
cost of goods (to the extent included in the game or rental tape purchase amount
described below), plus depreciation, less game and rental tape purchases. For
purposes of calculating Seller's net operating cash flow pursuant to Section
1.8(g) below, there shall be excluded all of Seller's expenses directly related
to Store #13 (as indicated on Schedule A), and all revenues from Store #13.
(g) A Cash Flow Adjustment shall occur only if the net operating
cash flow for the Audit Period, as determined by the Accountants (the "Audited
Cash Flow") is less than $700,000. A Cash Flow Adjustment shall be a reduction
in the Base Purchase Price by an amount determined as follows:
Base Purchase Price - Base Purchase Price x Audited Cash Flow
---------------------------------------
$700,000
Any such reduction shall reduce the cash portion of the Purchase Price.
1.9 Option to Purchase Newtown Store.
(a) If the event specified in Section 5.11(a) or (b) shall
occur, the Buyer shall have the option (the "Option") to purchase all of the
Seller's assets relating to Seller's retail video store located at Village at
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ (the "Newtown Store") for a
price of $250,000 payable in cash at closing. The purchase price may, at
Buyer's option, be paid by (i) cancellation of the outstanding amount of the
Buyer Loan (described in Section 1.10 below), and (ii) cancellation of the
Seller's obligation to pay to Buyer the fee described in Section 5.11 below.
(b) The assets shall be of the same type and kind as the Assets,
but shall include only those Assets relating to or used in the conduct of the
business of the Newtown Store, and shall exclude all of Seller's cash in bank
accounts, but $600 in cash shall be left at the ▇▇▇▇▇▇ Store on the closing date
(the "Newtown Store Assets").
(c) In connection with the purchase of assets upon exercise of
the Option, (i) the Buyer shall assume the Seller's lease for the space occupied
by the Newtown Store, but shall assume no other liabilities of the Seller, (ii)
the Seller shall deliver the assets free and clear of all liens, security
interests or encumbrances and shall obtain all required governmental and third
party consents, and (iii) the Buyer and the Seller shall enter into an Asset
Purchase Agreement, in form and on terms substantially similar to this
Agreement, with such conforming changes as may be
necessary or appropriate to reflect that Seller will continue to conduct its
retail video store business.
(d) The Option may be exercised by Buyer at any time within the
60-day period following the date on which the Option first becomes exercisable,
by delivery of written notice of exercise by the Buyer to the Seller. If the
Buyer fails to timely exercise the Option, the Buyer shall be deemed to have
elected not to exercise the Option, and the Option shall thereafter expire and
be of no force and effect.
(e) The closing of the acquisition by the Buyer of the assets
relating to the Newtown store (the "Option Closing") shall take place within two
days following the date of delivery of the notice from the Buyer, or as soon as
practicable thereafter, at the offices of ▇▇▇▇ and ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, or at such other time and date as may be mutually agreed
upon in writing by the parties hereto.
1.10 Buyer Loan. On or about the date hereof, the Buyer shall loan to
the Seller the sum of $150,000 in cash (the "Buyer Loan"). Such loan shall be
evidenced by a promissory note and secured loan agreement, in form and substance
acceptable to the parties, which shall provide for (i) payment of the loan at
the Closing (or, if applicable, at the Option Closing), (ii) payment on demand
at any time from and after April 30, 1997, and (iii) interest (due at maturity,
but not before) at the rate of 12% per annum (simple interest). The Buyer Loan
shall be secured by a security interest in all of the Newtown Store Assets
(including inventory or accounts receivable), which shall have priority over any
other liens on such assets, except for the liens specifically identified on
Schedule 1.10.
2. Representations of the Seller
The Seller represents and warrants to the Buyer as follows:
2.1 Organization. The Seller is a corporation duly organized,
validly existing, and in good standing under the laws of the state of its
incorporation, and has all requisite power and authority (corporate and other)
to own its properties, to carry on its business as now being conducted, to
execute and deliver this Agreement and the agreements contemplated herein, and
to consummate the transactions contemplated hereby. Schedule 1.1(i) attached
hereto constitutes a true, correct and complete list of all corporate,
partnership, joint venture and other entities in which the Seller holds,
directly or indirectly, a 50% or greater interest. Each of the Subsidiaries is
a corporation or other entity duly organized and validly existing, and at the
Closing will be in good
standing, under the laws of the state of its incorporation or organization and
has all requisite power and authority to own its properties and to carry on its
business as now being conducted. The Seller and the Subsidiaries are each duly
qualified to do business, and at the Closing will be in good standing, in all
jurisdictions in which their ownership of property or the character of their
business requires such qualification. Certified copies of the charter, bylaws
and other governing instruments of each of the Seller and the Subsidiaries, each
as amended to date, have been previously delivered to the Buyer, are complete
and correct, and no amendments have been made thereto or have been authorized
since the date thereof. Except as set forth on Schedule 2.1, the Seller does
not own any capital stock of or other equity interest in any corporation,
partnership or other entity, other than the Subsidiaries. Schedule A sets forth
a list of each retail video rental store (including the location of each such
store (and the name and address of all owners (if not Seller) of each such
store)) owned, operated or licensed directly or indirectly by the Seller. The
Stores constitute all of the retail video rental stores operated by the Seller,
or in which Seller has a direct or indirect interest.
2.2 Capitalization of the Seller and the Subsidiaries. The Seller's
authorized capital stock consists of 50,000,000 shares of Common Stock, $.01 par
value, of which 22,004,395 shares are issued and outstanding, and 5,000 shares
of Series C Preferred Stock, $.01 par value, 37.4 of which are issued and
outstanding, and such outstanding shares of Common Stock and Preferred Stock are
held of record and beneficially by the stockholders listed on Schedule 2.2
attached hereto. All of such shares have been duly and validly issued and are
fully paid and nonassessable. The authorized capital stock of the Subsidiaries
is as set forth on Schedule 2.2 attached hereto. All of such shares have been
duly and validly issued, are fully paid and nonassessable and held of record by
the Seller.
2.3 Authorization. The execution and delivery of this Agreement by
the Seller, and the agreements provided for herein, and the consummation by the
Seller of all transactions contemplated hereby, have been duly authorized by all
requisite corporate action, except that the Seller's shareholders have not yet
approved such transactions. This Agreement and all such other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated hereby to which the Seller is a party constitute the valid and
legally binding obligations of the Seller, enforceable against the Seller in
accordance with their respective terms. The execution, delivery and performance
by the Seller of this Agreement and the agreements provided for herein, and the
consummation by the Seller of the transactions contemplated hereby and thereby,
will not, with or without the giving of notice or the passage of time or both,
(a) violate the provisions of any law, rule or regulation applicable to the
Seller; (b) violate the provisions of the charter or bylaws of the Seller; (c)
violate any judgment, decree, order or award of any court, governmental body or
arbitrator; or (d) except with respect to the Leases (as to which the consent of
the respective landlords is required), conflict with or result in the breach or
termination of any term or provision of, or constitute a default under, or cause
any acceleration under, or cause the creation of any lien, charge or encumbrance
upon the
properties or assets of the Seller pursuant to, any indenture, mortgage, deed of
trust or other instrument or agreement to which the Seller is a party or by
which the Seller or any of its properties is or may be bound. Schedule 2.3
attached hereto sets forth a true, correct and complete list of all consents and
approvals of third parties that are required in connection with the consummation
by the Seller of the transactions contemplated by this Agreement.
2.4 Ownership of the Assets. Schedule 2.4(i) attached hereto sets
forth a true, correct and complete list of all claims, liabilities, liens,
pledges, charges, encumbrances and equities of any kind affecting the Assets
(collectively, the "Encumbrances"). The Seller is, and at the Closing will be,
the true and lawful owner of the Assets, and will have the right to sell and
transfer to the Buyer good, clear, record and marketable title to the Assets,
free and clear of all Encumbrances of any kind, except as set forth on
Schedule 2.4(ii) attached hereto (the "Permitted Encumbrances"). The delivery
to the Buyer of the instruments of transfer of ownership contemplated by this
Agreement will vest good and marketable title to the Assets in the Buyer, free
and clear of all liens, mortgages, pledges, security interests, restrictions,
prior assignments, encumbrances and claims of any kind or nature whatsoever,
except for the Permitted Encumbrances. The Encumbrances which are listed on
Schedule 1.10 secure obligations of the Seller which have been discharged in
full.
2.5 Financial Statements.
(a) The Seller has previously delivered to the Buyer its
combined audited balance sheets as of December 31, 1993, 1994 and 1995 (the
"Audited Balance Sheets") and the related statements of income, shareholders'
equity, retained earnings and statements of cash flow of the Seller for the
fiscal years ended December 31, 1993, 1994 and 1995 (collectively, including the
Audited Balance Sheet, the "Audited Financial Statements").
The Seller has also delivered its combined unaudited balance sheets as of
Seller's fiscal quarters ended March 31, 1996, June 30, 1996 and September 30,
1996 (the "Unaudited Balance Sheets") and the related statements of income,
shareholders' equity, retained earnings and statements of cash flow of the
Seller for the fiscal quarters then ended (collectively, including the Unaudited
Balance Sheets, the "Unaudited Financial Statements").
The Seller shall deliver to the Buyer, on or before March 31, 1997, with
(or as part of) the 1996 Audited Statements, its combined audited balance sheets
as of December 31, 1996 and December 31, 1995, and the combined comparative
statements of operations and retained earnings and statements of cash flows for
the years ended December 31, 1996 and December 31, 1995 (the "Comparative
Financial Statements").
The Seller has delivered to the Buyer its internal statements for each
whole monthly period commencing after September 30, 1996 and ending prior to
the date hereof and shall deliver to the Buyer as promptly as possible
following the last day of each month prior to the Closing, commencing with
November 1996, and in any event within 45 days after the end of each such
month, its balance sheet and related statements of income, shareholders'
equity, retained earnings and changes in financial condition for the
one-month period then ended, all certified by the Accountants or Seller's
chief financial officer (collectively, the "Internal Financial Statements").
The Audited Financial Statements and the Comparative Financial Statements
have been (or will be) prepared in accordance with GAAP applied consistently
with past practice, and are (or will be) certified without qualification (except
for the Going Concern Qualification) by the Seller's independent certified
public accountants. The Unaudited Financial Statements and the Internal
Financial Statements have been or will be certified by the Seller's chief
financial officer to have been prepared in accordance with GAAP, consistent with
past practice.
The Audited Financial Statements and the Unaudited Financial Statements are
hereinafter referred to collectively as the "Financial Statements." The
Seller's Balance Sheet dated September 30, 1996 is sometimes hereinafter
referred to as its "Current Balance Sheet."
(b) The Financial Statements, the Internal Financial Statements
and the Comparative Financial Statements fairly present (or will fairly
present), as of their respective dates, the financial condition, retained
earnings, assets and liabilities of the Seller and the results of operations of
the Seller's business for the periods indicated; with respect to the contracts
and commitments for the sale of goods or the provision of services by the
Seller, the Financial Statements, the Internal Financial Statements and the
Comparative Financial Statements contain and reflect (or will contain and
reflect) adequate reserves, which are consistent with previous reserves taken,
for all reasonably anticipated material losses and costs and expenses; and the
amounts shown as accrued for current and deferred income and other taxes in the
Financial Statements, the Internal Financial Statements and the Comparative
Financial Statements are (or will be) sufficient for the payment of all unpaid
federal, state and local income taxes, interest, penalties, assessments or
deficiencies applicable to the Seller, whether disputed or not, for the
applicable period then ended and periods prior thereto.
The results of Seller's operations for the 12-month period ended December
31, 1996, as reflected in the 1996 Audited Financial Statements will not be
materially different from the results of Seller's operations for such period as
reflected in the Unaudited Financial Statements, the Internal Financial
Statements and the Comparative Financial Statements.
2.6 Absence of Undisclosed Liabilities. Except as and to the extent
(a) reflected and reserved against in the Current Balance Sheet, (b) set forth
on Schedule 2.6 attached hereto or (c) incurred in the ordinary course of
business after the date of the Current Balance Sheet and not material in amount,
either individually or in the aggregate, the Seller does not have any liability
or obligation, secured or unsecured, whether accrued, absolute, contingent,
unasserted or otherwise, affecting the Assets. For purposes of this
Subsection 2.6, "material" means any amount in excess of $10,000.
2.7 Litigation. Except as set forth on Schedule 2.7 attached hereto,
the Seller is not a party to, or to the Seller's knowledge threatened with, and
none of the Assets are subject to, any litigation, suit, action, investigation,
proceeding or controversy before any court, administrative agency or other
governmental authority relating to or affecting the Assets or the business or
condition (financial or otherwise) of the Seller. The Seller is not in
violation of or in default with respect to any judgment, order, writ,
injunction, decree or rule of any court, administrative agency or governmental
authority or any regulation of any administrative agency or governmental
authority.
2.8 Insurance. Schedule 2.8 attached hereto sets forth a true,
correct and complete list of all fire, theft, casualty, general liability,
workers compensation, business interruption, environmental impairment, product
liability, automobile and other insurance policies insuring the Assets or
business of the Seller and of all life insurance policies maintained for any of
its employees, specifying the type of coverage, the amount of coverage, the
premium, the insurer and the expiration date of each such policy (collectively,
the "Insurance Policies") and all claims made under such Insurance Policies
since January 1, 1991. True, correct and complete copies of all of the
Insurance Policies have been previously delivered by the Seller to the Buyer.
The Insurance Policies are in full force and effect and are in amounts and of a
nature which are adequate and customary for the Seller's business. All premiums
due on the Insurance Policies or renewals thereof have been paid and there is no
default under any of the Insurance Policies.
2.9 Inventory. Schedule 2.9 attached hereto sets forth a true,
correct and complete list of the Inventory as of September 30, 1996,
including a description and the book value thereof. Schedule 2.9, as updated
pursuant to Subsection 7.9 hereof, shall set forth a true, correct and
complete list of the Inventory as of the Closing Date, including a
description and valuation thereof. Such Inventory consists of items of a
quality and quantity which are usable or saleable without discount in the
ordinary course of the business conducted by the Seller. The value of all
items of obsolete materials and of materials of below standard quality has
been written down to realizable market value, and the values at which such
Inventory is carried reflect the normal inventory valuation policy of the
Seller of stating the Inventory at the
lower of cost or market value in accordance with generally accepted accounting
principles.
2.10 Fixed Assets. Schedule 2.10 attached hereto sets forth a true,
correct and complete list of all Fixed Assets as of September 30, 1996,
including a description and the book value thereof. Schedule 2.10, as updated
pursuant to Subsection 7.9 hereof, shall set forth a true, correct and complete
list of all Fixed Assets as of the Closing Date, including a description and
valuation thereof. All of the Fixed Assets are in good operating condition and
repair, normal wear and tear excepted, are currently used by the Seller in the
ordinary course of business and in the production of products of the Seller and
normal maintenance has been consistently performed with respect to such Fixed
Assets.
2.11 Leases. Schedule 2.11 attached hereto sets forth a true, correct
and complete list as of the date hereof of all leases of real property,
identifying separately each ground lease, to which the Seller is a party (the
"Leases"). True, correct and complete copies of the Leases, and all amendments,
modifications and supplemental agreements thereto, have previously been
delivered by the Seller to the Buyer. The Leases are in full force and effect,
are binding and enforceable against each of the parties thereto in accordance
with their respective terms and, except as set forth on Schedule 2.11, have not
been modified or amended since the date of delivery to the Buyer. Except as set
forth on Schedule 2.11, no party to any Lease has sent written notice to the
other claiming that such party is in default thereunder, which remains uncured.
Except as set forth on Schedule 2.11 attached hereto, there has not occurred any
event which would constitute a breach of or default in the performance of any
material covenant, agreement or condition contained in any Lease, nor has there
occurred any event which with the passage of time or the giving of notice or
both would constitute such a breach or material default. The Seller is not
obligated to pay any leasing or brokerage commission relating to any Lease and,
except as set forth on Schedule 2.11 attached hereto, will not have any
enforceable obligation to pay any leasing or brokerage commission upon the
renewal of any Lease. No material construction, alteration or other leasehold
improvement work with respect to any of the Leases remains to be paid for or to
be performed by the Seller. The Financial Statements contain adequate reserves
to provide for the restoration of the properties subject to the Leases at the
end of the respective Lease terms, to the extent required by the Leases.
2.12 Change in Financial Condition and Assets. Except as set forth on
Schedule 2.12 attached hereto, since September 30, 1996, there has been no
change which materially and adversely affects the business, properties, assets,
condition (financial or otherwise) or prospects of the Seller. Except as set
forth on Schedule 2.12, the Seller has no knowledge of any existing or
threatened occurrence, event or development which, as far as can be reasonably
foreseen, could have a material adverse effect on the
Seller or its business, properties, assets, condition (financial or otherwise)
or prospects.
2.13 Tax Matters.
(a) Except as set forth on Schedule 2.13 to this Agreement:
(i) Within the times and in the manner prescribed by law,
the Seller has filed all Returns which are required to be filed;
(ii) With respect to all amounts in respect of Taxes imposed
upon the Seller for which it could be liable, whether to Taxing Authorities (as,
for example, under law) or to other persons or entities (as, for example, under
Tax allocation agreements), with respect to all taxable periods or portions of
taxable periods ending on or before the Closing Date, all applicable tax laws
and agreements have been fully complied with, and all such amounts required to
be paid by the Seller to Taxing Authorities or others on or before the date
hereof have been paid.
(iii) All Returns filed by the Seller constitute complete
and accurate representations of the respective Tax liabilities of, or
attributable to, the Seller for such years;
(iv) No examination of the Returns of the Seller is
currently in progress nor, to the knowledge of the Seller, threatened and no
unresolved deficiencies have been asserted or assessed against the Seller as a
result of any audit by any Taxing Authority and no such deficiency has been
proposed or threatened;
(v) There are no liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of the Seller;
(vi) The Seller is not a person other than a United States
person within the meaning of the Code;
(b) For purposes of this Section 2.13: "Return" means any return,
declaration, report, statement or other document required to be filed in
respect of any Tax. "Tax" or "Taxes" means any federal, state, local,
foreign and other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, windfall profits, customs duty or other tax, fee,
assessment or charge of any kind whatever, together with interest and any
penalty, addition to tax or additional amount with respect thereto. "Taxing
Authority" means any governmental authority responsible for the imposition of
Taxes.
2.14 Accounts Receivable. Schedule 2.14 attached hereto sets forth a
true, correct and complete list of all Accounts Receivable, including an aging
thereof as of September 30, 1996. Schedule 2.14, as updated pursuant to
Subsection 7.9 hereof, shall set forth a true, correct and complete list of the
Accounts Receivable as of the Closing Date, including an aging thereof. All
Accounts Receivable arose out of the sales or rentals of inventory or services
in the ordinary course of business and are collectible in the face value thereof
within 90 days of the date of invoice, using normal collection procedures, net
of the reserve for doubtful accounts as set forth thereon, which reserve is
adequate and was calculated in accordance with generally accepted accounting
principles consistently applied.
2.15 Books and Records. The general ledgers and books of account of
the Seller, all federal, state and local income, franchise, property and other
tax returns filed by the Seller, with respect to the Assets, and all other books
and records of the Seller are in all material respects complete and correct and
have been maintained in accordance with good business practice and in accordance
with all applicable procedures required by laws and regulations.
2.16 Contracts and Commitments.
(a) Schedule 2.16 attached hereto contains a true, complete and
correct list and description of the following contracts and agreements, whether
written or oral (collectively, the "Contracts"):
(i) all loan agreements, indentures, mortgages and
guaranties to which the Seller is a party or by which the Seller or any of its
property is bound;
(ii) all pledges, conditional sale or title retention
agreements, security agreements, equipment obligations, personal property leases
and lease purchase agreements relating to any of the Assets to which the Seller
is a party or by which the Seller or any of its property is bound;
(iii) all contracts, agreements, commitments, purchase
orders or other understandings or arrangements to which the Seller is a party or
by which the Seller or any of its property is bound which (A) involve payments
or receipts by the Seller of more than $2,000 in the case of any single
contract, agreement, commitment, understanding or arrangement under which full
performance (including payment) has not been rendered by all parties thereto or
(B) which may materially adversely affect the condition (financial or otherwise)
or the properties, assets, business or prospects of the Seller;
(iv) all collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans, deferred
compensation agreements, pension plans,
retirement plans, employee stock option or stock purchase plans and group life,
health and accident insurance and other employee benefit plans, agreements,
arrangements or commitments to which the Seller is a party or by which the
Seller or any of its property is bound;
(v) all agency, distributor, sales representative and
similar agreements to which the Seller is a party;
(vi) all contracts, agreements or other understandings or
arrangements between the Seller any stockholder or affiliate (as that term is
defined in the Securities Exchange Act of 1934, as amended (an "Affiliate")) of
the Seller;
(vii) all leases, whether operating, capital or
otherwise, under which the Seller is lessor or lessee; and
(viii) any other material agreement or contract entered
into by the Seller.
(b) Except as set forth on Schedule 2.16 attached hereto:
(i) each Contract is a valid and binding agreement of the
Seller, enforceable against the Seller in accordance with its terms, and the
Seller does not have any knowledge that any Contract is not a valid and binding
agreement of the other parties thereto;
(ii) the Seller has fulfilled all material obligations
required pursuant to the Contracts to have been performed by the Seller on
its part prior to the date hereof, and the Seller has no reason to believe
that it will not be able to fulfill, when due, all of its obligations under
the Contracts which remain to be performed after the date hereof;
(iii) the Seller is not in breach of or default under any
Contract, and no event has occurred which with the passage of time or giving
of notice or both would constitute such a default, result in a loss of rights
or result in the creation of any lien, charge or encumbrance, thereunder or
pursuant thereto;
(iv) to the knowledge of the Seller, there is no existing
breach or default by any other party to any Contract, and no event has occurred
which with the passage of time or giving of notice or both would constitute a
default by such other party, result in a loss of rights or result in the
creation of any lien, charge or encumbrance thereunder or pursuant thereto;
(v) the Seller is not restricted by any Contract from
carrying on its business anywhere in the world; and
(vi) the Seller has no written or oral Contracts to sell
products or perform services which are expected to be performed at, or to result
in, a loss.
(c) Except as set forth on Schedule 2.3 or Schedule 2.16, the
continuation, validity and effectiveness of each Contract will not be affected
by the transfer thereof to Buyer under this Agreement and all such Contracts are
assignable to Buyer without a consent.
(d) True, correct and complete copies of all Contracts have
previously been delivered by the Seller to the Buyer.
2.17 Compliance with Agreements and Laws. The Seller has all
requisite licenses, permits and certificates, including environmental, health
and safety permits, from federal, state and local authorities necessary to
conduct its business and own and operate its assets (collectively, the
"Permits"). Schedule 2.17 attached hereto sets forth a true, correct and
complete list of all such Permits, copies of which have previously been
delivered by the Seller to the Buyer. The Seller is not in violation of any
law, regulation or ordinance (including, without limitation, laws, regulations
or ordinances relating to building, zoning, environmental, disposal of hazardous
substances, land use or similar matters) relating to its properties, the
violation of which could have a material adverse effect on the Seller or its
properties. The business of the Seller does not violate, in any material
respect, any federal, state, local or foreign laws, regulations or orders
(including, but not limited to, any of the foregoing relating to employment
discrimination, occupational safety, environmental protection, hazardous waste
(as defined in the Resource Conservation and Recovery Act, as amended, and the
regulations adopted pursuant thereto), conservation, or corrupt practices, the
enforcement of which would have a material and adverse effect on the results of
operations, condition (financial or otherwise), assets, properties, business or
prospects of the Seller. Except as set forth on Schedule 2.17 attached hereto,
the Seller has not since January 1, 1993 received any notice or communication
from any federal, state or local governmental or regulatory authority or
otherwise of any such violation or noncompliance.
2.18 Employee Relations.
(a) The Seller is in compliance with all federal, state and
municipal laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours, and is not engaged in any unfair
labor practice, and there are no arrears in the payment of wages or social
security taxes.
(b) Except as set forth on Schedule 2.18 attached hereto:
(i) none of the employees of the Seller is represented by
any labor union;
(ii) there is no unfair labor practice complaint against the
Seller pending before the National Labor Relations Board or any state or local
agency;
(iii) there is no pending labor strike or other material
labor trouble affecting the Seller (including, without limitation, any
organizational drive);
(iv) there is no material labor grievance pending against
the Seller;
(v) there is no pending representation question respecting
the employees of the Seller; and
(vi) there are no pending arbitration proceedings arising
out of or under any collective bargaining agreement to which the Seller is a
party, or to the knowledge of the Seller, any basis for which a claim may be
made under any collective bargaining agreement to which the Seller is a party.
(c) For purposes of this Subsection 2.18, the term "employee"
shall be construed to include sales agents and other independent contractors who
spend a majority of their working time on the Seller's business.
2.19 Absence of Certain Changes or Events. Except as set forth on
Schedule 2.19 attached hereto, since September 30, 1996, the Seller has not
entered into any transaction which is not in the usual and ordinary course of
business, and, without limiting the generality of the foregoing, the Seller has
not:
(a) Incurred any material obligation or liability for borrowed
money;
(b) Discharged or satisfied any lien or encumbrance or paid any
obligation or liability other than current liabilities reflected in the Current
Balance Sheet;
(c) Mortgaged, pledged or subjected to lien, charge or other
encumbrance any of the Assets;
(d) Sold or purchased, assigned or transferred any of its
tangible assets or cancelled any debts or claims, except for inventory sold and
raw materials purchased in the ordinary course of business;
(e) Made any material amendment to or termination of any
Contract or done any act or omitted to do any act which would cause the breach
of any Contract;
(f) Suffered any losses, whether insured or uninsured, and
whether or not in the control of the Seller, in excess of $5,000 in the
aggregate, or waived any rights of any value;
(g) Made any changes in compensation of its officers, directors
or employees;
(h) Received notice of any litigation, warranty claim or
products liability claims; or
(i) Made any material change in the terms, status or funding
condition of any Employee Plan, as defined in Subsection 2.23 hereof.
2.20 Suppliers. Schedule 2.20 attached hereto sets forth a true,
correct and complete list of the names and addresses of the ten suppliers of the
Seller which accounted for the largest dollar volume of purchases by the Company
for the fiscal year ending December 31, 1995. None of such suppliers has
notified the Seller that it intends to discontinue its relationship with the
Seller.
2.21 Prepayments and Deposits. Schedule 2.21 attached hereto sets
forth all prepayments or deposits from customers for products to be shipped, or
services to be performed, after the Closing Date which have been received by the
Seller as of the date hereof.
2.22 Trade Names and Other Intangible Property.
(a) Schedule 2.22 attached hereto sets forth a true, correct
and complete list and, where appropriate, a description of, all Intangible
Property. True, correct and complete copies of all licenses and other
agreements relating to the Intangible Property have been previously delivered
by the Seller to the Buyer.
(b) Except as otherwise disclosed in Schedule 2.22 attached
hereto, the Seller is the sole and exclusive owner of all Intangible Property
and all designs, permits, labels and packages used on or in connection
therewith. The Intangible Property owned by the Seller is sufficient to conduct
the Seller's business as presently conducted and, when transferred to the Buyer
pursuant to this Agreement, will be sufficient to permit the Buyer to conduct
the business of the Seller as presently conducted by the Seller. The Seller has
received no notice of, and has no knowledge of any basis for, a claim against it
that any of its operations, activities, products or publications infringes on
any patent, trademark, trade name, copyright or other property right of a third
party, or that it is illegally or otherwise using the trade secrets, formulae or
any property rights of others. The Seller has no disputes with or claims
against any third party for infringement by such third party of any trade name
or other Intangible Property of the Seller. The Seller has taken all steps
reasonably
necessary to protect its right, title and interest in and to the Intangible
Property.
2.23 Employee Benefit Plans.
(a) The Seller does not now have or otherwise contribute to or
participate in, and has not in the past had or otherwise contributed to, any
employee benefit plan subject to the reporting requirements of the Employee
Retirement Income Security Act of 1974.
(b) The Buyer assumes no liabilities with respect to any
employee benefit plan which liability relates to any period prior to the Closing
Date, including, without limitation, any taxes, accrued vacation or sick pay
(whether or not vested), accrued vacation, sick and personal leaves, employee
policies, employee benefit claims or liability to the Pension Benefit Guaranty
Corporation.
(c) Schedule 2.23 attached hereto contains a true, correct and
complete list of all pension, benefit, profit sharing, retirement, deferred
compensation, welfare, insurance, disability, bonus, vacation pay, severance pay
and other similar plans, programs and agreements, whether reduced to writing or
not, relating to the Seller's employees, or maintained at any time since
January 1, 1991 by the Seller or by any other member of any controlled group of
corporations, group of trades or businesses under common control, or affiliated
service group (as defined for purposes of Section 414(b), (c) and (m),
respectively, of the Internal Revenue Code of 1986, as amended (the "Code"))
(the "Employee Plans") and, except as set forth on Schedule 2.23 attached
hereto, the Seller has no obligations, contingent or otherwise, past or present,
under applicable law or the terms of any Employee Plan.
2.24 Regulatory Approvals. All consents, approvals, authorizations
and other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Seller and which are necessary for the execution
and delivery by the Seller of this Agreement and the documents to be executed
and delivered by the Seller in connection herewith are set forth on
Schedule 2.24 attached hereto and have been, or will be prior to the Closing
Date, obtained and satisfied.
2.25 Indebtedness to and from Officers, Directors and Shareholders.
Except as set forth on Schedule 2.25 attached hereto, the Seller is not
indebted, directly or indirectly, to any person who is an officer, director or
shareholder of the Seller or any affiliate of any such person in any amount
whatsoever other than for salaries for services rendered or reimbursable
business expenses, all of which have been reflected on the Current Balance
Sheet, and no such officer, director, shareholder or affiliate is indebted to
the Seller, except for advances made to employees of
the Seller in the ordinary course of business to meet reimbursable business
expenses anticipated to be incurred by such obligor.
2.26 Powers of Attorney and Suretyships. Except as set forth on
Schedule 2.26 attached hereto, the Seller has no general or special powers of
attorney outstanding (whether as grantor or grantee thereof) and has no
obligation or liability (whether actual, accrued, accruing, contingent or
otherwise) as guarantor, surety, co-▇▇▇▇▇▇, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any person, corporation, partnership,
joint venture, association, organization or other entity, except as endorser or
maker of checks or letters of credit, respectively, endorsed or made in the
ordinary course of business.
2.27 Disclosure. No representation or warranty by the Seller in this
Agreement or in any Exhibit hereto, or in any list, statement, document or
information set forth in or attached to any Schedule delivered or to be
delivered pursuant to this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit any material fact necessary
in order to make the statements contained therein not misleading. The Seller
has disclosed to the Buyer all material facts pertaining to the transactions
contemplated by this Agreement.
3. Representations of the Buyer. The Buyer represents and warrants to
the Seller as follows:
3.1 Organization and Authority. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware, and has requisite corporate power and authority to own its properties
and to carry on its business as now being conducted. The Buyer has full power
to execute and deliver this Agreement and the Instrument of Assumption of
Liabilities and to consummate the transactions contemplated hereby and thereby.
Copies of the Certificate of Incorporation and the Bylaws of the Buyer, as
amended to date, have been previously delivered to the Seller, are complete and
correct, and no amendments have been made thereto or have been authorized since
the date thereof. The Buyer is qualified to transact business, and in good
standing, in the State of New Jersey and the Commonwealth of Pennsylvania.
3.2 Capitalization of the Buyer. On the date hereof, the Buyer's
authorized capital stock consists of 35,000,000 shares of Common Stock, $.01 par
value ("Common Stock"), and 2,000,000 shares of Preferred Stock, $.01 par value
per share, none of which shares of Preferred Stock are issued or outstanding.
All of the outstanding shares of capital stock of the Buyer have been and on the
Closing Date will be duly and validly issued and are, or will be, fully paid and
nonassessable.
3.3 Authorization. The execution and delivery of this Agreement by
the Buyer, and the agreements provided for herein, and the consummation by the
Buyer of all transactions contemplated
hereby, have been duly authorized by all requisite corporate action. This
Agreement and all such other agreements and written obligations entered into and
undertaken in connection with the transactions contemplated hereby constitute
the valid and legally binding obligations of the Buyer, enforceable against the
Buyer in accordance with their respective terms. The execution, delivery and
performance of this Agreement and the agreements provided for herein, and the
consummation by the Buyer of the transactions contemplated hereby and thereby,
will not, with or without the giving of notice or the passage of time or both,
(a) violate the provisions of any law, rule or regulation applicable to the
Buyer; (b) violate the provisions of the Buyer's Certificate of Incorporation or
Bylaws; (c) violate any judgment, decree, order or award of any court,
governmental body or arbitrator; or (d) conflict with or result in the breach or
termination of any term or provision of, or constitute a default under, or cause
any acceleration under, or cause the creation of any lien, charge or encumbrance
upon the properties or assets of the Buyer pursuant to, any indenture, mortgage,
deed of trust or other agreement or instrument to which it or its properties is
a party or by which the Buyer is or may be bound.
3.4 Regulatory Approvals. All consents, approvals, authorizations
and other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Buyer and which are necessary for the consummation
of the transactions contemplated by this Agreement have been, or will be prior
to the Closing Date, obtained and satisfied.
3.5 Disclosure. No representation or warranty by the Buyer in this
Agreement or in any Exhibit hereto, or in any list, statement, document or
information set forth in or attached to any Schedule delivered or to be
delivered pursuant hereto, contains or will contain any untrue statement of a
material fact or omits or will omit any material fact necessary in order to make
the statements contained therein not misleading.
4. Access to Information; Public Announcements
4.1 Access to Management, Properties and Records.
(a) Except to the extent prohibited by law, from the date of
this Agreement until the Closing Date, the Seller shall afford the officers,
attorneys, accountants and other authorized representatives of the Buyer free
and full access upon reasonable notice and during normal business hours to
all management personnel, offices, properties, books and records of the
Seller, so that the Buyer may have full opportunity to make such
investigation as it shall desire to make of the management, business,
properties and affairs of the Seller, and the Buyer shall be permitted to
make abstracts from, or copies of, all such books and records, including
without limitation, correspondence, manuals, customer lists, employment
records, studies, reports or summaries relating to or arising out of the
business of the Seller. Except to the extent
prohibited by law, the Seller shall furnish to the
Buyer such financial and operating data and other information as to the Assets
and the business of the Seller as the Buyer shall reasonably request.
Notwithstanding the foregoing, the Seller is engaged in certain litigation
matters, all of which are described in Seller's Annual Report on Form 10-K for
its fiscal year ended December 31, 1995 and its Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996 (copies of which reports have been
provided to the Buyer, and are hereinafter referred to as the "Applicable Public
Reports"). The Seller believes, in good faith, that much of its information
(and associated documentation relating thereto) relating to such litigation is
attorney-client privileged. Buyer agrees that it need not be provided with
access to such privileged information, which agreement is based on Seller's (i)
representation and warranty to Buyer that such litigation matters are reasonably
completely and accurately described in the Applicable Public Reports, (ii)
representation to Buyer that access to such information by Buyer would
jeopardize Seller's attorney-client privilege with respect to such information,
and (iii) agreement to indemnify and hold harmless Buyer in respect of any
damages, costs, claims or liability arising from such litigation.
(b) If the Buyer, at its option and expense, prior to the
Closing Date, elects to have a report or reports prepared by an engineer or
other professional selected by the Buyer, certifying that the real property
associated with the Assets (i) complies with all applicable federal, state and
local environmental and wetlands laws, rules and regulations and that there is
not now, and never has been, manufacture, storage, or disposal of hazardous
wastes at the real estate in violation of said laws, rules and regulations,
(ii) complies with all applicable building, health and fire codes, and
subdivision control laws, rules and regulations, the Seller shall cooperate with
such engineer or professional to the extent necessary to prepare such reports,
including, without limitation, providing such engineer or professional access to
such real property and necessary records, and arranging interviews with
employees of the Seller.
(c) If reasonably requested by the Buyer, the Seller shall
authorize the release to the Buyer of all files pertaining to the Seller, the
Assets or the business or operations of the Seller held by any federal, state,
county or local authorities, agencies or instrumentalities.
4.2 Confidentiality. All information not previously disclosed to the
public or generally known to persons engaged in the respective businesses of the
Seller or the Buyer which shall have been furnished by the Buyer or the Seller
to the other party in connection with the transactions contemplated hereby or as
provided pursuant to this Section 4 shall not be disclosed to any person other
than their respective employees, directors, attorneys, accountants or financial
advisors or other than as contemplated
herein. In the event that the transactions contemplated by this Agreement shall
not be consummated, all such information which shall be in writing shall be
returned to the party furnishing the same, including, to the extent reasonably
practicable, all copies or reproductions thereof which may have been prepared,
and neither party shall at any time thereafter disclose to third parties, or
use, directly or indirectly, for its own benefit, any such information, written
or oral, about the business of the other party hereto. Notwithstanding the
above, (a) the Buyer may include in any Registration Statement or periodic
report filed by it with the Securities and Exchange Commission or any state
securities commission or any stock market and (b) otherwise disclose, to the
extent reasonably advised to do so by counsel, any information regarding the
Seller, the business of the Seller, the financial condition of the Seller and/or
the terms of this Agreement.
4.3 Public Announcements. The Seller agrees that prior to the
Closing Date, except as otherwise required by law, any and all public
announcements or other public communications concerning this Agreement and the
purchase of the Assets by the Buyer shall be subject to the approval of the
Buyer, which approval Buyer agrees shall not be unreasonably withheld.
5. Pre-Closing Covenants of the Seller
From and after the date hereof and until the Closing Date:
5.1 Conduct of Business. The Seller shall carry on its business
diligently and substantially in the same manner as heretofore and shall not make
or institute any unusual or new methods of purchase, sale, shipment or delivery,
lease, management, accounting or operation, except as agreed to in writing by
the Buyer. All of the property of the Seller shall be used, operated, repaired
and maintained in a normal business manner consistent with past practice.
5.2 Absence of Material Changes. Without the prior written consent
of the Buyer (which consent shall not be unreasonably withheld), the Seller
shall not:
(a) Except to the extent described in Seller's Proxy Statement
dated November 20, 1996 (with respect to Seller's annual meeting of shareholders
(the "November Proxy Statement")), take any action to amend its charter or
Bylaws;
(b) Issue any stock, bonds or other corporate securities or
grant any option or issue any warrant to purchase or subscribe to any of such
securities or issue any securities convertible into such securities, except (1)
upon exercise of currently outstanding options or warrants or other rights to
acquire stock in the Seller; (2) upon conversion of currently outstanding
convertible securities; or (3) for issuance of options to purchase 400,000
shares of Seller's Common Stock to persons who
are elected to Seller's Board of Directors, as described in the November Proxy
Statement;
(c) Incur any obligation or liability (absolute or contingent),
except current liabilities incurred and obligations under contracts entered into
in the ordinary course of business;
(d) Declare or make any payment or distribution to its
shareholders with respect to their stock or purchase or redeem any shares of its
capital stock;
(e) Mortgage, pledge, or subject to any lien, charge or any
other encumbrance any of the Assets;
(f) Sell, assign, or transfer any of the Assets, except for
inventory sold in the ordinary course of business, at a normal profit margin,
and for not less than replacement cost;
(g) Except as described in Schedule 5.2(g), cancel any debts or
claims, except in the ordinary course of business;
(h) Merge or consolidate with or into any corporation or other
entity;
(i) Make, accrue or become liable for any bonus, profit sharing
or incentive payment, except for accruals under existing plans, if any, or
increase the rate of compensation payable or to become payable by it to any of
its officers, directors or employees;
(j) Make any election or give any consent under the Code or the
tax statutes of any state or other jurisdiction or make any termination,
revocation or cancellation of any such election or any consent or compromise or
settle any claim for past or present tax due;
(k) Modify, amend, alter or terminate any of its executory
contracts of a material value or which are material in amount;
(l) Take or permit any act or omission constituting a material
breach or default under any contract, indenture or agreement by which it or its
properties are bound;
(m) Fail to (i) preserve the possession and control of its
assets and business, (ii) keep in faithful service its present officers and key
employees, (iii) preserve the goodwill of its customers, suppliers, agents,
brokers and others having business relations with it, and (iv) keep and preserve
its business existing on the date hereof until after the Closing Date;
(n) Fail to operate its business and maintain its books,
accounts and records in the customary manner and in the
ordinary or regular course of business and maintain in good repair its business
premises, fixtures, furniture and equipment;
(o) Enter into any leases, contracts, agreements or
understandings other than those entered into in the ordinary course of business
calling for payments which in the aggregate do not exceed $5,000 for each such
lease, contract, agreement or understanding;
(p) Engage any employee for a salary in excess of $10,000 per
annum (except to replace an existing employee at a salary not in excess of such
existing employee's then current salary);
(q) Materially alter the terms, status or funding condition of
any Employee Plan;
(r) Make any loans to any person or entity; or
(s) Commit or agree to do any of the foregoing in the future
prior to the Closing Date (provided any such commitment with respect to periods
after the Closing Date may not prohibit or contradict performance by the Seller
of its obligations under this Agreement, or otherwise impair or impede the
Seller's ability to perform any of its obligations hereunder).
5.3 Taxes. The Seller will, on a timely basis, file all tax returns
for and pay any and all taxes which shall become due or shall have accrued (a)
on account of the operation of the business of the Seller or the ownership of
the Assets on or prior to the Closing Date or (b) on account of the sale of the
Assets (including a pro-rata portion of all personal property and excise taxes
payable with respect to the Assets by the Seller).
5.4 Delivery of Financial Statements and Payroll Information. The
Seller will deliver the Internal Financial Statements and the Comparative
Financial Statements, at the times and in accordance with the provisions of
Section 2.5. On or before December 31, 1996, Seller shall provide to the Buyer,
the Seller's W-2 payroll information for all of Seller's employees, for the
12-month period ending on December 31, 1995, and such information shall be true,
complete and correct in all material respects. On or before January 31, 1997,
Seller shall provide to the Buyer, on computer diskette, the Seller's W-2
payroll information for all of Seller's employees, for the 12-month period
ending on December 31, 1996, and the information contained thereon shall be
true, complete and correct in all material respects.
5.5 Compliance with Laws. The Seller will comply with all laws and
regulations which are applicable to it, its ownership of the Assets or to the
conduct of its business and will perform and comply with all contracts,
commitments and obligations by which it is bound.
5.6 Continued Truth of Representations and Warranties of the Seller.
The Seller will not take any actions which would result in any of the
representations or warranties set forth in Section 2 hereof being untrue.
5.7 Continuing Obligation to Inform. From time to time prior to the
Closing, the Seller will deliver or cause to be delivered to the Buyer
supplemental information concerning events subsequent to the date hereof which
would render any statement, representation or warranty in this Agreement or any
information contained in any Schedule inaccurate or incomplete in any material
respect at any time after the date hereof until the Closing Date.
5.8 Exclusive Dealing. The Seller will not, directly or indirectly,
through any officer, director, agent or otherwise, (a) solicit, initiate or
encourage submission of proposals or offers from any person relating to any
acquisition or purchase of all or a material portion of the Assets, or any
equity interest in, the Seller or any equity investment, merger, consolidation
or business combination with the Seller, or (b) subject to the exercise by the
Seller's Directors' of their fiduciary duties (as advised in writing by counsel)
participate in any discussions or negotiations regarding, or furnish to any
other person, any non-public information with respect to, or otherwise cooperate
in any way with, or assist or participate in, facilitate or encourage, any
effort or attempt by any other person to do or seek any of the foregoing. The
Seller shall promptly notify the Buyer if any such proposal or offer, or any
inquiry or contact with any person with respect thereto, is made.
Nothing herein shall prohibit or prevent the Seller from soliciting,
initiating or encouraging proposals with respect to transactions to be
consummated after the Closing of the transactions contemplated by this
Agreement, provided that (1) none of such proposals or transactions may relate
to the Assets, the Seller's retail video business or the transactions
contemplated by this Agreement and (2) none or such proposals or transactions
with respect to periods after the Closing may prohibit or contradict performance
by the Seller of its obligations under this Agreement, or otherwise impair or
impede the Seller's ability to perform any of its obligations hereunder.
5.9 No Publicity. Except as required by applicable laws, the Seller
shall make no public announcement with respect to this Agreement or the
transactions contemplated hereby without the express prior written consent of
the Buyer. The Seller shall hold in confidence, and use its best efforts to
have all of its officers, directors and personnel hold in confidence, the terms
of this Agreement and the transactions contemplated hereby. If the Seller
believes that disclosure is required by applicable laws, it shall promptly so
notify the Buyer, which notice shall include a draft of the proposed disclosure,
and the Seller shall work in good faith with Buyer to agree upon the disclosure
to be made by Seller.
5.10 Approval of Shareholders. Seller shall promptly prepare (and
submit to its shareholders) a Proxy Statement and such other documentation as
may be necessary to submit, on or before the Closing Date, the approval of the
transactions contemplated hereby to Seller's shareholders, which Proxy Statement
shall be in form and substance reasonably acceptable to the Buyer. Without
limiting the foregoing, Seller shall recommend that its shareholders approve the
transaction contemplated hereby (subject to the last paragraph of Section 5.11
below) and otherwise use its best efforts to obtain the approval of the Seller's
shareholders of the transactions contemplated hereby.
5.11 Breakup Fee. The Seller shall pay to the Buyer the sum of
$100,000, which the parties agree to be equal to the reasonable fees and
expenses incurred by the Buyer in connection with the consummation of the
transactions contemplated hereby:
(a) If Seller's shareholders for any reason fail to approve the
consummation of the transactions contemplated hereby on or before the
Closing Date; or
(b) the Seller's Directors, whether or not in the exercise of their
fiduciary or other legal duties, on or before the Closing Date, shall have
failed to approve or recommend, or shall have withdrawn or adversely
modified or taken a public position materially inconsistent with its
approval or recommendation of, this Agreement or the terms hereof.
Nothing contained in this Section 5.11 shall relieve the Seller of its
obligation (subject to the exercise by the Seller's Directors' of their
fiduciary duties, as advised in writing by counsel) to recommend that the
Seller's stockholders accept and approve the transactions contemplated by this
Agreement. The provisions contained in this Section 5.11 shall survive any
termination of this Agreement.
6. Satisfaction of Conditions; Liquidated Damages.
6.1 Satisfaction of Conditions. The Seller and the Buyer covenant
and agree to use their commercially reasonable efforts to obtain the
satisfaction of the conditions specified in this Agreement.
6.2 Liquidated Damages.
(a) The parties hereto agree that the harm suffered by the Buyer
as a result of a breach of this Agreement by the Seller and the failure by the
Seller to consummate the transactions contemplated hereby is difficult to
accurately estimate. The parties agree, based on all present circumstances,
that $100,000 represents a reasonable estimate of the damages, excluding lost
opportunity costs, which would be suffered by the Buyer upon a failure to close
due to a breach of the Seller.
(b) If Seller (i) willfully or intentionally breaches any
representation, warranty or covenant under this Agreement, willfully or
intentionally fails to perform any condition or obligation required to be
performed hereunder, or willfully or intentionally fails to disclose a material
fact pertaining to the Assets or the transactions contemplated by this Agreement
to the Buyer; or (ii) either elects not to sell the Assets to the Buyer pursuant
to the terms of this Agreement, sells or otherwise transfers the Assets or
enters into an agreement (in principle or otherwise) with any other person or
entity to sell any shares of the capital stock of Seller, to merge with or into,
or consolidate Seller with any person or entity other than the Buyer, to sell
more than 10% of the Assets to any other person or entity or to effect any other
transaction with any other person or entity that would preclude or otherwise
frustrate the transfer of the Assets to the Buyer (a "Willful Breach"), the
Seller will pay to the Buyer the sum of $100,000, as liquidated damages, and
Seller will pay the Buyer the additional sum of $100,000, which the parties
agree would be a reasonable estimate of Buyer's lost opportunity cost. The
remedy set forth in this paragraph (b) shall be available to the Buyer only in
the event that the transactions contemplated hereby are not consummated on or
before the Closing Date.
The provisions of this Section 6.2 shall not be applicable (and the Seller
shall not be obligated to pay any amount under this Section 6.2 to Buyer) in the
event that the Seller pays to the Buyer the break-up fee described in Section
5.11.
7. Conditions to Obligations of the Buyer
The obligations of the Buyer under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of the Buyer:
7.1 Continued Truth of Representations and Warranties of the Seller;
Compliance with Covenants and Obligations. The representations and warranties
of the Seller shall be true on and as of the Closing Date as though such
representations and warranties were made on and as of such date, except for any
changes permitted by the terms hereof or consented to in writing by the Buyer.
The Seller shall have performed and complied with all terms, conditions,
covenants, obligations, agreements and restrictions required by this Agreement
to be performed or complied with by it prior to or at the Closing Date.
7.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Seller to authorize or carry out this
Agreement and to convey, assign, transfer and deliver the Assets shall have been
taken. Without limiting the foregoing, the Seller's shareholders shall have
approved the transactions contemplated by this Agreement.
7.3 Governmental Approvals. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Seller of the transactions contemplated by this
Agreement and the operation of the Seller's business by the Buyer shall have
consented to, authorized, permitted or approved such transactions.
7.4 Consents of Lenders, Lessors and Other Third Parties. The Seller
shall have received all requisite consents and approvals of all lenders,
lessors and other third parties whose consent or approval is required in order
for the Seller to consummate the transactions contemplated by this Agreement,
including, without limitation, those set forth on Schedule 2.3 attached hereto.
7.5 Adverse Proceedings. No action or proceeding by or before any
court or other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which might affect
the right of the Buyer to own or use the Assets after the Closing.
7.6 Opinion of Counsel. The Buyer shall have received an opinion of
▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to the Seller, dated as of the Closing Date, in
substantially the form attached hereto as Exhibit C. Such opinion may rely on
legal opinions of other counsel, including Semmes, ▇▇▇▇▇ & ▇▇▇▇▇▇.
7.7 Board of Directors and Shareholder Approval. The Board of
Directors and shareholders of the Seller shall have duly authorized the
transactions contemplated by this Agreement.
7.8 The Assets. Except for the Permitted Encumbrances, at the
Closing the Buyer shall receive good, clear, record and marketable title to the
Assets, free and clear of all liens, liabilities, security interests and
encumbrances of any nature whatsoever.
7.9 Update. The Seller shall have provided the Buyer with a true,
correct and complete list and amount, as of the Closing Date, of:
(a) the Inventory;
(b) the Fixed Assets;
(c) the Accounts Receivable, including an aging thereof; and
(d) the trade accounts payable and accrued liabilities assumed
pursuant to Subsection 1.4(a)(i) and (ii) hereof.
7.10 Cash on Hand at Stores. On the Closing Date, the Seller will
have cash on hand, at each Store, of $600, which cash will be transferred to the
Buyer pursuant to the terms of this Agreement.
7.11 Payables. On the Closing Date, the Seller will have used its
best efforts to satisfy all obligations to suppliers and vendors of goods and
services and other trade creditors which are past due in accordance with their
terms and to cause the Seller to have no such obligations to suppliers, vendors
and trade creditors outstanding for more than 60 days as of the Closing. In the
event that the Seller is unable to satisfy all such obligations to suppliers,
vendors and trade creditors as contemplated by the preceding sentence, the Buyer
shall be permitted, without Seller's approval, to apply all or any of the Base
Purchase Price to any and all of the liabilities of Seller to the extent
necessary to enable Seller to satisfy all such obligations to suppliers, vendors
and trade creditors.
7.12 Tax Lien Waivers. On or prior to the Closing Date, the Seller
shall have obtained and delivered to the Buyer tax lien waivers from all
jurisdictions in which Assets are located and which provide such tax lien
waivers.
7.13 Closing of Offering. The Buyer shall have consummated the
Offering.
7.14 Closing Deliveries. The Buyer shall have received at or prior to
the Closing each of the following documents:
(a) a ▇▇▇▇ of sale substantially in the form attached hereto as
Exhibit D;
(b) such instruments of conveyance, assignment and transfer, in
form and substance satisfactory to the Buyer, as shall be appropriate to
convey, transfer and assign to, and to vest in, the Buyer, good, clear, record
and marketable title to the Assets;
(c) such contracts, files and other data and documents
pertaining to the Assets or the Seller's business as the Buyer may reasonably
request;
(d) copies of the general ledgers and books of account of the
Seller, and all federal, state and local income, franchise, property and other
tax returns filed by the Seller with respect to the Assets since January 1,
1990;
(e) such certificates of the Seller's officers and such other
documents evidencing satisfaction of the conditions specified in Section 7 as
the Buyer shall reasonably request;
(f) a certificate of the Secretary of State of the State of
Delaware as to the legal existence and good standing
(including tax) of the Seller in Delaware and a certificate of the Secretary of
State of each other state or jurisdiction in which the Assets are located, as to
Seller's qualification to do business in such jurisdiction;
(g) certificates of the Chairman of the Board of Directors of
the Seller attesting to the incumbency of the Seller's officers, respectively,
the authenticity of the resolutions authorizing the transactions contemplated by
the Agreement, and the authenticity and continuing validity of the charter
documents delivered pursuant to Subsection 2.1;
(h) estoppel certificates from each lessor from whom the Seller
leases real or personal property consenting to the assumption of such lease by
the Buyer and representing that there are no outstanding claims against the
Seller under any such lease;
(i) the schedules listed in Subsection 7.9;
(j) the Escrow Agreement; and
(k) such other documents, instruments or certificates as the
Buyer may reasonably request.
8. Conditions to Obligations of the Seller
The obligations of the Seller under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each of
which may be waived in writing at the sole discretion of the Seller:
8.1 Continued Truth of Representations and Warranties of the Buyer;
Compliance with Covenants and Obligations. The representations and warranties
of the Buyer in this Agreement shall be true on and as of the Closing Date as
though such representations and warranties were made on and as of such date,
except for any changes consented to in writing by the Seller. The Buyer shall
have performed and complied with all terms, conditions, obligations, agreements
and restrictions required by this Agreement to be performed or complied with by
it prior to or at the Closing Date.
8.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Buyer to authorize or carry out this
Agreement shall have been taken.
8.3 Governmental Approvals. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Buyer of the transactions contemplated by this Agreement
shall have consented to, authorized, permitted or approved such transactions.
8.4 Consents of Lenders, Lessors and Other Third Parties. The Buyer
shall have received all requisite consents and approvals of all lenders, lessors
and other third parties whose consent or approval is required in order for the
Buyer to consummate the transactions contemplated by this Agreement.
8.5 Adverse Proceedings. No action or proceeding by or before any
court or other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which might affect
the right of the Seller to transfer the Assets.
8.6 Opinion of Counsel. The Seller shall have received an opinion of
▇▇▇▇ and ▇▇▇▇, counsel to the Buyer, dated as of the Closing Date, in
substantially the form attached hereto as Exhibit E, and as to such other
matters as may be reasonably requested by the Seller or its counsel.
8.7 Closing Deliveries. The Seller shall have received at or prior
to the Closing each of the following documents:
(a) such certificates of the Buyer's officers and such other
documents evidencing satisfaction of the conditions specified in this Section 8
as the Seller shall reasonably request;
(b) a certificate of the Secretary of State of the State of
Delaware as to the legal existence and good standing (including tax) of the
Buyer in Delaware;
(c) a certificate of the Secretary of the Buyer attesting to the
incumbency of the Buyer's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the charter documents delivered pursuant
to Subsection 3.1;
(d) Instrument of Assumption of Liabilities executed by the
Buyer and accepted by the Seller;
(e) payment of the Base Purchase Price;
(f) the Escrow Agreement; and
(g) such other documents, instruments or certificates as the
Seller may reasonably request.
9. Indemnification
9.1 By the Buyer and the Seller. The Buyer on the one hand and the
Seller, on the other hand, each hereby indemnifies and holds harmless the other
against all claims, damages, losses, liabilities, costs and expenses (including,
without limitation, settlement costs and any legal, accounting or other expenses
for
investigating or defending any actions or threatened actions) reasonably
incurred by the Buyer or the Seller in connection with each and all of the
following:
(a) Any breach by the indemnifying party of any representation
or warranty in this Agreement;
(b) Any breach of any covenant, agreement or obligation of the
indemnifying party contained in this Agreement or any other agreement,
instrument or document contemplated by this Agreement; and
(c) Any misrepresentation contained in any statement,
certificate or schedule furnished by the indemnifying party pursuant to this
Agreement or in connection with the transactions contemplated by this Agreement;
provided that, the Buyer shall not be entitled to any indemnification in
connection with any of the foregoing, except with respect to claims by third
parties, if the Buyer receives the breakup fee pursuant to Section 5.11 or if
Buyer receives liquidated damages pursuant to Section 6, and in either of such
cases, the Closing does not occur.
9.2 By the Seller. The Seller further agrees to indemnify and hold
harmless the Buyer from any and all claims, damages, losses, liabilities, costs
and expenses (including, without limitation, settlement costs and any legal,
accounting or other expenses for investigating or defending any actions or
threatened actions) reasonably incurred by the Buyer, in connection with each
and all of the following:
(a) Any claims against, or liabilities or obligations of, the
Seller or against the Assets (x) relating to periods prior to the Closing Date
(y) or, if relating to periods after the Closing Date, not specifically assumed
by the Buyer pursuant this Agreement;
(b) The failure of the Buyer to obtain the protections afforded
by compliance with the notification and other requirements of the bulk sales
laws in force in the jurisdictions in which such laws may be applicable to
either the Seller or the transactions contemplated by this Agreement;
(c) Any violation by the Seller of, or any failure by the Seller
to comply with, any law, ruling, order, decree, regulation or zoning,
environmental or permit requirement applicable to the Seller, the Assets or its
business, whether or not any such violation or failure to comply has been
disclosed to the Buyer, including any costs incurred by the Buyer (i) in order
to bring the Assets into compliance with environmental laws as a consequence of
noncompliance with such laws on the Closing Date or (ii) in connection with the
transfer of the Assets;
(d) Any warranty claim or product liability claim relating to
the Seller's business or operations prior to the Closing Date;
(e) Any tax liabilities or obligations of the Seller;
(f) Any claims against, or liabilities or obligations of, the
Seller with respect to obligations under Seller's Employee Plans; and
(g) The litigation matters referenced in Section 4.1(a) of this
Agreement.
9.3 Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder the party seeking indemnification (the "Indemnified
Party"), shall promptly notify the party from whom indemnification is sought
(the "Indemnifying Party") of the claim and, when known, the facts constituting
the basis for such claim. In the event of any such claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third-party, the notice to the Indemnifying Party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld,
unless suit shall have been instituted against it and the Indemnifying Party
shall not have taken control of such suit after notification thereof as provided
in Subsection 9.4 of this Agreement.
9.4 Defense by Indemnifying Party. In connection with any claim
giving rise to indemnity hereunder resulting from or arising out of any claim or
legal proceeding by a person who is not a party to this Agreement, the
Indemnifying Party at its sole cost and expense may, upon written notice to the
Indemnified Party, assume the defense of any such claim or legal proceeding if
it acknowledges to the Indemnified Party in writing its obligations to indemnify
the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim or litigation
resulting therefrom within 30 days after the date such claim is made, (a) the
Indemnified Party may defend against such claim or litigation, in such manner as
it may deem appropriate, including, but not limited to, settling such claim or
litigation, after giving notice of the same to the Indemnifying Party, on such
terms as the Indemnified Party may deem appropriate, and (b) the Indemnifying
Party shall be entitled to participate in (but not control) the defense of such
action, with its counsel and at its own expense. The Indemnifying Party may not
thereafter question the manner in which the
Indemnified Party defended such third party claim or the amount or nature of any
such settlement.
9.5 Payment of Indemnification Obligation. All indemnification by
the Buyer or the Seller hereunder shall be effected by payment of cash or
delivery of a cashier's or certified check in the amount of the indemnification
liability.
9.6 Survival of Representations; Claims for Indemnification. All
representations and warranties made by the parties herein or in any
instrument or document furnished in connection herewith shall survive the
Closing and any investigation at any time made by or on behalf of the parties
hereto. All such representations and warranties shall expire on the second
anniversary of the Closing Date, except for claims, if any, asserted in
writing prior to such second anniversary, which shall survive until finally
resolved and satisfied in full. All claims and actions for indemnity
pursuant to this Section 9 for breach of any representation or warranty shall
be asserted or maintained in writing by a party hereto on or prior to the
expiration of such two-year period. Notwithstanding the above, claims
resulting from the failure by the Seller to pay any tax when due shall expire
one year after any applicable statute of limitations.
10. Post-Closing Agreements
The Seller agrees that from and after the Closing Date:
10.1 Proprietary Information.
(a) Except as required by law, the Seller shall hold in
confidence, and use its best efforts to have all of its officers, directors and
personnel hold in confidence, all knowledge and information of a secret or
confidential nature with respect to the business of the Seller and shall not
disclose, publish or make use of the same without the consent of the Buyer,
except to the extent that such information shall have become public knowledge
other than by breach of this Agreement by the Seller. The covenant contained in
this Section 10.1(a) shall not apply to any business of the Seller unrelated to
the Assets, as such unrelated business may be conducted after the consummation
of the transactions contemplated by this Agreement.
(b) The Seller agrees that the remedy at law for any breach of
this Subsection 10.1 would be inadequate and that the Buyer shall be entitled to
injunctive relief in addition to any other remedy it may have upon breach of any
provision of this Subsection 10.1.
10.2 No Solicitation or Hiring of Former Employees. Except as
provided by law, for a period of five years after the Closing Date, neither the
Seller nor any of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(individually, a "Principal" and collectively, the "Principals") shall solicit
any person who was an
employee of the Seller on the Closing Date to terminate his employment with the
Buyer or to become an employee of the Seller or hire any person who was such an
employee on the date hereof or on the Closing Date.
10.3 Non-Competition Agreement.
(a) For a period of five years after the Closing Date, neither
the Seller nor any Principal shall, in any location which is within a three-mile
radius of any retail video store owned, operated or franchised by the Buyer
during such five-year period (including the Stores): (i) market, rent or sell
any product which has the same or substantially the same form, function and
primary application as any existing or proposed product marketed, rented or sold
by the Seller on or prior to the Closing Date or (ii) engage in any business
competitive with the business of the Seller as conducted on the date hereof or
on the Closing Date, in the United States or any other country in which the
Buyer conducted its business during the two years prior to the Closing Date.
(b) The parties hereto agree that the duration and geographic
scope of the non-competition provision set forth in this Subsection 10.3 are
reasonable. In the event that any court determines that the duration or the
geographic scope, or both, are unreasonable and that such provision is to that
extent unenforceable, the parties hereto agree that the provision shall remain
in full force and effect for the greatest time period and in the greatest area
that would not render it unenforceable. The parties intend that this
non-competition provision shall be deemed to be a series of separate covenants,
one for each and every county of each and every state of the United States of
America and each and every political subdivision of each and every country
outside the United States of America where this provision is intended to be
effective. The Seller agrees that damages are an inadequate remedy for any
breach of this provision and that the Buyer shall, whether or not it is pursuing
any potential remedies at law, be entitled to equitable relief in the form of
preliminary and permanent injunctions without bond or other security upon any
actual or threatened breach of this non-competition provision.
10.4 Sharing of Data.
(a) The Seller shall have the right for a period of three years
following the Closing Date to have reasonable access to such books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other similar information as are transferred to
the Buyer pursuant to the terms of this Agreement for the limited purposes of
concluding its involvement in the business of the Seller prior to the Closing
Date and in connection with any litigation matters unrelated to the transactions
contemplated by this Agreement to which the Seller is a party (including without
limitation, the litigation matters referenced in Section 4.1(a)), and for
complying with its obligations under applicable securities, tax,
environmental, employment or other laws and regulations. The Buyer shall
have the right for a period of three years following the Closing Date to have
reasonable access to those books, records and accounts, including financial
and tax information, correspondence, employment records and other records
which are retained by the Seller pursuant to the terms of this Agreement to
the extent that any of the foregoing relates to the business of the Seller
transferred to the Buyer hereunder or is otherwise needed by the Buyer in
order to comply with its obligations under applicable securities, tax,
environmental, employment or other laws and regulations.
(b) The Seller and the Buyer agree that from and after the
Closing Date they shall cooperate fully with each other to facilitate the
transfer of the Assets from the Seller to the Buyer and the operation thereof by
the Buyer.
10.5 Use of Name. Without Buyer's prior written consent, the Seller
and each of the Principals agrees not to use the name "Choices Entertainment",
"Choices" or any derivation thereof after the Closing Date in connection with
any business related to, competitive with, or an outgrowth of, the business
conducted by the Seller on the date hereof. The Seller hereby grants to the
Buyer, effective upon the Closing Date, a fully-paid, nonexclusive, perpetual
license to use the names "Choices" and "Choices Entertainment" and any
derivation thereof (and to use any associated trademarks (including Seller's
registered trademark "Choices"), logos, images or names used by Seller in the
conduct of its retail video business on or before the Closing Date).
10.6 Cooperation in Litigation. Each party hereto will fully
cooperate with the other in the defense or prosecution of any litigation or
proceeding already instituted or which may be instituted hereafter against or by
such party relating to or arising out of the conduct of the business of the
Seller prior to or after the Closing Date (other than litigation arising out the
transactions contemplated by this Agreement). The party requesting such
cooperation shall pay the out-of-pocket expenses (including reasonable legal
fees and disbursements) of the party providing such cooperation and of its
officers, directors, employees and agents reasonably incurred in connection with
providing such cooperation, but shall not be responsible to reimburse the party
providing such cooperation for such party's time spent in such cooperation or
the salaries or costs of fringe benefits or similar expenses paid by the party
providing such cooperation to its officers, directors, employees and agents
while assisting in the defense or prosecution of any such litigation or
proceeding.
11. Termination of Agreement
11.1 Termination by Lapse of Time. This Agreement shall terminate at
5:00 p.m., Boston time, on the Termination Date, if the transactions
contemplated hereby have not been consummated,
unless such date is extended by the written consent of all of the parties
hereto.
11.2 Termination by Agreement of the Parties. This Agreement may be
terminated by the mutual written agreement of the parties hereto. Except as
provided in Section 1.10, Section 5.11 or Section 6.2, if applicable, in the
event of such termination by agreement, the Buyer shall have no further
obligation or liability to the Seller under this Agreement, and the Seller shall
have no further obligation or liability to the Buyer under this Agreement.
11.3 Termination by Reason of Breach. This Agreement may be
terminated by the Seller, if at any time prior to the Closing there shall occur
a material breach of any of the representations, warranties or covenants of the
Buyer or the failure by the Buyer to perform any condition or obligation
hereunder, and may be terminated by the Buyer, if at any time prior to the
Closing there shall occur a material breach of any of the representations,
warranties or covenants of the Seller or the failure of the Seller to perform
any condition or obligation hereunder.
11.4 Survival of Certain Obligations. The provisions of Section 4.2
of this Agreement shall survive any termination of this Agreement pursuant to
this Section 11.
12. Transfer and Sales Tax
Notwithstanding any provisions of law imposing the burden of such
taxes on the Seller or the Buyer, as the case may be, the Seller shall be
responsible for and shall pay (a) all sales, use and transfer taxes, and (b) all
governmental charges, if any, upon the sale or transfer of any of the Assets
hereunder. If the Seller shall fail to pay such amounts on a timely basis, the
Buyer may pay such amounts to the appropriate governmental authority or
authorities, and the Seller shall promptly reimburse the Buyer for any amounts
so paid by the Buyer.
13. Brokers
13.1 For the Seller. The Seller represents and warrants that it has
not engaged any broker or finder or incurred any liability for brokerage fees,
commissions or finder's fees in connection with the transactions contemplated by
this Agreement. The Seller agrees to indemnify and hold harmless the Buyer
against any claims or liabilities asserted against it by any person acting or
claiming to act as a broker or finder on behalf of the Seller.
13.2 For the Buyer. The Buyer agrees to pay all fees, expenses and
compensation owed to any person, firm or corporation who has acted in the
capacity of broker or finder on its behalf in connection with the transactions
contemplated by this Agreement. The Buyer agrees to indemnify and hold harmless
the Seller against
any claims or liabilities asserted against it by any person acting or claiming
to act as a broker or finder on behalf of the Buyer.
14. Notices
Any notices or other communications required or permitted hereunder
shall be sufficiently given if delivered personally or sent by receipt confirmed
telecopy, federal express or other reputable overnight courier, registered or
certified mail, postage prepaid, addressed as follows or to such other address
of which the parties may have given notice:
To the Seller: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Choices Entertainment Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
To the Buyer: West Coast Entertainment Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
With a copy to: ▇▇▇▇ and ▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally; or (b) one
business day after delivery to an overnight courier or after the date of
confirmation of a telecopy; or (c) three business days after being sent, if sent
by registered or certified mail; or (d) on the date of actual receipt, if sent
by any other method.
15. Arbitration
(a) Any dispute, controversy or claim between the parties arising out
of or relating to this Agreement, a breach hereof or the transactions
contemplated hereby, shall be settled by arbitration in accordance with the
provisions of this Section 15. Any arbitration pursuant to this Section 15
shall be conducted by a single arbitrator appointed by the Philadelphia,
Pennsylvania office of the American Arbitration Association upon the request of
either party. The arbitrator shall have a minimum of five years of experience
in the area of business relevant to the particular dispute. Each party shall be
permitted to submit only one proposal to the arbitrator, and the arbitrator
shall be required to choose
one of such two proposals as the resolution of the dispute. The arbitrator
may proceed to a resolution notwithstanding the failure of a party to
participate in the proceedings. Each of the parties shall pay its own costs
and expenses in connection with any such arbitration, and the parties shall
share equally in the fees and expenses of the arbitrator.
(b) The parties agree that any such arbitration will occur in
Philadelphia, Pennsylvania, any such arbitration award shall be final and
binding upon the parties, may be entered in any court having jurisdiction and
shall not be appealable by either party in any court.
16. Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
Buyer and the Seller may not assign their respective obligations hereunder
without the prior written consent of the other party; provided, however, that
the Buyer may assign this Agreement, and its rights and obligations hereunder,
to a subsidiary or affiliate. Any assignment in contravention of this provision
shall be void. No assignment shall release the Buyer from any obligation or
liability under this Agreement.
17. Entire Agreement; Amendments; Attachments
(a) This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the parties pursuant hereto
represent the entire understanding and agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior oral and written
and all contemporaneous oral negotiations, commitments and understandings
between such parties. The Buyer and the Seller (and to the limited extent they
are joining in this Agreement below, the Principals) may amend or modify this
Agreement, in such manner as may be agreed upon, by a written instrument
executed by the Buyer and the Seller (and, to the extent related to the
provisions to which they are parties, the Principals).
(b) If the provisions of any Schedule or Exhibit to this Agreement
are inconsistent with the provisions of this Agreement, the provision of the
Agreement shall prevail. The Exhibits and Schedules attached hereto or to be
attached hereafter are hereby incorporated as integral parts of this Agreement.
18. Expenses
Except as otherwise expressly provided herein, the Buyer and the
Seller shall each pay their own expenses in connection with this Agreement and
the transactions contemplated hereby. Buyer shall pay the costs and expenses of
any audit conducted by, or at the request of, the Buyer, and Seller shall pay
the costs and expenses of any accounting services provided to the Seller in
connection with the transactions contemplated hereby. Notwithstanding the
above, the Buyer shall reimburse Seller for reasonable travel and related
expenses (approved by the Buyer in advance) which are incurred in connection
with attendance by Seller at meetings requested by the Buyer.
19. Legal Fees
In the event that legal proceedings are commenced by the Buyer against
the Seller, or by the Seller against the Buyer, in connection with this
Agreement or the transactions contemplated hereby, the party or parties which do
not prevail in such proceedings shall pay the reasonable attorneys' fees and
other costs and expenses, including investigation costs, incurred by the
prevailing party in such proceedings.
20. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
21. Section Headings
The section headings are for the convenience of the parties and in no
way alter, modify, amend, limit, or restrict the contractual obligations of the
parties.
22. Severability
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
23. Counterparts
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall be one and the
same document.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of and on the date first above written.
CHOICES ENTERTAINMENT CORPORATION
ATTEST:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
---------------------- --------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title:President
------------------------------
PRINCIPALS:
The Principals are hereby executing and
delivering this Agreement for the limited
purpose of reflecting their agreement to the
matters contained in Sections 10.2, 10.3 and
10.5 (and Section 17). They are not parties
hereto for any other purposes.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------------
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
WEST COAST ENTERTAINMENT CORPORATION
ATTEST:
By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Title: CFO
------------------------- ---------------------------------
Schedule A
Stores
Store #1
Morrisville Shopping Center
▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Store #▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Store #▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇-▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Store #6
Village at ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Store #7
Town Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Store #9
Shoppes at Foxmoor
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Store #▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Store #▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Store #13
Choices Movies & Games
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Exhibit A
FORM OF ESCROW AGREEMENT
This Escrow Agreement is entered into as of __________, 1997, between
West Coast Entertainment Corporation, a Delaware corporation (the "Buyer"), and
Choices Entertainment Corporation, a Delaware corporation (the "Seller").
WHEREAS, the Buyer has acquired, as of the date hereof, certain assets
of the Seller pursuant to an Asset Purchase Agreement dated __________, 1996
(the "Purchase Agreement") by and among the Buyer and the Seller.
WHEREAS, the Purchase Agreement provides that an escrow account will
be established to secure the Seller's indemnification obligations to the Buyer
under the Purchase Agreement on the terms and conditions set forth herein, and
that the Buyer will act as Escrow Agent.
WHEREAS, the parties hereto desire to establish the terms and
conditions pursuant to which such escrow account will be established and
maintained.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and not
otherwise defined shall have the respective meanings ascribed to them in the
Purchase Agreement.
2. Escrow and Indemnification.
(a) Escrow Fund. The Buyer shall hold as Escrow Agent $243,000
in cash (such amount, together with any interest earned thereon, as provided
herein, the "Escrow Fund"). The Escrow Fund shall be held as a trust fund and
shall not be subject to any lien, attachment, trustee process or any other
judicial process of any creditor of any party hereto. The Buyer agrees to
accept delivery of the Escrow Fund as Escrow Agent and to hold the Escrow Fund
in an escrow account (the "Escrow Account"), subject to the terms and conditions
of this Agreement. The Buyer shall not be entitled to any fee or compensation
in respect of its serving as the Escrow Agent.
(b) Indemnification. The Seller has agreed in Section 9 of the
Purchase Agreement to indemnify and hold harmless the Buyer from and against
certain claims, damages, losses, liabilities, costs and expenses ("Damages").
The Escrow Fund shall be security for such indemnity obligations of the Seller,
subject to the limitations, and in the manner provided, in this Agreement.
(c) Investment of Escrow Fund. The Escrow Fund shall be
invested in a separate bank, money market or other similar
interest-bearing account which in any event shall be mutually acceptable to
the Buyer and the Seller. All amounts earned on the Escrow Fund shall be
retained in (and become part of) the Escrow Fund and available to satisfy
indemnity claims of the Buyer in accordance with the Purchase Agreement.
(d) Transferability. The interest of the Seller in the Escrow
Fund shall not be assignable or transferable, other than by operation of law or
pursuant to the terms of this Agreement. Notice of any such assignment or
transfer by operation of law shall be given to the Buyer, on its own behalf and
as Escrow Agent, and no such assignment or transfer shall be valid until such
notice is given.
3. Administration of Escrow Account. The Buyer, as Escrow Agent,
shall administer the Escrow Account as follows:
(a) If the Buyer has incurred or suffered Damages for which it
is entitled to indemnification under Section 9 of the Purchase Agreement, the
Buyer shall, prior to the date which is two years following of the Closing Date
under the Purchase Agreement (the "Termination Date"), give written notice of
such claim (a "Claim Notice") to the Seller. Each Claim Notice shall state the
amount of claimed Damages (the "Claimed Amount") and the basis for such claim.
(b) Within 20 days after delivery of a Claim Notice the Seller
shall provide to the Buyer, on its own behalf and as Escrow Agent, a written
response (the "Response Notice") in which the Seller shall: (i) agree that a
portion of the Escrow Fund equal to the full Claimed Amount may be released from
the Escrow Account to the Buyer, (ii) agree that a portion, but not all, of the
Claimed Amount (the "Agreed Amount") may be released from the Escrow Account to
the Buyer or (iii) contest that any of the Escrow Fund may be released from the
Escrow Account to the Buyer. The Seller may contest the release of all or a
portion of the Escrow Fund only based upon a good faith belief that all or such
portion of the Claimed Amount does not constitute Damages for which the Buyer is
entitled to indemnification under Section 9 of the Purchase Agreement. If no
Response Notice is delivered by the Seller within such 20-day period, the Seller
shall be deemed to have agreed that a portion of the Escrow Fund equal to all of
the Claimed Amount may be released to the Buyer from the Escrow Account.
(c) If the Seller in the Response Notice agrees (or is deemed to
have agreed) that a portion of the Escrow Fund equal to all of the Claimed
Amount may be released from the Escrow Account to the Buyer, the Buyer may
transfer and deliver to itself such portion of the Escrow Fund (or if the Escrow
Fund is less than the amount to be so released, all of the Escrow Fund).
(d) If the Seller in the Response Notice agrees that part, but
not all, of the Claimed Amount may be released from the Escrow Fund to the
Buyer, the Buyer may transfer and deliver to
itself for its own account a portion of the Escrow Fund equal to such part of
the Claimed Amount (or if the Escrow Fund is less than the amount to be so
released, all of the Escrow Fund).
(e) If the Seller in the Response Notice contests the release of
all or part of the Claimed Amount (the "Contested Amount"), the matter shall be
settled by binding arbitration in accordance with the provisions of Section 15
of the Purchase Agreement. The final decision of the arbitrator shall be
furnished to the Seller and the Buyer, on its own behalf and as Escrow Agent, in
writing and shall constitute a conclusive determination of the issue in
question, binding upon the Seller and the Buyer, on its own behalf and as Escrow
Agent, and shall not be contested by any of them. Such decision may be used in
a court of law only for the purpose of seeking enforcement of the arbitrator's
award. After delivery of a Response Notice that the Claimed Amount is contested
by the Seller, the Buyer, as Escrow Agent, shall continue to hold in the Escrow
Account a portion of the Escrow Fund sufficient to cover the Contested Amount,
notwithstanding the occurrence of the Termination Date, until (i) delivery of a
copy of a settlement agreement executed by the Buyer and the Seller setting
forth instructions to the Buyer, as Escrow Agent, as to the release of the
portion of the Escrow Fund, if any, that shall be made with respect to the
Contested Amount or (ii) delivery of a copy of the final award of the arbitrator
setting forth instructions to the Buyer, as Escrow Agent, as to the release of
the portion of the Escrow Fund, if any, that shall be made with respect to the
Contested Amount. The Buyer, as Escrow Agent, shall thereupon release a portion
of the Escrow Fund from the Escrow Account in accordance with such agreement or
instructions.
4. Release of Escrow Fund.
(a) Promptly after the Termination Date, the Buyer, as Escrow
Agent, shall distribute to the Seller all of the Escrow Fund then held in
escrow. Notwithstanding the foregoing, if the Buyer has previously given a
Claim Notice which has not then been resolved in accordance with Section 3, the
Buyer, as Escrow Agent, shall retain in the Escrow Account after the Termination
Date a portion of the Escrow Fund equal to the Claimed Amount which has not then
been resolved.
(b) Any distribution of all or a portion of the Escrow Fund to
the Seller shall be made by delivery of a bank or certified check, or wire
transfer of immediately available funds, at the address set forth in Section 7
(or such other address as may be provided in writing to the Buyer, as Escrow
Agent by the Seller).
5. Limitation of Escrow Agent's Liability.
(a) The Buyer, in its capacity as Escrow Agent, shall be
obligated only for the performance of such duties as are specifically set forth
in this Agreement and shall incur no liability with respect to any action taken
or suffered by it in
reliance upon any notice, direction, instruction, consent, statement or other
documents believed by it to be genuine and duly authorized, nor for other
action or inaction except its own willful misconduct or gross negligence. In
all questions arising under the Escrow Agreement, the Buyer, as Escrow Agent,
may rely on the advice of counsel, and for anything done, omitted or suffered
in good faith by the Buyer, as Escrow Agent, based on such advice the Buyer,
as Escrow Agent, shall not be liable to anyone. The Buyer, as Escrow Agent,
shall not be required to take any action hereunder involving any expense
unless the payment of such expense is made or provided for in a manner
reasonably satisfactory to it.
(b) Neither the Buyer, as Escrow Agent, nor any of its
directors, officers, employees or agents shall be liable to anyone for any
action taken or omitted to be taken by it in good faith by it or any of its
directors, officers, employees or agents hereunder, except in the case of gross
negligence or willful misconduct. In no event shall the Buyer, as Escrow Agent,
be liable for indirect, punitive, special or consequential damages.
6. Termination. This Agreement shall terminate upon the later of
the Termination Date or the release by the Buyer, as Escrow Agent, of all of the
Escrow Fund in accordance with this Agreement; provided that the provisions of
Section 5 shall survive such termination or the resignation or removal of the
Buyer as Escrow Agent.
7. Notices. All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) via a reputable
nationwide overnight courier service, in each case to the address set forth
below. Any such notice, instruction or communication shall be deemed to have
been delivered two business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, or one business day after it is
sent via a reputable nationwide overnight courier service.
If to the Buyer, on its own behalf and as Escrow Agent:
West Coast Entertainment Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Operating Officer
If to the Seller:
Choices Entertainment Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Any party may give any notice, instruction or communication in
connection with this Agreement using any other means (including personal
delivery, telecopy or ordinary mail), but no such notice, instruction or
communication shall be deemed to have been delivered unless and until it is
actually received by the party to whom it was sent. Any party may change the
address to which notices, instructions or communications are to be delivered by
giving the other parties to this Agreement notice thereof in the manner set
forth in this Section 7.
8. Successor Escrow Agent. In the event the Buyer becomes
unavailable or unwilling to continue in its capacity as Escrow Agent, the Buyer
may resign as Escrow Agent and be discharged from its duties or obligations
hereunder by delivering a resignation to the Seller not less than 30 days' prior
to the date when such resignation shall take effect. The Buyer may appoint a
successor Escrow Agent without the consent of the Seller so long as such
successor is a bank with assets of at least $50 million, and may appoint any
other successor Escrow Agent with the consent of the Seller, which shall not be
unreasonably withheld. The Buyer shall be solely responsible for payment of any
fee or compensation due to any successor Escrow Agent.
9. General.
(a) Governing Law, Assigns. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Delaware
without regard to conflict-of-law principles and shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns.
(b) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(c) Entire Agreement. Except as set forth in the Purchase
Agreement, this Agreement constitutes the entire understanding and agreement of
the parties with respect to the subject matter of this Agreement and supersedes
all prior agreements or understandings, written or oral, between the parties
with respect to the subject matter hereof.
(d) Waivers. No waiver by any party hereto of any condition or
of any breach of any provision of this Escrow Agreement shall be effective
unless in writing. No waiver by any party of any such condition or breach, in
any one instance, shall be deemed to be a further or continuing waiver of any
such condition or breach or a waiver of any other condition or breach of any
other provision contained herein.
(e) Amendment. This Agreement may be amended only with the
written consent of the Buyer, on its own behalf and as Escrow Agent, and the
Seller.
(f) Force Majeure. None of the parties hereto shall be
responsible for delays or failures in performance resulting from acts beyond its
control. Such acts shall include but not be limited to acts of God, strikes,
lockouts, riots, acts of war, epidemics, governmental regulations superimposed
after the fact, fire, communication line failures, computer viruses (provided
that the parties hereto will maintain reasonable measures to protect against
any such viruses), power failures, earthquakes or other such disasters.
(end of page)
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
THE BUYER, ON ITS OWN BEHALF AND AS ESCROW AGENT:
WEST COAST ENTERTAINMENT CORPORATION
By:
---------------------------------
---------------------------------
(print name and title)
THE SELLER:
CHOICES ENTERTAINMENT CORPORATION
By
----------------------------------
----------------------------------
(print name and title)
Exhibit B
INSTRUMENT OF ASSUMPTION OF LIABILITIES
This Instrument of Assumption of Liabilities dated ______ __, 1997 is
made by West Coast Entertainment Corporation, a Delaware corporation (the
"Buyer"), in favor the Seller named below (the "Seller"). All capitalized terms
used in this Instrument of Assumption of Liabilities and not defined herein
shall have the respective meanings ascribed to them in the Asset Purchase
Agreement dated December __, 1996 by and between the Buyer and the Seller (the
"Agreement").
WHEREAS, pursuant to the Agreement, the Seller has agreed to sell,
transfer, convey, assign and deliver to the Buyer substantially all of the
assets and business of the Seller;
WHEREAS, in partial consideration therefor, the Agreement requires the
Buyer to assume certain of the liabilities of the Seller;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Buyer hereby agrees as
follows:
1. The Buyer shall assume and agree to perform, pay and discharge
the Assumed Liabilities.
2. The Buyer does not hereby assume or agree to perform, pay or
discharge, and the Seller shall remain unconditionally liable for, from and
after the date hereof, any liabilities, obligations and commitments that are not
Assumed Liabilities.
3. Nothing herein shall be deemed to deprive the Buyer of any
defenses, set-offs or counterclaims which the Seller may have, have had or which
the Buyer shall have against third parties with respect to any of the
obligations, liabilities and commitments hereby assumed (the "Defenses and
Claims"), so long as the assertion of such Defenses and Claims does not result
in the Seller being legally responsible to pay any Assumed Liability. The
Seller hereby transfers, conveys and assigns to the Buyer all Defenses and
Claims and agrees to cooperate with the Buyer, at the Buyer's expense, to
maintain, secure, perfect and enforce the Defenses and Claims, including the
signing of any documents, the giving of any testimony or the taking of any such
other action as is reasonably requested by the Buyer in connection with the
Defenses and Claims.
4. The Buyer, by its execution of this Instrument of Assumption of
Liabilities, and the Seller, by its acceptance of this Instrument of Assumption
of Liabilities, each hereby acknowledge and agree that neither the
representations and warranties nor the rights and remedies of any party under
the Agreement shall be deemed to be enlarged, modified or altered in any way by
this instrument.
5. This Instrument of Assumption may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Buyer and the Seller have caused this
Instrument to be duly executed under seal as of and on the date first above
written.
BUYER:
WEST COAST ENTERTAINMENT CORPORATION
By:
----------------------------------
Title:
-------------------------------
ACCEPTED:
SELLER:
CHOICES ENTERTAINMENT CORPORATION,
a Delaware corporation
By:
---------------------------------
Title:
------------------------------
Exhibit C
Substance of Opinion of Seller's Counsel
1. The Seller is a corporation validly existing and in good standing
under the laws of the jurisdiction of its incorporation. The Seller is
qualified to transact business as a foreign corporation in each jurisdiction
where the nature of its business would require it to be so qualified.
2. The Seller has the corporate power to conduct its business as it
is currently being conducted, to execute and deliver the Asset Purchase
Agreement, and the other agreements, instruments and documents contemplated
thereby (collectively, with the Asset Purchase Agreement, the "Transaction
Documents") to which it is a party and to perform its obligations thereunder.
The execution, delivery and performance by the Seller of the Transaction
Documents to which it is a party have been duly authorized by all necessary
corporate and stockholder action on the part of the Seller.
3. Each of the Transaction Documents has been duly executed and
delivered by the Seller, and is a valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its respective terms.
4. Except as set forth in the Asset Purchase Agreement (including
the Schedules and Exhibits thereto), neither the execution and delivery by the
Seller of the Transaction Documents, nor the consummation by the Seller of the
Closing, with or without the giving of notice, the passage of time or both, (a)
violates the provisions of any law, rule or regulation applicable to the Seller,
(b) violates the provisions of the Charter or Bylaws of the Seller, (c) violates
any judgment, decree, order or award known to us of any court, governmental body
or arbitrator specifically naming the Seller or by which the Seller or its
assets or properties are bound, or (d) to such counsel's actual knowledge,
conflicts with or results in the breach or termination of any term or provision
of, or constitutes a default under, or requires any consent under, or causes any
acceleration under, or causes the creation of any lien, charge or encumbrance
upon the Seller's assets pursuant to, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Seller is a party or by which the
Seller or any of its assets is bound.
5. Except for licenses, approvals or consents of governmental
authorities required in order for the Buyer to operate the business of the
Seller after the Closing, and consents, waivers and approvals of governmental
authorities obtained and delivered at the Closing, no consent, approval or
authorization of, or filing with, any state or federal governmental authority is
necessary for the execution or delivery by the Seller of the Transaction
Documents, or the consummation by the Seller of the transactions contemplated
thereby.
6. To such counsel's actual knowledge, without having undertaken any
independent searches of computerized data bases or the dockets of any court,
administrative agency or regulatory body or other tribunal, and except as set
forth on Schedule 2.7 [litigation disclosure schedule] to the Asset Purchase
Agreement, there is no litigation, suit, action, investigation, adversarial
proceeding or controversy before any court, administrative agency or other
governmental authority relating to or affecting the Seller, the Assets or the
business or condition (financial or otherwise) of the Seller.
Exhibit D
▇▇▇▇ OF SALE
This ▇▇▇▇ of Sale dated ______ __, 1997 is executed and delivered by
the Seller named below (the "Seller"), to West Coast Entertainment Corporation,
a Delaware corporation (the "Buyer"). All capitalized terms used in this ▇▇▇▇
of Sale and not defined herein shall have the respective meanings ascribed to
them in the Asset Purchase Agreement dated December __, 1996 by and between the
Buyer and the Seller (the "Agreement").
WHEREAS, pursuant to the Agreement, the Seller has agreed to sell,
transfer, convey, assign and deliver to the Buyer substantially all of the
assets of the Seller, and the Buyer has agreed to assume certain of the
liabilities of the Seller;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Seller hereby agrees as
follows:
1. The Seller hereby sells, transfers, conveys, assigns and delivers
to the Buyer, and its successors and assigns, to have and to hold forever, all
of the Assets.
2. Notwithstanding the foregoing, the Assets to be transferred to
the Buyer under this ▇▇▇▇ of Sale shall not include the Excluded Assets.
3. The Seller does hereby irrevocably constitute and appoint the
Buyer, and its successors and assigns, its true and lawful attorney, with full
power of substitution, in its name or otherwise, and on behalf of the Seller, or
for its own use, to claim, demand, collect and receive at any time and from time
to time any and all assets, properties, claims, accounts and other rights,
tangible or intangible, hereby sold, transferred, conveyed, assigned and
delivered, or intended so to be, and to prosecute the same at law or in equity
and, upon discharge thereof, to complete, execute and deliver any and all
necessary instruments of satisfaction and release.
4. The Seller, by its execution of this ▇▇▇▇ of Sale, and the Buyer,
by its acceptance of this ▇▇▇▇ of Sale, each hereby acknowledges and agrees that
neither the representations and warranties nor the rights and remedies of any
party under the Agreement shall be deemed to be enlarged, modified or altered in
any way by this instrument.
5. This ▇▇▇▇ of Sale may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Seller and the Buyer have caused this ▇▇▇▇ of
Sale to be duly executed under seal as of and on the date first above written.
SELLER:
CHOICES ENTERTAINMENT CORPORATION, a Delaware
corporation
By:
---------------------------------
Title:
------------------------------
ACCEPTED:
WEST COAST ENTERTAINMENT CORPORATION,
a Delaware corporation
By:
-----------------------------
Title:
--------------------------
Exhibit E
Substance of Opinion of ▇▇▇▇ and ▇▇▇▇
1. The Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. The Buyer is
qualified to do business and is in good standing in the Commonwealth of
Pennsylvania and the State of New Jersey.
2. The Buyer has all requisite corporate power and authority to
execute and deliver the Transaction Documents to which it is a party, and to
perform its obligations thereunder. The execution, delivery and performance of
the Transaction Documents to which the Buyer is a party have been duly and
validly authorized by all necessary corporate action on the part of the Buyer.
Each of the Transaction Documents to which the Buyer is a party has been duly
and validly executed and delivered by the Buyer, and constitutes the valid and
binding obligation of the Buyer enforceable against the Buyer in accordance with
its respective terms.
3. Except as set forth in the Asset Purchase Agreement, including
the schedules and exhibits thereto, neither the execution and delivery by the
Buyer of the Transaction Documents to which it is a party, nor the consummation
by the Buyer of the Closing, with or without the giving of notice, the passage
of time or both, (a) violates the provisions of any law, rule or regulation
applicable to the Buyer; (b) violates the provisions of the Charter or By-laws
of the Buyer; or (c) violates any judgment, decree, order or award of any court,
governmental body or arbitrator specifically naming the Buyer or by which it or
its assets or properties are specifically bound of which we are aware.
4. Except as obtained and in effect at the Closing, no consent,
approval, order or authorization of, or filing with, any governmental authority
(other than filings required to be made after the Closing under applicable
federal and state securities laws) is required on the part of the Buyer in
connection with the execution and delivery of the Transaction Documents to which
it is a party or the consummation of the transactions contemplated thereby.