AMENDMENT NUMBER 3 TO AGREEMENT OF PURCHASE AND SALE
THIS AMENDMENT NUMBER 3 TO AGREEMENT OF PURCHASE AND
SALE (this "Amendment") is made and entered into as of the 21st
day of June, 1993, by and between WHEREHOUSE ENTERTAINMENT, INC.,
a Delaware corporation ("Purchaser"), and THE RECORD SHOP, INC.,
a Minnesota corporation ("Seller"), with reference to the
following facts:
A. Purchaser and Seller have entered into that certain
Agreement of Purchase and Sale dated May 10, 1993, as amended by
that certain Amendment Number 1 to Purchase Agreement dated as of
May 28, 1993 and that certain Amendment Number 2 to Purchase
Agreement dated as of June 18, 1993 (collectively, the "Purchase
Agreement").
B. Purchaser and Seller desire that the Purchase Agreement
be further amended as hereinafter set forth.
NOW, THEREFORE, the parties hereto hereby agree as
follows:
1. Amendments to Purchase Agreement.
1.1 Section 2.4 of the Purchase Agreement is
hereby amended to read in its entirety as follows:
"2.4 Prorations and Adjustments. The Trans-
ferred Assets Purchase Price shall be adjusted at the
Closing or the applicable Delayed Closing (i) for
Seller's preliminary prorated share of Current Property
Taxes calculated in accordance with Section 3.5 hereof;
(ii) for Seller's preliminary unpaid Sales Taxes
calculated in accordance with Section 3.6 hereof; and
(iii) for Seller's preliminary unpaid Payroll Taxes
calculated in accordance with Section 3.7 hereof. The
Transferred Assets Purchase Price shall be adjusted to
prorate all rents, real property taxes and "CAM" and
other charges paid by Seller under the Store Leases and
utilities paid by Seller and all lease and other
payments due under the Sensormatic Leases and Store
Contracts paid by Seller for the period from the due
date of the last such payment to be made by Seller
immediately prior to the Closing Date or the applicable
Delayed Closing Date, as the case may be, to the
Closing Date or the applicable Delayed Closing Date.
In the event that the actual amount of any such taxes,
rents, "CAM" and other charges for the year of the
Closing or applicable Delayed Closing is more or less
than that estimated by the parties at the Closing or
applicable Delayed Closing, Purchaser or Seller, as the
case may be, shall make all appropriate payments to the
other party so that all payments and prorations made
pursuant to this Section 2.4 are accurate, based upon
the actual assessment for the year of the Closing or
applicable Delayed Closing. The Transferred Assets
Purchase Price shall be increased by all utilities
deposits of Seller which Seller causes the applicable
utilities to transfer to the account of Purchaser at
the Closing or any Delayed Closing, as applicable. The
Transferred Assets Purchase Price payable at the
Closing shall be further increased by $3,799.57, which
amount represents one-half of the rent, real property
taxes and "CAM" and other charges due under the Store
Lease for the Store located at Brookdale Center,
Brooklyn Center, Minnesota for the period from June 1
to June 30."
1.2 Section 2.2 of the Purchase Agreement is
hereby amended to read in its entirety as follows:
"2.2 Allocation of Transferred Assets
Purchase Price. The Transferred Assets Purchase Price
shall be allocated among the Transferred Assets in
accordance with a schedule which Purchaser and Seller
shall attempt to agree upon during the ninety day
period (the "Negotiation Period") commencing immedi-
ately following the Closing Date. In the event that
Purchaser and Seller are able to mutually agree upon
the allocation of the Transferred Assets Purchase Price
(the "Purchase Price Allocations"), Purchaser and
Seller shall evidence such agreement by entering into
an amendment to this Agreement to which shall be
attached a schedule ("Schedule 2.2") on which the
Purchase Price Alloca-tions shall be set forth. In the
event that Seller and Purchaser agree on the Purchase
Price Allocations as provided above, Seller and
Purchaser each agrees (i) to report the sale of the
Transferred Assets for federal and state income tax
purposes in accordance with the allocation set forth on
Schedule 2.2, (ii) not to take any position inconsis-
tent with such allocations on any of its tax returns
and (iii) to timely file federal tax Form 8594 with the
applicable tax return for the year of this transaction
and any other year in which a Delayed Closing occurs
reflecting such Purchase Price Allocations. In the
event that Seller and Purchaser are unable to agree
upon the Purchase Price Allocations during the Negoti-
ation Period, each of Seller and Purchaser shall be
free to report the sale of the Transferred Assets for
federal and state income tax purposes in accordance
with any allocations schedule which each of them may
establish, which allocations may be inconsistent with
those made by the other party hereto. In any event,
each party shall provide the other with a draft copy of
its relevant federal tax Form 8594 at least fifteen
(15) days prior to filing such form."
1.3 Section 7.7 of the Purchase Agreement is
hereby amended to add subsection 7.7.5 thereto, which subsection
shall read in its entirety as follows:
"7.7.5 Seller hereby agrees to offer to
all of its employees and former employees, to the
extent required by the provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA"),
all benefits subject to COBRA for the maximum period
required by COBRA."
1.4 Section 7.9 of the Purchase Agreement is
hereby amended to read in its entirety as follows:
"Maintenance of Books and Records. Both
prior to and for the five years after the Closing,
Seller (or Seller's shareholders in the event that
Seller has been dissolved) shall keep and shall make
available to Purchaser for inspection and copying upon
reasonable notice all of its books and records and the
materials referred to in Sections 7.1 and 7.2. For the
avoidance of doubt, after the Closing Seller shall
permit Purchaser and Purchaser's accountants and
attorneys reasonable access to all books and records of
Seller for the purpose of preparing any financial
statements and information which may be required under
applicable laws, rules or regulations, including,
without limitation, all federal and state securities
laws and all rules and regulations which may be promul-
gated from time to time by the SEC or any state agency
or authority having jurisdiction over Purchaser and its
affiliates (collectively, the "Disclosure Rules"),
which financial statements and information may to the
extent required by the Disclosure Rules, be filed with
the SEC or any other federal and state agency or
authority or otherwise disseminated to the public. To
the extent Purchaser either (i) acquires other assets
in fiscal year 1993 and such acquisitions necessitate
Purchaser filing financial statements of Seller with
the SEC or (ii) subsequent to the Closing Purchaser
reasonably concludes that it is required to file with
the SEC Financial Statements of Seller, Seller shall
furnish to Purchaser copies of its audited financial
statements for fiscal year 1992 and prior years
("Seller's Audited Financial Statements") which
Purchaser may use in connection with preparing any
financial statements and information which may be
required under any Disclosure Rules as a result of such
acquisitions or for any other reasonable reason, and
Purchaser may include such audited financial statements
and Seller's Audited Financial Statements in any
filings with the SEC or any other federal or state
agency or authority or otherwise disseminate them to
the public subject, however, to Purchaser obtaining the
prior consent of the auditing firm or firms which
delivered the applicable auditor's report or reports in
connection with Seller's Audited Financial Statements
to the extent required prior to filing or disseminating
them. Purchaser shall pay all costs incurred by Seller
in making such financial information available, includ-
ing, without limitation, the out-of-pocket costs
incurred by Seller in making its former Vice President/
Comptroller available, if necessary."
1.5 Section 6.1 of the Purchase Agreement is
hereby amended by renumbering subsection 6.1.21 thereof as
"6.1.22" and by adding to Section 6.1 immediately after subsec-
tion 6.1.20 thereof the following new subsection 6.1.21:
"6.1.21 Claims Against Health Insurance
Plans. Based solely on the verbal report given by Tami
Faigus of Massachusetts Mutual to Ben Castenada of
Seller for the period commencing on May 31, 1992
through May 31, 1993, there have been no "major claims"
filed by Seller's employees against Seller's health
insurance plans except those described on Schedule
6.1.21. As used herein the term "major claims" shall
mean a claim or series of related claims exceeding
$10,000."
1.6 Section 13.12 of the Purchase Agreement is
hereby amended to read in its entirety as follows:
"13.12 Hart-Scott-Rodino Compliance.
Purchaser and Seller hereby acknowledge to each other
that, pursuant to Section 7A(a)(3) of HSR, HSR will not
apply to the transactions contemplated by this Agree-
ment because the fair market value of the Transferred
Assets Purchase Price for the Transferred Assets is
less than $15,000,000. Seller hereby further acknow-
ledges to Purchaser that, pursuant to Section7A(a)(2)
of HSR, HSR will not apply to the transactions contem-
plated by this Agreement because Seller does not meet
the "size of the parties" requirement set forth
therein. Notwithstanding anything to the contrary
contained herein, in no event shall Purchaser be
obligated to purchase any Inventory hereunder which, in
the reasonable discretion of Purchaser and/or Seller,
would cause the parties to violate HSR."
2. Exhibits and Schedules. Attached hereto are the
following Exhibits and Schedules which are hereby incorporated
into the Purchase Agreement by reference:
Exhibit A (Form of Store Leasehold Consent),
Exhibit B (Form of Transfer and Sale Documents),
Exhibit C (Form of Service Mark License), Exhibit D-1
and D-2 (Forms of Management Agreements), Exhibit E
(Form of Opinion of Seller's Counsel), Exhibit F (Form
of Store Leasehold Assignments), Exhibit G (Form of
Sensormatic Lease Consents), Exhibit H (Form of Store
Contract Consents), Exhibit I-1 and I-2 (Forms of
Escrow Agreements), and Exhibit J (Form of Opinion of
Purchaser's Counsel).
Schedule 1.2.1 (List of Stores), Schedule 1.2.2
(List of F,F&E), Schedule 1.2.3 (Sensormatic Leases),
Schedule 1.2.5 (Store Service Marks), Schedule 1.2.6
(Store Contracts), Schedule 2.5.1.2 (Short Term Store
Leases), Schedule 4.7 (List of Stores Subject to
Management Agreements), Schedule 6.1.1 (Seller's
Conflicts), Schedule 6.1.3 (Material Agreements),
Schedule 6.1.4 (Existing Litigation), Schedule 6.1.7
(Store Lease Defaults), Schedule 6.1.8 (Sensormatic
Lease and Store Contracts Defaults), Schedule 6.1.9
(Physical Condition of Stores and F,F&E), Schedule
6.1.10.3 (Store Compliance with Laws), Schedule 6.1.15
(Employee Plans), Schedule 6.1.16 (Employment Claims),
Schedule 6.1.21 (Claims Against Health Insurance
Plans), and Schedule 6.2 (Purchaser's Conflicts).
3. Other Amendments to the Purchase Agreement. Not-
withstanding anything in the Purchase Agreement to the contrary:
3.1 The physical possession of the Entry Devices
with respect to the Stores possession of which are
being delivered to Purchaser at the Closing will not be
delivered to the Purchaser at the Closing.
3.2 All unused gift certificates of Seller, other
than those currently located at the Store in the Main
Place Mall in Santa Ana, California (the "Santa Ana
Main Place Store"), will be destroyed by Purchaser
promptly after the Closing and those located at the
Santa Ana Main Place Store will be marked to indicate
that they may only be redeemed at such Store.
3.3 Seller shall reimburse Purchaser for the cost
of repairing or replacing the items listed on Schedule
6.1.9 to the Agreement under the heading "Items to be
Repaired or Replaced by Purchaser". Seller shall
promptly reimburse Purchaser for such costs after
Purchaser delivers to Seller evidence reasonably
satisfactory to Seller of the costs incurred therefor.
Promptly following the Closing, Seller shall repair or
replace, at its expense, the items listed on said
Schedule 6.1.9 under the heading "Items to be Repaired
or replaced by Seller." All other conditions identi-
fied in the memoranda from Rick Morley to Greg Fisher
dated June 18, 1993, from Joe Gonzalez to Greg Fisher
dated June 18, 1993 and from Greg Fisher to Mort Gerber
dated June 18, 1993 shall be Purchaser's responsibil-
ity.
3.4 Notwithstanding anything contained in the
Agreement to the contrary, Purchaser and Seller
acknowledge that the UCC-1's filed in various states
affecting the Sensormatic Equipment will not be
released at Closing and Purchaser will acquire
possession to such Sensormatic Equipment subject to
such UCC-1's.
3.5 Following the Closing and each Delayed
Closing Seller shall in a timely manner prepare and
file with the appropriate federal, state or local
governments or governmental agencies all requisite tax
returns and reports with respect to any and all income,
franchise, profits, sales, use, excise, personal
property, real property, payroll (including income tax
withholdings) and other taxes owed by Seller which
accrued on or before the Closing or as a result of the
Closing.
4. Stores Operated Under a Management Agreement.
4.1 Purchaser represents that it has orally
notified each of the lessors of a Store Lease pertain-
ing to a Store the possession of which was then
expected to be delivered to Purchaser at the Closing
pursuant to a Management Agreement (a "Management
Store") that (i) the Purchaser would obtain possession
of the Management Store pursuant to a Management
Agreement, and (ii) Purchaser then intended to close
the Management Store for a short period of time to
remodel said Store.
4.2 Purchaser agrees to reopen all of the
Management Stores no later than June 26, 1993.
5. Full Force and Effect. Except as expressly
amended hereby, the Purchase Agreement shall continue in full
force and effect in accordance with the provisions thereof on the
date hereof.
6. Governing Law. This Amendment shall be construed
in accordance with and governed by the laws of the State of
California, without giving effect to that State's conflicts of
law rules.
7. Counterparts. This Amendment may be executed in
one or more counterparts, each of which is deemed an original,
but all of which together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties have duly executed this
Amendment as of the date first above written.
PURCHASER: SELLER:
WHEREHOUSE ENTERTAINMENT, INC., THE RECORD SHOP, INC.
a Delaware corporation a Minnesota corporation
By: /s/ Scott Young By: /s/ Mary Ann Levitt
--------------------- ----------------------
Scott Young Mary Ann Levitt
Its: President Its: President
By: /s/ Cathy Wood
---------------------
Cathy Wood
Its: Secretary
AJS_D025.RV4
EXHIBIT A
LANDLORD'S ACKNOWLEDGEMENT, ESTOPPEL, CONSENT,
AMENDMENT TO LEASE AND RELEASE
THIS LANDLORD'S ACKNOWLEDGMENT, ESTOPPEL, CONSENT AND
AMENDMENT TO LEASE ("Acknowledgment") is executed this _____ day
of _______________, 1993, by __________________________________,
("Landlord") for the benefit of WHEREHOUSE ENTERTAINMENT, INC., a
Delaware corporation, whose business address is 19701 Hamilton
Avenue, Torrance, California 90502 ("Buyer").
A. By a lease dated ________ and amended ________________
(collectively the "Lease"), Landlord leased to The Record Shop,
Inc., a Minnesota corporation ("Tenant"), those premises located
at _____________________. A copy of the Lease is attached hereto
as Exhibit A and incorporated herein by this reference.
B. Tenant is selling a substantial portion of its assets
to Buyer.
C. In accordance with said sale, Tenant will execute an
Assignment of Leasehold Interests by which Tenant will assign to
Buyer all of its right, title and interest in and to the Lease,
among other Leases.
D. As a condition to accepting said assignment, Buyer
requires the Landlord to execute this Acknowledgment upon which
it will rely in succeeding to the interest of Tenant in and to
the Lease.
THEREFORE, in consideration of the promises herein
contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Land-
lord does hereby state and agree to the following for the
benefit of Buyer:
1. Attached hereto as Exhibit "A" is a true and
correct copy of the Lease. The Lease is in full force and
effect. There have been no modifications, amendments or restate-
ments to the Lease other than as contained in Exhibit "A". The
Lease constitutes the only agreement between Landlord and Tenant
relating to the premises described therein.
2. As of the date hereof, the Lease is valid and
subsisting and in full force and effect, and the Tenant has
accepted the premises described therein.
3. The Lease commencement date was _________________
and the Lease termination date is __________________, unless
earlier terminated or extended as provided in the Lease.
4. The base rent currently being paid by the Tenant
under the Lease is $__________ per month. The rent on the Lease
has been paid by Tenant through ________________________. No
additional rent is presently due and owing under the Lease and
there are no other payments due or payable from Tenant to Land-
lord under the Lease as of the date hereof unless otherwise
specifically described in this Acknowledgement.
5. The common area maintenance charge currently being
paid by Tenant under the Lease is $__________ per month. No
additional common area maintenance charge is presently due and
owing under the Lease. Tenant's share of common area maintenance
costs have been paid through _______________________, and to the
best of Landlord's knowledge, no material adjustments for the
current or past years' costs are contemplated or required under
the Lease.
6. Tenant's share of the real property taxes
currently being paid under the Lease is $__________ per month.
No additional share of real property taxes are presently due
and owing under the Lease. Tenant's share of real property taxes
have been paid through _______________________, and to the best
of Landlord's knowledge, no material adjustments for the current
or past years' share of taxes are contemplated or required under
the Lease.
7. The association dues and/or advertising fund
charges currently being paid by Tenant under the Lease are
$__________ per month. No additional association dues and/or
advertising fund charges are presently due and owing under the
Lease. Tenant's share of Association dues and/or advertising
fund charges have been paid through _______________________, and
to the best of Landlord's knowledge, no material adjustments
for the current or past years' charges are contemplated or
required under the Lease.
8. Tenant's share of the insurance costs currently
being paid under the Lease is $__________ per month. No addi-
tional insurance costs are presently due and owing under the
Lease. Tenant's share of insurance costs have been paid through
_______________________, and to the best of Landlord's knowledge,
no material adjustments for the current or past years' costs are
contemplated or required under the Lease.
9. All improvements placed on the premises conform to
the Lease and have been satisfactorily completed.
10. The Landlord hereby consents to the assignment
from Tenant to Buyer of Tenant's rights, duties and obligations
under the Lease and waives any rights that Landlord may have to
alter the terms and conditions of the Lease, declare an event of
default under the Lease or increase the rental obligations under
the Lease.
11. The Tenant is not in default under any terms and
conditions of the Lease, nor does there exist any set of facts
which, through the passage of time or by the giving notice to
Tenant, or both, could constitute a default under the Lease or
could give Landlord the right to accelerate the performance of
any obligation thereunder or excuse Landlord from the performance
of any obligation thereunder. Landlord has no charge, lien,
claim, defense or offset of any kind under the Lease or otherwise
against Tenant or the Lease.
12. The Landlord is not in default under any terms and
conditions of the Lease, nor does there exist any set of facts
which, through the passage of time or by the giving of notice to
Tenant, or both, could constitute a default by Landlord under the
Lease or excuse Landlord from the performance of any obligation
thereunder.
13. The Landlord has received no notice from Tenant of
Tenant's assignment, pledge, encumbrance of Tenant's interest in
and to the Lease.
14. Landlord acknowledges that Buyer, as assignee of
the Tenant's interest under the Lease, shall not be responsible
for the performance of any of the terms, conditions and obliga-
tions of the Lease accruing prior to the date of this Acknow-
ledgment.
15. To the best knowledge of Landlord, there are no
pending or threatened eminent domain proceedings or special
assessments which may affect the premises or the shopping center
in which the premises are located.
16. If the Lease contains provisions which are
different from the provisions set forth below, such different
provisions are hereby deleted from the Lease and there are
substituted in their place the provisions set forth below. If
the Lease does not contain any such provisions, the provisions
set forth below are hereby added to the Lease.
16.1 Tradename. Buyer, as tenant under the Lease,
shall have the right, but not the obligation, to change the
current name of the business being conducted from the Premises to
any of the following tradenames: "Record Shop", "Wherehouse",
"Wherehouse Entertainment", "Rocky Mountain Records", or such
other tradename as Buyer shall use to operate the majority of its
stores in the area in which the Premises is located.
16.2 Address for Notice. The address for notices
to tenant under the Lease shall be:
Wherehouse Entertainment, Inc.
19701 Hamilton Avenue
Torrance, California 90502-1334
Attention: Vice President Real Estate
16.3 Uses. Buyer shall have the right to use and
occupy the Premises for the retail sale of all home entertainment
software, such as records, tapes, cassettes, compact discs,
cartridges, video reproductions, audio reproductions and techno-
logical innovations thereto, and all other items, accessories and
devices carried by Buyer's other retail stores of a type similar
to the business being conducted on the Premises.
16.4 Alterations/Remodel. Landlord hereby grants
to Buyer the right to convert and remodel the Premises to bring
them into conformance with Buyer's standard stores and to Land-
lord's construction criteria which will be provided by Landlord
to Buyer concurrently with the execution of this Acknowledgement.
All such work shall be done in conformity with applicable laws,
rules and regulations and shall be fully paid by Buyer.
16.5 Radius Restrictions. All radius restrictions
in the Lease are deleted therefrom.
16.6 No Right to Relocation. Any provision in the
Lease allowing Landlord to relocate the tenant thereunder is
deleted therefrom.
16.7 No Landlord Lien. Any provision of the Lease
granting to Landlord a (contingent) security interest in personal
property, inventory and tenant improvements belong to tenant are
deleted therefrom.
16.8 Hazardous Substances. Landlord represents
and warrants to Buyer that there are no Hazardous Substances
located on, under or adjacent to the Premises or the shopping
center of which the Premises are a part. For purposes of this
provision, the term "Hazardous Substances" shall include, but not
be limited to, substances defined as "hazardous substances,"
"hazardous materials," or "toxic substances" in the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq.; the Resource
Conservation and Recovery Act, 42 U.S.C. Section 690 et seq. and
any similar laws applicable to the Property under federal, state
or local law and in the regulations adopted and publications
promulgated pursuant to all said laws.
16.9 Assignment and Subletting. Notwithstanding
anything contained in the Lease, Buyer shall have the right to
assign the Lease, or any interest therein, or sublet the
Premises, without the consent of Landlord, to a franchisee as a
normal part of Buyer's business, or to any corporation with which
it may merge or consolidate, or which acquires all or a substan-
tial portion of the shares of stock or assets of Buyer, or is a
parent or subsidiary of Buyer; provided, that no such assignment
or subletting shall release Buyer from any liability under the
Lease without the consent of Landlord; and provided further, that
any successor to Buyer as tenant under the Lease must deliver to
Landlord a written document confirming the successor's obligation
to perform as tenant under the Lease and an agreement to be bound
by all of the provisions of the Lease.
16.10 Continuous Operations. In order to
allow Buyer to remodel the Premises one time only, Landlord
grants to Buyer a two-week exception from its obligation to
continuously operate its business on the Premises.
16.11 Insurance. Attached hereto are the
specifications of Buyer's blanket property damage and liability
insurance. If and to the extent the insurance required of
tenant under the Lease differs from said specifications, said
specifications shall be deemed to control and anything contrary
in the Lease shall be deleted therefrom.
17. By executing this Acknowledgement, Landlord
releases Tenant from any future liability under the Lease
following the assignment of the Lease to Buyer and agrees to
look solely to Buyer for any such future liability following said
assignment.
18. This Acknowledgement shall only become binding on
the parties hereto when it has been executed by each of the
parties and the Lease has been assigned by Tenant and accepted by
Buyer. Such assignment and acceptance shall occur not later than
July 30, 1993.
19. This Acknowledgment integrates all prior oral and
written conversations between Landlord and Buyer concerning the
terms and conditions of the Lease and Tenant's performance there-
under.
The undersigned Landlord hereby acknowledges that the
Buyer will rely upon the statements contained herein in making
its decision to acquire the assets of Tenant, including Tenant's
interest in the Lease, and Landlord agrees to be bound by its
statements made herein.
This Acknowledgement is executed on the day and date
first above written.
LANDLORD: BUYER:
WHEREHOUSE ENTERTAINMENT, INC.,
a Delaware corporation
_________________________ By:___________________________
Its:__________________________
TENANT:
THE RECORD SHOP, INC.,
a Minnesota corporation
By:_________________________
Its:________________________
Specifications of Buyer's Blanket Property Damage and Liability
Insurance
Insurance Company Requirements Within "A" category
Financial Class. V
Notice of Change or Cancellation 20 days
Property Coverage "All Risk" fire
Extended Coverage
80% replacement value
Deductible not to exceed
$100,000
Blanket policies
permitted
Mutual Waiver of
Subrogation
Liability Commercial General
Liability
Occurrence Form
General Aggregate $1,000,000
Products Comp/Op Agg. $1,000,000
Personal and Adv. Injury $1,000,000
Each Occurrence $1,000,000
Fire Damage $ 50,000
Med. Expense nil
Boiler and Machinery Insurance nil
EXHIBIT B
BILL OF SALE
FOR VALUABLE CONSIDERATION, the receipt and sufficiency
of which are hereby acknowledged, THE RECORD SHOP, INC., a
Minnesota corporation ("Seller"), hereby sells, conveys, assigns,
transfers and delivers, to WHEREHOUSE ENTERTAINMENT, INC., a
Delaware corporation ("Purchaser"), and its successors and
assigns, forever, all of the assets described on Schedule A
attached hereto (the "Purchased Assets").
Seller hereby represents, warrants, covenants and
agrees that it is hereby conveying good and marketable title to
the Purchased Assets, free and clear of all security interests,
liens, pledges, encumbrances, claims, charges, agreements,
rights, options, warranties, equities and restrictions (collec-
tively, the "Liens").
Seller further covenants and agrees that it will, from
time to time, make, execute and deliver such instruments,
consents and assurances as Purchaser may reasonably request in
order to vest or otherwise perfect in Purchaser good and market-
able title to, and to put Purchaser in possession of, all of the
Purchased Assets, free and clear of any Liens.
IN WITNESS WHEREOF, the undersigned has duly executed
and delivered this Bill of Sale as of the 21st day of June, 1993.
THE RECORD SHOP, INC.,
a Minnesota corporation
By: ______________________________
Mary Ann Levitt
Its: President
SCHEDULE A
1. All of the "F,F&E" (as that term is defined in that certain
Agreement of Purchase and Sale dated as of May 10, 1993, as
amended, by and between Seller and Purchaser (the "Purchase
Agreement")) located on the date hereof at the stores of
Seller listed on Schedule 1 attached hereto (the "Trans-
ferred Stores").
2. All of the "Inventory" (as that term is defined in the
Purchase Agreement) located on the date hereof in (i)
Seller's warehouse in Golden Valley, Minnesota, (ii) the
Transferred Stores, (iii) the stores of Seller listed on
Schedule 2 attached hereto, and(iv) the stores of Seller
listed on Schedule 3 attached hereto.
3. The "Plans" (as that term is defined in the Purchase
Agreement) relating in any way to the Transferred Stores or
the F,F&E located therein.
SCHEDULE 1
[TRANSFERRED STORES]
Store Name Location
20. Arrowhead Mall Arizona
21. Paradise Valley Mall R.S. Arizona
22. Paradise Valley Mall P.M. Arizona
23. Park Central Mall Arizona
24. Superstition Springs Arizona
25. Westridge Mall Arizona
26. Broadway Plaza Mall California
27. Chestnut Street California
28. Manchester Center California
29. Stanford Shopping Center California
30. Valley Fair Mall California
31. North County Fair California
32. Merle Hay Mall Iowa
33. Calhoun Square Minnesota
34. The Meadows Mall Nevada
35. Crossroads Plaza Mall P.M. Utah
36. Crossroads Plaza Mall R.S. Utah
SCHEDULE 2
[MANAGEMENT STORES]
Store Name Location
1. Flagstaff Mall Arizona
2. NewPark Mall California
3. Lindale Mall Iowa
4. Southridge Mall Iowa
5. Valley West Mall Iowa
6. Crossroads Center Minnesota
7. Minneapolis City Center Minnesota
8. Ridgedale Center Minnesota
9. Rosedale Center Minnesota
10. Columbia Mall North Dakota
SCHEDULE 3
[CLOSED STORES]
Store Name Location
1. Brookdale Center Minnesota
2. Southdale Center Minnesota
ASSIGNMENT OF SERVICE MARKS
THIS ASSIGNMENT OF SERVICE MARKS is made as of this
____ day of ___________, 199__, by THE RECORD SHOP, INC., a
Minnesota corporation ("Assignor"), whose principal offices are
located at 2330 Marinship Way, Suite 207, Sausilito, California
94695, in favor of WHEREHOUSE ENTERTAINMENT, INC., a Delaware
corporation ("Assignee"), whose principal offices are located at
19701 Hamilton Avenue, Torrance, California 90502-1334, with
reference to the following:
A. Assignor has adopted and used in its business the
following tradenames, service names, trademarks, service marks
and logos (the "Service Marks"): [TO BE PROVIDED BY SELLER]
B. Assignor desires to sell, assign and transfer to
Assignee, and Assignee desires to purchase and acquire from
Assignor, all of Assignor's right, title and interest in and
to the Service Marks, together with all associated goodwill.
NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,
Assignor agrees as follows:
1. Assignor hereby irrevocably sells, conveys,
assigns and transfers to Assignee and its successors and assigns,
the Service Marks, together with all associated goodwill (collec-
tively, the "Transferred Service Marks").
2. Assignor hereby represents, warrants and covenants
that it is hereby conveying to Assignee good and marketable title
to the Transferred Service Marks, free and clear of all security
interests, liens, pledges, encumbrances, claims, charges, agree-
ments, rights, options, warranties, equities and restrictions
(collectively, the "Liens").
3. Assignor further covenants and agrees that it
will, from time to time, make, execute and deliver such instru-
ments, covenants and assurances as Assignee may reasonably
request in order to vest or otherwise perfect in Assignee good
and marketable title to, and to put Purchaser in possession of,
all of the Transferred Service Marks, free and clear of any
Liens.
IN WITNESS WHEREOF, the undersigned has duly executed
and delivered this Assignment of Service Marks as of the date and
year first above written.
THE RECORD SHOP, INC.,
a Minnesota corporation
By: ______________________________
Mary Ann Levitt
Its: President
EXHIBIT C
SERVICE MARK LICENSE
THIS SERVICE MARK LICENSE (this "License") is made and
entered into as of the 21st day of June, 1993, by and between
WHEREHOUSE ENTERTAINMENT, INC., a Delaware corporation
("Licensee"), and THE RECORD SHOP, INC., a Minnesota corporation
("Licensor"), with reference to the following facts:
A. Licensor owns and operates music retail stores in the
States of Arizona, California, Iowa, Minnesota, Nevada, North
Dakota and Utah (the "Business").
B. Licensor has adopted, used and is using in connection
with its Business various tradenames, service names, trademarks,
service marks and logos, including, without limitation, the
tradenames, service names, trademarks, service marks and logos
described on Exhibit A attached hereto (collectively, the
"Service Marks").
C. Licensee owns and operates music stores ("Licensee's
Business").
D. Contemporaneously herewith, Licensee is acquiring
certain of the assets used by Licensor in connection with the
Business pursuant to the terms of the Agreement of Purchase
and Sale dated as of May 10, 1993 by and between Licensor and
Licensee, as amended (the "Purchase Agreement"). Unless
otherwise defined herein, all capitalized terms used herein
shall have the meanings ascribed to them in the Purchase
Agreement.
E. Pursuant to the provisions of the Purchase Agreement,
Licensee desires to obtain from Licensor the non-exclusive,
royalty-free right to use the Service Marks, and Licensor is
willing to grant such license and right to Licensee upon the
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual
covenants, agreements, representations and warranties herein
contained, the parties hereto hereby agree as follows:
1. Licensor hereby grants to Licensee a non-
exclusive, royalty-free license and right to use the Service
Marks during the "Term" (as hereafter defined) in connection with
Licensee's conduct of Licensee's Business throughout the world,
including, but not limited to, in connection with all Stores,
possession of which is delivered at any time to Licensee by
Licensor in accordance with the Purchase Agreement, subject to
the terms and conditions set forth herein. All use and benefit
of the Service Marks by Licensee hereunder shall inure to the
benefit of Licensee.
2. Licensee at no time during the Term shall do or
cause to be done any act which will, or is intended to, impair
any right, title or interest of Licensor in or to the Service
Marks.
3. Licensor may terminate this License and all rights
of Licensee hereunder to use the Service Marks in the event
Licensee materially defaults in any of its obligations hereunder
and fails to cure such default for a period of 60 days (the "Cure
Period") after Licensee's receipt of written notice from Licensor
specifying such failure and requesting that it be remedied,
provided, however, if the failure stated in the notice cannot be
corrected by Licensee within the Cure Period, Licensor will not
unreasonably withhold its consent to an extension of the Cure
Period if it is possible to correct such failure and corrective
action is instituted by Licensee within the Cure Period and
diligently pursued until said failure is corrected.
4. In order to secure the obligations of Licensor
under this License, Licensor hereby grants a continuing first
priority security interest in and lien upon, and hypothecates,
pledges and assigns to Licensee for security purposes, all of
Licensor's right, title and interest in and to the Service Marks,
the good will and all common law and statutory rights in and to
the Service Marks, together with all other property rights
necessary to effectuate the security interest in the Service
Marks (collectively, the "Collateral"). Upon the occurrence of
an "Event of Default" (as hereafter defined), Licensee shall
have, and be entitled to exercise, all of the rights, remedies,
powers and privileges of a secured party under the Commercial
Code of the State of California, and all other rights and
remedies under any applicable laws in any jurisdiction. Licensor
shall pay to Licensee on demand any and all expenses, including,
without limitation, reasonable attorneys' fees, incurred or paid
by Licensee in protecting or enforcing any of its rights under
this Section 4. Upon the request of Licensee, Licensor shall
execute and deliver UCC financing statements for the States of
Arizona, California, Iowa, Minnesota, Nevada, North Dakota and
Utah, and all other documents reasonably requested by Licensee to
perfect Licensee's security interest in the Collateral. As used
in this Agreement the term "Event of Default" shall mean Licensor
or Licensor as a debtor in possession or a trustee for the estate
of Licensor appointed under the United States Bankruptcy Code,
(i) attempts to terminate this License during the Term except
in strict conformance with Section 3 hereof, (ii) licenses,
sells, hypothecates, pledges or transfers any of the Service
Marks or any interest therein to any other person or entity other
than Licensee or Seller's Assignees in accordance with the
provisions of the Purchase Agreement, and/or (iii) uses any of
the Service Marks other than in connection with Licensor's
operation of Retained Stores.
5. No termination of this License shall affect or
release any obligations or liabilities of either party that
accrued prior to the effective date of such expiration or
termination. The provisions of this Section shall survive the
termination of this License.
6. Subject to the provisions for termination set
forth in Section 3 hereof, the term (the "Term") of this Licensee
shall commence as of the date hereof and shall continue until all
of Licensor's right, title and interest in and to all of the
Service Marks are indefeasibly conveyed to Licensee pursuant to
the terms of the Purchase Agreement.
7. Licensor hereby covenants and agrees that during
the Term Licensor, without the prior written consent of Licensee,
which may be withheld in its sole and absolute discretion, (i)
shall not license, sell, hypothecate, pledge, or transfer any of
the Service Marks or any interest therein to any other person or
entity (other than to Licensee or Seller's Assignees in accord-
ance with the Purchase Agreement), and (ii) shall use the Service
Marks solely in connection with Licensor's operation of the
Retained Stores.
8. To the best of Licensor's knowledge, Licensor
represents and warrants that it owns all right, title and
interest in and to the Service Marks, free and clear of all
Liens. This representation and warranty shall survive the
execution and delivery of this License.
9. All notices, statements or other documents which
any party shall be required or shall desire to give to the other
hereunder shall be in writing and shall be given by said party
only by telecopier, or by courier or personal delivery or by
addressing it as indicated below, and by depositing it certified
first-class mail, return receipt requested, postage prepaid, in
the U.S. mail. The addresses of the parties shall be those of
which the other party actually receives written notice pursuant
to this Section 9, and until further notice:
If to Licensee: Wherehouse Entertainment, Inc.
19701 Hamilton Avenue
Torrance, CA 90502-1334
Facsimile: (310) 538-2583
Attention: Cathy Wood,
Senior Vice President
With a copy to: Mitchell, Silberberg & Knupp
11377 West Olympic Boulevard
Los Angeles, California 90064
Facsimile: (310) 312-3787
Attention: Roy Shults, Esq.
If to Licensor: The Record Shop, Inc.
74 Cloudview Road
Sausalito, CA 94695
Facsimile: (415) 331-2657
Attention: Mort Gerber
With a copy to: Snell & Wilmer
400 East Van Buren
One Arizona Center
Phoenix, AZ 85004-0001
Facsimile: (602) 382-6070
Attention: Jody Pokorski, Esq.
Any such communications given by courier or personal
delivery shall be deemed given when delivered if during normal
business hours on a business day (or if not, the next business
day after delivery); any such communications given by telecopier
shall be deemed given when received if during normal business
hours on a business day (or if not, the next business day after
delivery) provided that such telecopy is legible and that at the
time such telecopy is sent the sending party receives written
confirmation of receipt and forwards a copy of the notice by
courier or personal delivery or by mail; and any such communi-
cations sent by certified first-class mail, return receipt
requested, postage prepaid shall be deemed given two business
days after the date of mailing.
10. The parties shall promptly, from time to time
after the date hereof, execute and deliver to the other party
such further documents, instruments and agreements as the other
party may reasonably request in order to consummate the trans-
actions contemplated by this License.
11. This License and the Purchase Agreement contain
all of the terms and conditions agreed upon by the parties hereto
with respect to the subject matter hereof and all prior agree-
ments whether oral or written between the parties hereto other
than the Purchase Agreement with regard to the subject matter
hereof, are merged herein and superseded hereby. No other
agreements regarding the subject matter hereof not specifically
referred to herein, oral or otherwise, shall be deemed to exist
or to bind any of the parties hereto. This License may not be
modified or changed except by written instruments signed by all
of the parties hereto. Licensor may not assign this License or
any interests therein. Any sale of all or substantially all of
the assets of Licensor (other than to Licensee) or a change in
control of Licensor shall constitute an assignment of this
License. Subject to the immediately preceding two sentences,
this License shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns.
Nothing in this License, expressed or implied, is intended to
confer on any person other than the parties hereto and their
respective successors and assigns any rights or remedies under or
by reason of this License and all agreements specifically
referred to herein.
12. This License may be executed in two counterparts
each of which shall be deemed to be an original and which
together shall constitute one and the same instrument.
13. The parties hereto acknowledge and agree that
monetary damages at law will not be sufficient to compensate
either party hereto in the event of a breach of this Agreement by
the other party hereto and, accordingly, each of the parties
hereto shall have all equitable remedies available to it under
applicable law, including, but not limited to, the right to
obtain preliminary and permanent injunctive relief. No remedy
conferred by any of the specific provisions of this License is
intended to be exclusive of any other remedy, each and every
remedy shall be cumulative and shall be in addition to every
other remedy given hereunder now or hereafter existing at law or
in equity, and an election by a party of one or more remedies
shall not constitute a waiver of the party's right to pursue any
other available remedies.
14. This License shall be governed by and construed in
accordance with the laws of the State of California, without
reference to is principles of conflict of laws.
15. In the event suit is brought to enforce or
interpret any part of this License or the rights or obligations
of any party to this License, the prevailing party shall be
entitled to recover as an element of such party's costs of suit,
and not as damages, reasonable attorneys' fees to be fixed by the
court. The prevailing party shall be the party who is entitled
to recover its costs of suit whether or not the suit proceeds to
final judgment. A party not entitled to recover its costs shall
not recover attorneys' fees. No sum for attorneys' fees shall
be counted in calculating the amount of judgment for purposes of
determining whether a party is entitled to recover its costs or
attorneys' fees.
IN WITNESS WHEREOF, the parties have duly executed this
License as of the date first above written.
LICENSEE: LICENSOR:
WHEREHOUSE ENTERTAINMENT, INC., THE RECORD SHOP, INC.,
a Delaware corporation a Minnesota corporation
By: _____________________ By: ______________________
Scott Young Mary Ann Levitt
Its: President Its: President
By: _____________________
Cathy Wood
Its: Secretary
EXHIBIT A
Tradenames
Record Shop
Paradise Music
Logos
Record Shop
Paradise Music - See attached
EXHIBIT D-1
SECTION 7.18.1 MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is made
and entered into as of the 21st day of June, 1993, by and between
WHEREHOUSE ENTERTAINMENT, INC., a Delaware corporation
("Manager"), and THE RECORD SHOP, INC., a Minnesota corporation
("Lessee"), with reference to the following facts:
A. Pursuant to the terms of that certain lease agreement
("Lease") identified on Exhibit A, attached hereto and hereby
incorporated herein, Lessee leases from "Lessor" (as defined in
Exhibit A) certain retail space (the "Premises").
B. Lessee operates a music retail store at the Premises
[which together with all assets (other than inventory) used in
the operation thereof, including Lessee's interest under the
Lease, all furniture, fixtures and equipment (including, without
limitation, all Sensormatic security systems owned by Lessee),
Lessee's interests under contracts for goods and services
provided to Lessee and leases for the Sensormatic security
systems and other equipment not owned by Lessee shall be referred
to herein collectively as the "Store"], for which it wishes to
obtain professional management services.
C. Manager is experienced and qualified in the management
of retail music stores.
D. Manager and Lessee are entering into this Agreement
pursuant to Sections 4.7, 5.3 and 7.18 of that certain Agreement
of Purchase and Sale, dated as of May 10, 1993, by and between
Manager and Lessee, as amended (the "Acquisition Agreement") and
this Agreement is one of the 7.18.1 "Management Agreements" to be
entered into by the parties hereto pursuant to the Acquisition
Agreement. Each initially capitalized term used but not defined
in this Management Agreement is used herein as defined in the
Acquisition Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants, agreements, representations and warranties herein
contained, the parties hereto hereby agree as follows:
1. Appointment of Manager. Lessee hereby appoints Manager
as sole and exclusive manager of the Store, and Manager hereby
accepts such appointment, all on the terms and conditions set
forth in this Agreement.
2. Scope of Management Services. Commencing with the
"Effective Date" (as hereafter defined) and continuing until
termination of this Agreement as provided herein, Manager shall
employ its skill and professional expertise in managing the Store
and shall manage the Store generally in accordance with the
standards employed in operating retail music stores owned by
Manager. For the avoidance of doubt, the parties acknowledge
that in connection with Manager's operation of the Store, Manager
shall have the exclusive and irrevocable right to exercise all of
Lessee's rights in connection with all assets of Lessee currently
used in the operation thereof (other than Lessee's inventory)
(collectively, the "Lessee's Store Assets"), including, without
limitation, Lessee's interest under the Lease, the furniture,
fixtures and equipment (including, without limitation, all
Sensormatic security systems owned by Lessee) located on the
Premises, Lessee's interests under contracts for goods and
services provided to Lessee listed on Schedule 2 attached hereto
(collectively, the "Store Contracts") and leases for the Sensor-
matic security systems and other equipment not owned by Lessee
listed on Schedule 2 attached hereto (collectively, the "Equip-
ment Leases"). Notwithstanding anything herein to the contrary,
Manager shall have full authority to manage and operate the Store
as it sees fit subject to the terms of this Management Agreement
and shall not be required to obtain Lessee's consent or approval
in connection with any matter arising out of the management or
operation of the Store. Without limiting the generality of the
foregoing, Manager shall be permitted, in its sole discretion, to
(i) enter into and perform contracts and agreements in its own
name for the furnishing of goods and services of all kinds to the
Store, (ii) assume obligations of all kinds in connection with
the management and operation of the Store, and (iii) recruit,
hire and terminate the services of all employees and independent
contractors who perform services in connection with the operation
of the Store. Lessee shall have no rights of any kind in connec-
tion with the operation or management of the Store, provided,
however, that Manager shall grant Lessee reasonable access to the
Store during normal business hours and shall permit Lessee, upon
reasonable advance notice to Manager, to review the books and
records maintained by Manager in connection with the management
and operation of the Store to the extent reasonably necessary to
verify that Manager has performed its obligations under this
Agreement. In addition, Manager shall grant Lessor access to
review the books and records maintained by Manager to the same
extent that Lessee has granted Lessor such rights to review
Lessee's books and records.
3. Term. The term (the "Term") of this Agreement shall
commence on the date Manager obtains sole and exclusive posses-
sion of the Store (the "Effective Date") and shall continue for a
period equal to the remaining term of the Lease (including any
rights of extension and renewal periods exercised by Lessee prior
to the date hereof), unless earlier terminated in accordance with
the terms hereof.
4. Obligations Under the Lease, Store Contracts and
Equipment Leases. During the Term, Manager shall be subject to
and bound by and comply with all terms and conditions of the
Lease with respect to the Premises, Store Contracts and the
Equipment Leases other than those terms and conditions described
on Schedule 4 attached hereto.
5. Management Fees; Expenses.
5.1 As compensation for the services Manager provides
hereunder, Manager shall be entitled to retain for its own
account all revenues, income and proceeds of all sales and
rentals of every kind (whether in cash or on credit) received
by or for the Store or Manager resulting from the operations of
the Store.
5.2 Notwithstanding the provisions of Section 5.1 of
this Agreement, Manager shall pay all costs and expenses of
managing, operating and maintaining the Store during the Term.
Without limiting the generality of the foregoing, Manager shall
pay to Lessee all amounts which accrue during the Term and are
not due to an act of Lessee or a failure by Lessee to perform any
obligation under the Lease, any Store Contract or any Equipment
Lease (i) arising at any time other than during the Term or (ii)
with respect to obligations under the Lease, arising during the
Term and described on Schedule 4 attached hereto, whether or not
resulting in a default thereunder, of (a) rent, additional rent,
common area fees and other amounts due to be paid by Lessee to
Lessor under the Lease as it now is in existence (or hereafter
amended pursuant to Section 6.4 below), and (b) all rent and
other amounts due to be paid by Lessee to the applicable third
party (each a "Contracting Party") under all Store Contracts and
Equipment Leases as such agreements are now in existence (or
hereafter amended pursuant to Section 6.4 below). At least five
(5) business days before the first day of each calendar month
during the Term, Manager shall pay to Lessee (i) all amounts
of rent and additional rent to be paid during such month by
Lessee to Lessor pursuant to the terms of the Lease and (ii) all
amounts of rent and other regularly scheduled payments to be
paid during such month by Lessee to the applicable Contracting
Party pursuant to the terms of the Store Contracts and the
Equipment Leases. Manager shall pay to Lessee all other amounts
due to be paid by Lessee to Lessor or the Contracting Parties, as
applicable, under the Lease, the Store Contracts and/or the
Equipment Leases not described in the immediately preceding
two sentences ("Additional Amounts") upon the later of (a) five
(5) business days after Manager receives written notice of the
Additional Amounts due (which written notice shall include a
detailed description and calculation of such Additional Amounts),
and (b) five (5) business days before such Additional Amounts are
required to be paid pursuant to the terms of the Lease, the Store
Contracts or the Equipment Leases, as the case may be. Payments
to Lessee pursuant to this Section 5.2 for any partial month
during the Term shall be prorated. All rent or other amounts
paid by Manager pursuant to this Section 5.2 which are later
refunded to Lessee by Lessor under the Lease or by any Contract-
ing Party under the Store Contracts and Equipment Leases shall
either, at Manager's option, offset future amounts due to be paid
to Lessee pursuant to this Section 5.2 or be paid by Lessee to
Manager.
6. Additional Covenants.
6.1 On or before the Effective Date, Lessee shall, at
its sole cost and expense:
6.1.1 Deliver possession of the Store to
Manager.
6.1.2 Deliver to Manager appropriate authori-
zations to provide for the transfer of the Store's telephone
numbers and other utilities to Manager and for the closing
of billing as of the Effective Date.
6.1.3 Deliver to Manager all keys, combina-
tions to locks and security codes for all security systems
relating to the Store (collectively, the "Entry Devices").
6.2 Prior to fourteen (14) days after the Effective
Date, Lessee shall, at its sole cost and expense, remove all of
its assets from the Store which do not constitute Lessee's
Store Assets.
6.3 During the Term, Lessee shall make timely payments
of rent, additional rent, lease payments, and all other amounts
as required by the Lease, the Equipment Leases and the Store
Contracts, provided that Lessee shall not be required to make
such payments if Lessee has timely notified Manager of the amount
of any such payment (but only to the extent such notice is
required pursuant to Section 5.2 hereof) and Manager has failed
to make such payments to Lessee. During the Term, Lessee shall
perform all of its obligations under the Lease described on
Schedule 4 attached hereto. Lessee shall use its best efforts to
cause Lessor to perform all of its obligations under the Lease
and to cause each Contracting Party to perform all of its
obligations under the applicable Store Contract and Equipment
Lease except that Lessee shall not be required to commence
litigation to enforce such obligations. Lessee hereby agrees
that Manager shall be assigned all rights which Lessee may have
to proceed against Lessor or the applicable Contracting Party
under the Lease or the applicable Store Contract or Equipment
Lease arising out of or in connection with Lessee's obligations
under the Lease or the applicable Store Contract or Equipment
Lease which Manager has agreed to perform pursuant to the terms
of this Agreement.
6.4 During the Term, Lessee shall give Manager at
least 7 days prior notice of all proposed amendments or modifi-
cations to the Lease or any Store Contract or Equipment Lease.
During the Term, Lessee shall not amend or modify the Lease or
any Store Contract or Equipment Lease in a manner that would
materially and adversely affect Manager, the Store Contracts or
the Equipment Leases without the prior written consent of
Manager, which consent shall not be unreasonably withheld.
6.5 All employees performing services in connection
with the management and operation of the Store during the Term
shall be employees of Manager and Manager shall solely establish
the terms and conditions of employment for all employees and
shall pay all salaries and other compensation due such employees.
6.6 During the Term, Lessee and Manager shall use
their best efforts to insure that notices sent by Lessor to the
lessee under the Lease are sent both to Manager and Lessee at the
address that each party may designate from time to time, provided
that Manager and Lessee mutually determine, in their reasonable
discretion, that doing so will not adversely affect the parties'
ability to obtain a Store Leasehold Consent with respect to the
Store.
6.7 During the Term, each party shall promptly forward
to the other party copies of all communications, including but
not limited to notices, bills and accounting statements, that it
receives from Lessor.
6.8 During the Term, neither Lessee nor Manager shall
perform any act which results in a default under the Lease or any
Store Contract or Equipment Lease.
7. Inventory Located at the Store. Lessee acknowledges
and agrees that all of the inventory of music records, pre-
recorded and unrecorded tapes and cassettes, compact discs and
accessories, videos, laser discs (collectively, the "Inventory")
located at the Store on the Effective Date shall be transferred
to Manager by Lessee pursuant to the Acquisition Agreement and
thereafter Lessee shall have no ownership interest or security
interest in such Inventory or any other Inventory thereafter
located in the Store whatsoever.
8. Termination of Agreement.
8.1 This Agreement shall immediately terminate upon
(i) the occurrence of a "Delayed Closing" (as such term is
defined in the Acquisition Agreement) with respect to the Store,
or (ii) termination of the Lease for any reason.
8.2 Either Manager or Lessee may terminate this
Agreement upon 60 days written notice in the event that Manager
and Lessee mutually determine, in their reasonable discretion,
(i) that they will not be able to obtain a Store Leasehold
Consent for the Store in the future, or (ii) that performing
their respective obligations under this Agreement will adversely
affect the parties' ability to obtain a Store Leasehold Consent
with respect to the Store. Either Manager or Lessee may
terminate this Agreement in its sole discretion upon 60 days
written notice (or such lesser time period if, in such terminat-
ing party's reasonable judgment, the parties should terminate
this Agreement and Manager should vacate the Store within such
lesser time period in order to minimize the parties' potential
liability) in the event that (a) Lessor's consent is required in
order for Manager and Lessee to enter into and perform this
Agreement, (b) Lessor has refused to grant such consent, and (c)
Lessor has taken (or has threatened to take) action which would
have a material adverse effect on either Manager or Lessee. In
addition, either Manager or Lessee may terminate this Agreement
in its sole and arbitrary discretion upon 60 days written notice
to the other party, provided, however, that such notice shall not
be given prior to November 30, 1993.
8.3 In the event a party (the "Breaching Party") fails
to observe and perform its monetary obligations under this Agree-
ment for a period of 15 days or its non-monetary obligations
under this Agreement for a period of 30 days (the "Cure Period")
after the Breaching Party's receipt of written notice from the
other party hereto (the "Non-Breaching Party") specifying such
failure and requesting that it be remedied, the Non-Breaching
Party may terminate this Agreement by delivering written notice
thereof to the Breaching Party, provided, however, if the failure
stated in the notice cannot be corrected by the Breaching Party
within the Cure Period, the Non-Breaching Party will not unrea-
sonably withhold its consent to an extension of the Cure Period
if it is possible to correct such failure and corrective action
is instituted by the Breaching Party within the Cure Period and
diligently pursued until said failure is corrected.
8.4 On or within three days before the date on which
this Agreement terminates (except in the event of a termination
due to a Delayed Closing), Manager shall deliver possession of
the Store to Lessee (in the same condition and repair as at
commencement of the Term, reasonable wear and tear excepted) and
shall (i) remove all of the assets from the Store other than
Lessee's Store Assets, (ii) deliver to Lessee appropriate
authorizations to provide for the transfer of the Store's
telephone numbers and other utilities to Lessee and for the
closing of billing as of the termination date of this Agreement
and (iii) deliver to Lessee all Entry Devices.
8.5 Upon termination of this Agreement, other than a
termination due to a Delayed Closing or termination of the Lease,
Lessee, at Lessee's sole option, shall have the right to purchase
Manager's furniture, fixtures and equipment ("FF&E") and/or
inventory (other than used compact discs) located in the
Premises, provided that Lessee shall notify Manager in writing
that it intends to purchase the FF&E and/or inventory (other than
used compact discs) at least two (2) weeks prior to the date of
the termination of this Agreement or in the event this Agreement
is terminated by either party with less than sixty (60) days
notice in accordance with Section 8.2 hereof prior to the termi-
nation of this Agreement. If Lessee purchases the FF&E pursuant
to this Section, the price for such FF&E shall be Manager's cost.
If Lessee purchases Manager's inventory pursuant to this Section,
the price of such inventory shall be Manager's cost of such
inventory, less the discounts applied to the purchase of inven-
tory set forth in Section 2.1.2 of the Acquisition Agreement
other than the discount referred to in Section 2.1.2.4 of the
Acquisition Agreement. All costs of ascertaining the value of
the property transferred pursuant to this Section 8.5 shall be
borne two-thirds by Lessee and one-third by Manager.
9. Indemnification of Manager.
9.1 Lessee agrees to, and hereby does, fully indem-
nify, defend and save and hold Manager harmless at all times in
the event that Manager shall at any time or from time to time
suffer any damage, obligation, liability, loss, cost, expense,
claim, settlement or causes of action (including all reasonable
attorneys' fees) arising out of, resulting from or in connection
with, or shall pay or become obligated to pay any sum on account
of (i) any damage to the Store or Lessee's Store Assets at any
time other than during the Term, (ii) the management or operation
of the Store by Lessee at any time other than during the Term,
(iii) Lessee's failure to obtain Lessor's or any Contracting
Party's consent to Manager and Lessee entering into this Agree-
ment (collectively the "Lessor/Contracting Party Consents"), (iv)
any action or omission by Lessor or any Contracting Party
resulting from or in connection with Lessee's failure to obtain
all Lessor/Contracting Party Consents, (v) the presence or
migration at any time prior to, during or after the Term of any
pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes, including, without limitation,
asbestos (collectively, "Polluting Substances") on, into or from
the Store, the Premises or the real property under or adjacent to
the Premises other than such Polluting Substances brought onto or
in the Store, the Premises or the real property under or adjacent
to the Premises by Manager, its employees or agents, (vi) any
breach by Lessee of the terms hereof (including, without limita-
tion, failure by Lessee to comply with the terms of the Lease,
Equipment Leases and Store Contracts to be performed by Lessee
pursuant hereto), (vii) any act of Lessee which results in a
default under the Lease or any Equipment Lease or Store Contract,
and/or (viii) any failure by Lessee to perform any obligation
under the Lease, any Equipment Lease or any Store Contract which
arose at any time other than during the Term or, with respect to
obligations under the Lease, which arose during the Term and is
described on Schedule 4 attached hereto (collectively, "Events of
Manager Indemnification").
9.2 Whenever any claim shall arise for indemnification
pursuant to Section 9.1, Manager shall promptly notify Lessee of
the claim and, when known, the facts constituting the basis for
such claim, provided that failure of Manager to provide Lessee
with such notice shall not excuse or affect Lessee's indemnifi-
cation obligations under Section 9.1 unless the failure to
provide such notice shall actually prejudice Lessee. In the
event Lessee shall become obligated to Manager pursuant to
Section 9.1, or in the event that any suit, action, investiga-
tion, claim or proceeding is begun, made or instituted as a
result of which Lessee may become obligated to Manager there-
under, Lessee shall have the right to defend, contest or other-
wise protect against any such suit, action, investigation, claim
or proceeding by one or more counsel reasonably acceptable to
Manager. In the event Lessee so elects to defend or contest,
Manager shall have the right, at its expense, to participate in
such defense, but such defense shall at all times be conducted by
and under the control of Lessee and its counsel. In the event
that Lessee elects not to defend, contest or otherwise protect
against any action, investigation, claim or proceeding, Manager
shall have the right, at Lessee's expense, to pursue any such
defense, contest or protection.
10. Indemnification of Lessee.
10.1 Manager agrees to, and hereby does, fully indem-
nify, defend and save and hold Lessee harmless at all times in
the event that Lessee shall at any time or from time to time
suffer any damage, obligation, liability, loss, cost, expense,
claim, settlement or causes of action (including all reasonable
attorneys' fees) arising out of, resulting from or in connection
with, or shall pay or become obligated to pay any sum on account
of (i) any damage to Store or Lessee's Store Assets (other than
reasonable wear and tear) during the Term caused by the gross
negligence or willful misconduct or willful neglect of Manager,
(ii) any breach by Manager of the terms hereof, including without
limitation, failure by Manager to comply with the terms of the
Lease, the Store Contracts and the Equipment Leases to be
complied with by Manager pursuant to the terms of this Agreement,
(iii) the presence or migration at any time during the Term of
any Polluting Substances brought onto, into or from the Store,
the Premises or the real property under or adjacent to the
Premises by Manager, its employees and agents, (iv) the manage-
ment or operation of the Store by Manager during the Term, (v)
any act of Manager during the Term which results in a default
under the Lease or any Equipment Lease or Store Contract, other
than defaults with respect to Lease obligations described on
Schedule 4 attached hereto, or (vi) any failure by Manager to
perform any obligation under the Lease, any Equipment Lease or
any Store Contract which arose during the Term and is not
described on Schedule 4 attached hereto, provided, however, any
such damages, obligations, liabilities, losses, costs expenses,
claims, settlements, or causes of action do not arise out of,
result from or be attributable to (a) an Event of Manager
Indemnification or (b) any action or omission by Lessor or any
Contracting Party resulting from or in connection with Lessee's
failure to obtain all Lessor/Contracting Party Consents and
"Lease Consents" (as defined below). For the avoidance of doubt,
Manager shall have no liability to Lessee for any lost revenues,
profits, income or other sums resulting from or in connection
with Lessor's or the Contracting Parties' termination of the
Lease or any or all of the Equipment Leases and Store Contracts.
However, Manager shall be liable for any and all other damage,
loss, cost, obligation, liability, expense, claim, settlement or
cause of action (including reasonable attorneys' fees) suffered
by Lessee as a result of or in connection with a termination of
the Lease or any or all of the Equipment Leases and Store
Contracts by Lessor or any applicable Contracting Party, which
termination is caused by an act or omission of Manager which
gives rise to indemnification of Lessee under clause (v) or (vi)
of this Section 10.1 provided that such termination is not a
result of Lessee's failure to obtain all Lessor/Contracting Party
Consents and Lease Consents or Lessee's breach of the Lease or
any of the Equipment Leases or Store Contracts.
10.2 Whenever any claim shall arise for indemnification
pursuant to Section 10.1, Lessee shall promptly notify Manager of
the claim and, when known, the facts constituting the basis for
such claim, provided that failure of Lessee to provide Manager
with such notice shall not excuse or affect Manager's indemnifi-
cation obligations under Section 10.1 unless the failure to
provide such notice shall actually prejudice Manager. In the
event Manager shall become obligated to Lessee pursuant to
Section 10.1, or in the event that any suit, action, investiga-
tion, claim or proceeding is begun, made or instituted as a
result of which Manager may become obligated to Lessee there-
under, Manager shall have the right to defend, contest or other-
wise protect against any such suit, action, investigation, claim
or proceeding by one or more counsel of its choice reasonably
acceptable to Lessee. If Manager so elects to defend or contest,
Lessee shall have the right, at its expense, to participate in
such defense, but such defense shall at all times be conducted by
and under the control of Manager and its counsel, and Lessee
shall be fully bound by the results thereof. In the event
Manager elects not to defend, contest or otherwise protest
against any such suit, investigation, claim or proceeding, Lessee
shall have the right, at Manager's expense, to pursue any such
defense, contest or protection.
10.3 For the purposes of this Agreement "Lease
Consents" shall include (i) Lessor's consent to Manager's closing
the Store for the purpose of remodeling the Store generally in
accordance with Section 16.4 of the "Form Store Leasehold
Consent" referenced on Schedule 2.5.1.1 of the Acquisition
Agreement for the period commencing June 20, 1993 and ending June
26, 1993, (ii) Lessor's waiver of any lien on Manager's assets,
{and (iii) the radius restriction set forth in Section ____ of
the Lease}.
11. Notices. All notices, statements or other documents
which any party shall be required or shall desire to give to the
other hereunder shall be in writing and shall be given by said
party only by telecopier, or by courier or personal delivery
or by addressing it as indicated below, and by depositing it
certified first-class mail, return receipt requested, postage
prepaid, in the U.S. mail. The addresses of the parties shall be
those of which the other party actually receives written notice
pursuant to this Section 11, and until further notice:
If to Manager: Wherehouse Entertainment, Inc.
19701 Hamilton Avenue
Torrance, CA 90502-1334
Facsimile: (310) 538-2583
Attention: Cathy Wood,
Senior Vice President
With a copy to: Mitchell, Silberberg & Knupp
11377 West Olympic Boulevard
Los Angeles, California 90064
Facsimile: (310) 312-3787
Attention: Roy Shults, Esq.
If to Lessee: The Record Shop, Inc.
74 Cloudview Road
Sausalito, CA 94695
Facsimile: (415) 331-2657
Attention: Mort Gerber
With a copy to: Snell & Wilmer
400 East Van Buren
One Arizona Center
Phoenix, AZ 85004-0001
Facsimile: (602) 382-6070
Attention: Jody Pokorski, Esq.
Any such communications given by courier or personal
delivery shall be deemed given when delivered if during normal
business hours on a business day (or if not, the next business
day after delivery); any such communications given by telecopier
shall be deemed given when received if during normal business
hours on a business day (or if not, the next business day after
delivery) provided that such telecopy is legible and that at the
time such telecopy is sent the sending party receives written
confirmation of receipt and forwards a copy of the notice by
courier or personal delivery or by mail; and any such communi-
cations sent by certified first-class mail, return receipt
requested, postage prepaid shall be deemed given two business
days after the date of mailing.
12. Miscellaneous.
12.1 Each of the parties hereto shall use its best
efforts to bring about the transactions contemplated by this
Agreement as soon as practicable, including the execution and
delivery of all instruments, assignments and assurances, and
shall take or cause to be taken such further or other actions
reasonably necessary or desirable in order to carry out the
intents and purposes of this Agreement. No party will take or
knowingly permit to be taken any action or do or knowingly permit
to be done anything in the conduct of their respective business-
es, or otherwise, which would be contrary to or in breach of any
of the terms or provisions of this Agreement, or which would
cause any of the representations contained herein to be or become
untrue or which would prevent the satisfaction of any condition
contained herein.
12.2 The parties shall promptly, from time to time
after the date hereof, execute and deliver to the other party
such further documents, instruments and agreements as the other
party may reasonably request in order to consummate the trans-
actions contemplated by this Agreement.
12.3 This Agreement, the Acquisition Agreement and all
of the other Management Agreements between Manager and Lessee
contain all of the terms and conditions agreed upon by the
parties hereto with respect to the subject matter hereof, and all
prior agreements (other than the Acquisition Agreement and all of
the other Management Agreements between Lessee and Manager)
regarding the subject matter hereof whether oral or written
between the parties hereto, are merged herein and therein and
superseded hereby and thereby. No other agreements regarding the
subject matter hereof not specifically referred to herein or in
the Acquisition Agreement, oral or otherwise, shall be deemed to
exist or to bind any of the parties hereto. This Agreement may
not be modified or changed except by written instruments signed
by all of the parties hereto. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors and assigns.
12.4 All captions and headings are inserted for the
convenience of the parties, and shall not be used in any way to
modify, limit, construe or otherwise affect this Agreement.
12.5 Upon termination of this Agreement as provided
herein, the parties' respective obligations hereunder shall
terminate except for the provisions of Sections 9 and 10 hereof
which shall survive the termination of this Agreement.
12.6 Subject to Section 12.9 hereof, each party hereto
shall bear its own expenses incurred with respect to the prepara-
tion, authorization, execution and performance of this Agreement
and all transactions contemplated hereunder (including, without
limitation, all fees and expenses of agents, representatives,
counsel and accountants).
12.7 This Agreement may be executed in two counterparts
each of which shall be deemed to be an original and which toge-
ther shall constitute one and the same instrument.
12.8 This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without
reference to its principles of conflict of laws.
12.9 Notwithstanding any provision to the contrary
contained herein or in any agreement referenced herein, this
Agreement shall not be deemed to confer any rights or benefits
upon any person other than the parties hereto.
12.10 In the event suit is brought to enforce or
interpret any part of this Agreement or the rights or obligations
of any party to this Agreement, the prevailing party shall be
entitled to recover as an element of such party's costs of suit,
and not as damages, reasonable attorneys' fees to be fixed by the
court. The prevailing party shall be the party who is entitled
to recover its costs of suit whether or not the suit proceeds to
final judgment. A party not entitled to recover its costs shall
not recover attorneys' fees. No sum for attorneys' fees shall be
counted in calculating the amount of judgment for purposes of
determining whether a party is entitled to recover its costs or
attorneys' fees.
12.11 Each party shall cooperate with the other
party to the extent that such cooperation is required, by the
terms of the Lease or any of the Equipment Leases or Store
Contracts or otherwise, to enable the other party's performance
of any of its obligations under this Agreement.
12.12 Each party shall hold, and shall use its best
efforts to cause its officers, directors, employees, accountants,
counsel, consultants, advisors and agents ("Representatives") to
hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, the terms
of this Agreement ("Terms"), provided that the parties or a
Representative may disclose the Terms to its Representatives in
connection with the transactions contemplated by this Agreement
so long as such persons are informed of the confidential nature
of the Terms and are directed to treat such information confiden-
tially. Notwithstanding the preceding sentence, this Section
shall not prohibit (i) any disclosure (including, without limita-
tion, any dissemination of copies of this Agreement) required by
any applicable law, statute or rule or requested by any govern-
mental agency (including, without limitation, any federal or
state securities law and any rule or regulation promulgated by
the Securities and Exchange Commission ("SEC") or any state
agency or authority having jurisdiction over the parties or their
affiliates) or (ii) any disclosure of such information in any
financial statements of Manager, Lessee or affiliates thereof to
the extent such disclosures are required by law (including,
without limitation, any federal or state securities law and any
rule or regulation promulgated by the SEC or any state agency or
authority having jurisdiction over the parties or their
affiliates).
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
MANAGER: LESSEE:
WHEREHOUSE ENTERTAINMENT, INC., THE RECORD SHOP, INC.
a Delaware corporation a Minnesota corporation
By: _______________________ By: _____________________
Scott Young Mary Ann Levitt
Its: President Its: President
By: _______________________
Cathy Wood
Its: Secretary
SCHEDULE 2
List of Store Contracts
List of Equipment Leases
SCHEDULE 4.1
Provisions of the Lease:
Provisions of the Store Contracts:
Provisions of the Equipment Leases:
EXHIBIT D-2
SECTION 7.18.2 MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is made
and entered into as of the 21st day of June, 1993, by and between
WHEREHOUSE ENTERTAINMENT, INC., a Delaware corporation
("Manager"), and THE RECORD SHOP, INC., a Minnesota corporation
("Lessee"), with reference to the following facts:
A. Pursuant to the terms of that certain lease agreement
("Lease") identified on Exhibit A, attached hereto and hereby
incorporated herein, Lessee leases from "Lessor" (as defined in
Exhibit A) certain retail space (the "Premises").
B. Lessee operates a music retail store at the Premises
[which together with all assets (other than inventory) used in
the operation thereof, including Lessee's interest under the
Lease, all furniture, fixtures and equipment (including, without
limitation, all Sensormatic security systems owned by Lessee),
Lessee's interests under contracts for goods and services
provided to Lessee and leases for the Sensormatic security
systems and other equipment not owned by Lessee shall be referred
to herein collectively as the "Store"], for which it wishes to
obtain professional management services.
C. Manager is experienced and qualified in the management
of retail music stores.
D. Manager and Lessee are entering into this Agreement
pursuant to Sections 4.7, 5.3 and 7.18 of that certain Agreement
of Purchase and Sale, dated as of May 10, 1993, by and between
Manager and Lessee, as amended (the "Acquisition Agreement") and
this Agreement is one of the 7.18.2 "Management Agreements" to be
entered into by the parties hereto pursuant to the Acquisition
Agreement. Each initially capitalized term used but not defined
in this Management Agreement is used herein as defined in the
Acquisition Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants, agreements, representations and warranties herein
contained, the parties hereto hereby agree as follows:
1. Appointment of Manager. Lessee hereby appoints Manager
as sole and exclusive manager of the Store, and Manager hereby
accepts such appointment, all on the terms and conditions set
forth in this Agreement.
2. Scope of Management Services. Commencing with the
"Effective Date" (as hereafter defined) and continuing until
termination of this Agreement as provided herein, Manager shall
employ its skill and professional expertise in managing the Store
and shall manage the Store generally in accordance with the
standards employed in operating retail music stores owned by
Manager. For the avoidance of doubt, the parties acknowledge
that in connection with Manager's operation of the Store, Manager
shall have the exclusive and irrevocable right to exercise all of
Lessee's rights in connection with all assets of Lessee currently
used in the operation thereof (other than Lessee's inventory)
(collectively, the "Lessee's Store Assets"), including, without
limitation, Lessee's interest under the Lease, the furniture,
fixtures and equipment (including, without limitation, all
Sensormatic security systems owned by Lessee) located on the
Premises, Lessee's interests under contracts for goods and
services provided to Lessee listed on Schedule 2 attached hereto
(collectively, the "Store Contracts") and leases for the
Sensormatic security systems and other equipment not owned by
Lessee listed on Schedule 2 attached hereto (collectively, the
"Equipment Leases"). Notwithstanding anything herein to the
contrary, Manager shall have full authority to manage and operate
the Store as it sees fit subject to the terms of this Management
Agreement and shall not be required to obtain Lessee's consent or
approval in connection with any matter arising out of the manage-
ment or operation of the Store. Without limiting the generality
of the foregoing, Manager shall be permitted, in its sole discre-
tion, to (i) enter into and perform contracts and agreements in
its own name for the furnishing of goods and services of all
kinds to the Store, (ii) assume obligations of all kinds in
connection with the management and operation of the Store, and
(iii) recruit, hire and terminate the services of all employees
and independent contractors who perform services in connection
with the operation of the Store. Lessee shall have no rights of
any kind in connection with the operation or management of the
Store, provided, however, that Manager shall grant Lessee reason-
able access to the Store during normal business hours and shall
permit Lessee, upon reasonable advance notice to Manager, to
review the books and records maintained by Manager in connection
with the management and operation of the Store to the extent
reasonably necessary to verify that Manager has performed its
obligations under this Agreement. In addition, Manager shall
grant Lessor access to review the books and records maintained by
Manager to the same extent that Lessee has granted Lessor such
rights to review Lessee's books and records.
3. Term. The term (the "Term") of this Agreement shall
commence on the date Manager obtains sole and exclusive posses-
sion of the Store (the "Effective Date") and shall continue for a
period equal to the remaining term of the Lease (including any
rights of extension and renewal periods exercised by Lessee prior
to the date hereof), unless earlier terminated in accordance with
the terms hereof.
4. Obligations Under the Lease, Store Contracts and
Equipment Leases. During the Term, Manager shall be subject to
and bound by and comply with all terms and conditions of the
Lease with respect to the Premises, Store Contracts and the
Equipment Leases other than those terms and conditions described
on Schedule 4 attached hereto.
5. Management Fees; Expenses.
5.1 As compensation for the services Manager provides
hereunder, Manager shall be entitled to retain for its own
account all revenues, income and proceeds of all sales and
rentals of every kind (whether in cash or on credit) received
by or for the Store or Manager resulting from the operations of
the Store.
5.2 Notwithstanding the provisions of Section 5.1 of
this Agreement, Manager shall pay all costs and expenses of
managing, operating and maintaining the Store during the Term.
Without limiting the generality of the foregoing, Manager shall
pay to Lessee all amounts which accrue during the Term and are
not due to an act of Lessee or a failure by Lessee to perform any
obligation under the Lease, any Store Contract or any Equipment
Lease (i) arising at any time other than during the Term or (ii)
with respect to obligations under the Lease, arising during the
Term and described on Schedule 4 attached hereto, whether or not
resulting in a default thereunder, of (a) rent, additional rent,
common area fees and other amounts due to be paid by Lessee to
Lessor under the Lease as it now is in existence (or hereafter
amended pursuant to Section 6.4 below), and (b) all rent and
other amounts due to be paid by Lessee to the applicable third
party (each a "Contracting Party") under all Store Contracts and
Equipment Leases as such agreements are now in existence (or
hereafter amended pursuant to Section 6.4 below). At least five
(5) business days before the first day of each calendar month
during the Term, Manager shall pay to Lessee (i) all amounts
of rent and additional rent to be paid during such month by
Lessee to Lessor pursuant to the terms of the Lease and (ii) all
amounts of rent and other regularly scheduled payments to be
paid during such month by Lessee to the applicable Contracting
Party pursuant to the terms of the Store Contracts and the
Equipment Leases. Manager shall pay to Lessee all other amounts
due to be paid by Lessee to Lessor or the Contracting Parties, as
applicable, under the Lease, the Store Contracts and/or the
Equipment Leases not described in the immediately preceding
two sentences ("Additional Amounts") upon the later of (a) five
(5) business days after Manager receives written notice of the
Additional Amounts due (which written notice shall include a
detailed description and calculation of such Additional
Amounts), and (b) five (5) business days before such Additional
Amounts are required to be paid pursuant to the terms of the
Lease, the Store Contracts or the Equipment Leases, as the case
may be. Payments to Lessee pursuant to this Section 5.2 for any
partial month during the Term shall be prorated. All rent or
other amounts paid by Manager pursuant to this Section 5.2 which
are later refunded to Lessee by Lessor under the Lease or by any
Contracting Party under the Store Contracts and Equipment Leases
shall either, at Manager's option, offset future amounts due to
be paid to Lessee pursuant to this Section 5.2 or be paid by
Lessee to Manager.
6. Additional Covenants.
6.1 On or before the Effective Date, Lessee shall, at
its sole cost and expense:
6.1.1 Deliver possession of the Store to
Manager.
6.1.2 Deliver to Manager appropriate authori-
zations to provide for the transfer of the Store's telephone
numbers and other utilities to Manager and for the closing
of billing as of the Effective Date.
6.1.3 Deliver to Manager all keys, combina-
tions to locks and security codes for all security systems
relating to the Store (collectively, the "Entry Devices").
6.2 Prior to fourteen (14) days after the Effective
Date, Lessee shall, at its sole cost and expense, remove all of
its assets from the Store which do not constitute Lessee's
Store Assets.
6.3 During the Term, Lessee shall make timely payments
of rent, additional rent, lease payments, and all other amounts
as required by the Lease, the Equipment Leases and the Store
Contracts, provided that Lessee shall not be required to make
such payments if Lessee has timely notified Manager of the amount
of any such payment (but only to the extent such notice is
required pursuant to Section 5.2 hereof) and Manager has failed
to make such payments to Lessee. During the Term, Lessee shall
perform all of its obligations under the Lease described on
Schedule 4 attached hereto. Lessee shall use its best efforts to
cause Lessor to perform all of its obligations under the Lease
and to cause each Contracting Party to perform all of its
obligations under the applicable Store Contract and Equipment
Lease except that Lessee shall not be required to commence
litigation to enforce such obligations. Lessee hereby agrees
that Manager shall be assigned all rights which Lessee may have
to proceed against Lessor or the applicable Contracting Party
under the Lease or the applicable Store Contract or Equipment
Lease arising out of or in connection with Lessee's obligations
under the Lease or the applicable Store Contract or Equipment
Lease which Manager has agreed to perform pursuant to the terms
of this Agreement.
6.4 During the Term, Lessee shall give Manager at
least 7 days prior notice of all proposed amendments or modifi-
cations to the Lease or any Store Contract or Equipment Lease.
During the Term, Lessee shall not amend or modify the Lease or
any Store Contract or Equipment Lease in a manner that would
materially and adversely affect Manager, the Store Contracts or
the Equipment Leases without the prior written consent of
Manager, which consent shall not be unreasonably withheld.
6.5 All employees performing services in connection
with the management and operation of the Store during the Term
shall be employees of Manager and Manager shall solely establish
the terms and conditions of employment for all employees and
shall pay all salaries and other compensation due such employees.
6.6 During the Term, Lessee and Manager shall use
their best efforts to insure that notices sent by Lessor to the
lessee under the Lease are sent both to Manager and Lessee at the
address that each party may designate from time to time.
6.7 During the Term, each party shall promptly forward
to the other party copies of all communications, including but
not limited to notices, bills and accounting statements, that it
receives from Lessor.
6.8 During the Term, neither Lessee nor Manager shall
perform any act which results in a default under the Lease or any
Store Contract or Equipment Lease.
7. Inventory Located at the Store. Lessee acknowledges
and agrees that all of the inventory of music records, pre-
recorded and unrecorded tapes and cassettes, compact discs
and accessories, videos, laser discs (collectively, the "Inven-
tory") located at the Store on the Effective Date shall be
transferred to Manager by Lessee pursuant to the Acquisition
Agreement and thereafter Lessee shall have no ownership interest
or security interest in such Inventory or any other Inventory
thereafter located in the Store whatsoever.
8. Termination of Agreement.
8.1 This Agreement shall immediately terminate upon
(i) the occurrence of a "Delayed Closing" (as such term is
defined in the Acquisition Agreement) with respect to the Store,
or (ii) termination of the Lease for any reason.
8.2 Either Manager or Lessee may terminate this Agree-
ment in its sole discretion upon 60 days written notice (or such
lesser time period if, in such terminating party's reasonable
judgment, the parties should terminate this Agreement and Manager
should vacate the Store within such lesser time period in order
to minimize the parties' potential liability) in the event that
(a) Lessor's consent is required in order for Manager and Lessee
to enter into and perform this Agreement, (b) Lessor has refused
to grant such consent, and (c) Lessor has taken (or has threat-
ened to take) action which would have a material adverse effect
on either Manager or Lessee. In addition, Lessee may terminate
this Agreement in its sole and arbitrary discretion upon 60 days
written notice to the other party, provided, however, that such
notice shall not be given prior to November 30, 1993.
8.3 In the event a party (the "Breaching Party") fails
to observe and perform its monetary obligations under this Agree-
ment for a period of 15 days or its non-monetary obligations
under this Agreement for a period of 30 days (the "Cure Period")
after the Breaching Party's receipt of written notice from the
other party hereto (the "Non-Breaching Party") specifying such
failure and requesting that it be remedied, the Non-Breaching
Party may terminate this Agreement by delivering written notice
thereof to the Breaching Party, provided, however, if the failure
stated in the notice cannot be corrected by the Breaching Party
within the Cure Period, the Non-Breaching Party will not unrea-
sonably withhold its consent to an extension of the Cure Period
if it is possible to correct such failure and corrective action
is instituted by the Breaching Party within the Cure Period and
diligently pursued until said failure is corrected.
8.4 On or within three days before the date on which
this Agreement terminates (except in the event of a termination
due to a Delayed Closing), Manager shall deliver possession of
the Store to Lessee (in the same condition and repair as at
commencement of the Term, reasonable wear and tear excepted) and
shall (i) remove all of the assets from the Store other than
Lessee's Store Assets, (ii) deliver to Lessee appropriate
authorizations to provide for the transfer of the Store's
telephone numbers and other utilities to Lessee and for the
closing of billing as of the termination date of this Agreement
and (iii) deliver to Lessee all Entry Devices.
8.5 Upon termination of this Agreement, other than a
termination due to a Delayed Closing or termination of the Lease,
Lessee, at Lessee's sole option, shall have the right to purchase
Manager's furniture, fixtures and equipment ("FF&E") and/or
inventory (other than used compact discs) located in the
Premises, provided that Lessee shall notify Manager in writing
that it intends to purchase the FF&E and/or inventory (other than
used compact discs) at least two (2) weeks prior to the date of
the termination of this Agreement or in the event this Agreement
is terminated by either party with less than sixty (60) days
notice in accordance with Section 8.2 hereof prior to the termi-
nation of this Agreement. If Lessee purchases the FF&E pursuant
to this Section, the price for such FF&E shall be Manager's cost.
If Lessee purchases Manager's inventory pursuant to this Section,
the price of such inventory shall be Manager's cost of such
inventory, less the discounts applied to the purchase of inven-
tory set forth in Section 2.1.2 of the Acquisition Agreement
other than the discount referred to in Section 2.1.2.4 of the
Acquisition Agreement. All costs of ascertaining the value of
the property transferred pursuant to this Section 8.5 shall be
borne two-thirds by Lessee and one-third by Manager.
9. Indemnification of Manager.
9.1 Lessee agrees to, and hereby does, fully indem-
nify, defend and save and hold Manager harmless at all times in
the event that Manager shall at any time or from time to time
suffer any damage, obligation, liability, loss, cost, expense,
claim, settlement or causes of action (including all reasonable
attorneys' fees) arising out of, resulting from or in connection
with, or shall pay or become obligated to pay any sum on account
of (i) any damage to the Store or Lessee's Store Assets at any
time other than during the Term, (ii) the management or operation
of the Store by Lessee at any time other than during the Term,
(iii) Lessee's failure to obtain Lessor's or any Contracting
Party's consent to Manager and Lessee entering into this
Agreement (collectively the "Lessor/Contracting Party Consents"),
(iv) any action or omission by Lessor or any Contracting Party
resulting from or in connection with Lessee's failure to obtain
all Lessor/Contracting Party Consents, (v) the presence or
migration at any time prior to, during or after the Term of any
pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes, including, without limitation,
asbestos (collectively, "Polluting Substances") on, into or from
the Store, the Premises or the real property under or adjacent to
the Premises other than such Polluting Substances brought onto or
in the Store, the Premises or the real property under or adjacent
to the Premises by Manager, its employees or agents, (vi) any
breach by Lessee of the terms hereof (including, without limita-
tion, failure by Lessee to comply with the terms of the Lease,
Equipment Leases and Store Contracts to be performed by Lessee
pursuant hereto), (vii) any act of Lessee which results in a
default under the Lease or any Equipment Lease or Store Contract,
and/or (viii) any failure by Lessee to perform any obligation
under the Lease, any Equipment Lease or any Store Contract which
arose at any time other than during the Term or, with respect to
obligations under the Lease, which arose during the Term and is
described on Schedule 4 attached hereto (collectively, "Events of
Manager Indemnification").
9.2 Whenever any claim shall arise for indemnification
pursuant to Section 9.1, Manager shall promptly notify Lessee of
the claim and, when known, the facts constituting the basis for
such claim, provided that failure of Manager to provide Lessee
with such notice shall not excuse or affect Lessee's indemnifi-
cation obligations under Section 9.1 unless the failure to
provide such notice shall actually prejudice Lessee. In the
event Lessee shall become obligated to Manager pursuant to
Section 9.1, or in the event that any suit, action, investiga-
tion, claim or proceeding is begun, made or instituted as a
result of which Lessee may become obligated to Manager there-
under, Lessee shall have the right to defend, contest or other-
wise protect against any such suit, action, investigation, claim
or proceeding by one or more counsel reasonably acceptable to
Manager. In the event Lessee so elects to defend or contest,
Manager shall have the right, at its expense, to participate in
such defense, but such defense shall at all times be conducted by
and under the control of Lessee and its counsel. In the event
that Lessee elects not to defend, contest or otherwise protect
against any action, investigation, claim or proceeding, Manager
shall have the right, at Lessee's expense, to pursue any such
defense, contest or protection.
10. Indemnification of Lessee.
10.1 Manager agrees to, and hereby does, fully indem-
nify, defend and save and hold Lessee harmless at all times in
the event that Lessee shall at any time or from time to time
suffer any damage, obligation, liability, loss, cost, expense,
claim, settlement or causes of action (including all reasonable
attorneys' fees) arising out of, resulting from or in connection
with, or shall pay or become obligated to pay any sum on account
of (i) any damage to Store or Lessee's Store Assets (other than
reasonable wear and tear) during the Term caused by the gross
negligence or willful misconduct or willful neglect of Manager,
(ii) any breach by Manager of the terms hereof, including without
limitation, failure by Manager to comply with the terms of the
Lease, the Store Contracts and the Equipment Leases to be
complied with by Manager pursuant to the terms of this Agreement,
(iii) the presence or migration at any time during the Term of
any Polluting Substances brought onto, into or from the Store,
the Premises or the real property under or adjacent to the
Premises by Manager, its employees and agents, (iv) the manage-
ment or operation of the Store by Manager during the Term, (v)
any act of Manager during the Term which results in a default
under the Lease or any Equipment Lease or Store Contract, other
than defaults with respect to Lease obligations described on
Schedule 4 attached hereto, or (vi) any failure by Manager to
perform any obligation under the Lease, any Equipment Lease or
any Store Contract which arose during the Term and is not
described on Schedule 4 attached hereto, provided, however, any
such damages, obligations, liabilities, losses, costs expenses,
claims, settlements, or causes of action do not arise out of,
result from or be attributable to (a) an Event of Manager
Indemnification or (b) any action or omission by Lessor or any
Contracting Party resulting from or in connection with Lessee's
failure to obtain all Lessor/Contracting Party Consents and
"Lease Consents" (as defined below). For the avoidance of doubt,
Manager shall have no liability to Lessee for any lost revenues,
profits, income or other sums resulting from or in connection
with Lessor's or the Contracting Parties' termination of the
Lease or any or all of the Equipment Leases and Store Contracts.
However, Manager shall be liable for any and all other damage,
loss, cost, obligation, liability, expense, claim, settlement or
cause of action (including reasonable attorneys' fees) suffered
by Lessee as a result of or in connection with a termination of
the Lease or any or all of the Equipment Leases and Store
Contracts by Lessor or any applicable Contracting Party, which
termination is caused by an act or omission of Manager which
gives rise to indemnification of Lessee under clause (v) or (vi)
of this Section 10.1 provided that such termination is not a
result of Lessee's failure to obtain all Lessor/Contracting Party
Consents and Lease Consents or Lessee's breach of the Lease or
any of the Equipment Leases or Store Contracts.
10.2 Whenever any claim shall arise for indemnification
pursuant to Section 10.1, Lessee shall promptly notify Manager of
the claim and, when known, the facts constituting the basis for
such claim, provided that failure of Lessee to provide Manager
with such notice shall not excuse or affect Manager's indemnifi-
cation obligations under Section 10.1 unless the failure to
provide such notice shall actually prejudice Manager. In the
event Manager shall become obligated to Lessee pursuant to
Section 10.1, or in the event that any suit, action, investiga-
tion, claim or proceeding is begun, made or instituted as a
result of which Manager may become obligated to Lessee there-
under, Manager shall have the right to defend, contest or other-
wise protect against any such suit, action, investigation, claim
or proceeding by one or more counsel of its choice reasonably
acceptable to Lessee. If Manager so elects to defend or contest,
Lessee shall have the right, at its expense, to participate in
such defense, but such defense shall at all times be conducted by
and under the control of Manager and its counsel, and Lessee
shall be fully bound by the results thereof. In the event
Manager elects not to defend, contest or otherwise protest
against any such suit, investigation, claim or proceeding, Lessee
shall have the right, at Manager's expense, to pursue any such
defense, contest or protection.
10.3 For the purposes of this Agreement "Lease
Consents" shall include (i) Lessor's consent to Manager's closing
the Store for the purpose of remodeling the Store generally in
accordance with Section 16.4 of the "Form Store Leasehold
Consent" referenced on Schedule 2.5.1.1 of the Acquisition
Agreement for the period commencing June 20, 1993 and ending June
26, 1993, (ii) Lessor's waiver of any lien on Manager's assets,
{and (iii) the radius restriction set forth in Section ____ of
the Lease}.
11. Notices. All notices, statements or other documents
which any party shall be required or shall desire to give to the
other hereunder shall be in writing and shall be given by said
party only by telecopier, or by courier or personal delivery or
by addressing it as indicated below, and by depositing it
certified first-class mail, return receipt requested, postage
prepaid, in the U.S. mail. The addresses of the parties shall be
those of which the other party actually receives written notice
pursuant to this Section 11, and until further notice:
If to Manager: Wherehouse Entertainment, Inc.
19701 Hamilton Avenue
Torrance, CA 90502-1334
Facsimile: (310) 538-2583
Attention: Cathy Wood,
Senior Vice President
With a copy to: Mitchell, Silberberg & Knupp
11377 West Olympic Boulevard
Los Angeles, California 90064
Facsimile: (310) 312-3787
Attention: Roy Shults, Esq.
If to Lessee: The Record Shop, Inc.
74 Cloudview Road
Sausalito, CA 94695
Facsimile: (415) 331-2657
Attention: Mort Gerber
With a copy to: Snell & Wilmer
400 East Van Buren
One Arizona Center
Phoenix, AZ 85004-0001
Facsimile: (602) 382-6070
Attention: Jody Pokorski, Esq.
Any such communications given by courier or personal
delivery shall be deemed given when delivered if during normal
business hours on a business day (or if not, the next business
day after delivery); any such communications given by telecopier
shall be deemed given when received if during normal business
hours on a business day (or if not, the next business day after
delivery) provided that such telecopy is legible and that at the
time such telecopy is sent the sending party receives written
confirmation of receipt and forwards a copy of the notice by
courier or personal delivery or by mail; and any such communica-
tions sent by certified first-class mail, return receipt
requested, postage prepaid shall be deemed given two business
days after the date of mailing.
12. Miscellaneous.
12.1 Each of the parties hereto shall use its best
efforts to bring about the transactions contemplated by this
Agreement as soon as practicable, including the execution and
delivery of all instruments, assignments and assurances, and
shall take or cause to be taken such further or other actions
reasonably necessary or desirable in order to carry out the
intents and purposes of this Agreement. No party will take or
knowingly permit to be taken any action or do or knowingly permit
to be done anything in the conduct of their respective business-
es, or otherwise, which would be contrary to or in breach of any
of the terms or provisions of this Agreement, or which would
cause any of the representations contained herein to be or become
untrue or which would prevent the satisfaction of any condition
contained herein.
12.2 The parties shall promptly, from time to time
after the date hereof, execute and deliver to the other party
such further documents, instruments and agreements as the other
party may reasonably request in order to consummate the trans-
actions contemplated by this Agreement.
12.3 This Agreement, the Acquisition Agreement and all
of the other Management Agreements between Manager and Lessee
contain all of the terms and conditions agreed upon by the
parties hereto with respect to the subject matter hereof, and all
prior agreements (other than the Acquisition Agreement and all of
the other Management Agreements between Lessee and Manager)
regarding the subject matter hereof whether oral or written
between the parties hereto, are merged herein and therein and
superseded hereby and thereby. No other agreements regarding the
subject matter hereof not specifically referred to herein or in
the Acquisition Agreement, oral or otherwise, shall be deemed to
exist or to bind any of the parties hereto. This Agreement may
not be modified or changed except by written instruments signed
by all of the parties hereto. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors and assigns.
12.4 All captions and headings are inserted for the
convenience of the parties, and shall not be used in any way to
modify, limit, construe or otherwise affect this Agreement.
12.5 Upon termination of this Agreement as provided
herein, the parties' respective obligations hereunder shall
terminate except for the provisions of Sections 9 and 10 hereof
which shall survive the termination of this Agreement.
12.6 Subject to Section 12.9 hereof, each party hereto
shall bear its own expenses incurred with respect to the prepara-
tion, authorization, execution and performance of this Agreement
and all transactions contemplated hereunder (including, without
limitation, all fees and expenses of agents, representatives,
counsel and accountants).
12.7 This Agreement may be executed in two counterparts
each of which shall be deemed to be an original and which toge-
ther shall constitute one and the same instrument.
12.8 This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without
reference to its principles of conflict of laws.
12.9 Notwithstanding any provision to the contrary
contained herein or in any agreement referenced herein, this
Agreement shall not be deemed to confer any rights or benefits
upon any person other than the parties hereto.
12.10 In the event suit is brought to enforce or
interpret any part of this Agreement or the rights or obligations
of any party to this Agreement, the prevailing party shall be
entitled to recover as an element of such party's costs of suit,
and not as damages, reasonable attorneys' fees to be fixed by the
court. The prevailing party shall be the party who is entitled
to recover its costs of suit whether or not the suit proceeds to
final judgment. A party not entitled to recover its costs shall
not recover attorneys' fees. No sum for attorneys' fees shall be
counted in calculating the amount of judgment for purposes of
determining whether a party is entitled to recover its costs or
attorneys' fees.
12.11 Each party shall cooperate with the other
party to the extent that such cooperation is required, by the
terms of the Lease or any of the Equipment Leases or Store
Contracts or otherwise, to enable the other party's performance
of any of its obligations under this Agreement.
12.12 Each party shall hold, and shall use its best
efforts to cause its officers, directors, employees, accountants,
counsel, consultants, advisors and agents ("Representatives") to
hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, the terms
of this Agreement ("Terms"), provided that the parties or a
Representative may disclose the Terms to its Representatives in
connection with the transactions contemplated by this Agreement
so long as such persons are informed of the confidential nature
of the Terms and are directed to treat such information confiden-
tially. Notwithstanding the preceding sentence, this Section
shall not prohibit (i) any disclosure (including, without limita-
tion, any dissemination of copies of this Agreement) required by
any applicable law, statute or rule or requested by any govern-
mental agency (including, without limitation, any federal or
state securities law and any rule or regulation promulgated by
the Securities and Exchange Commission ("SEC") or any state
agency or authority having jurisdiction over the parties or their
affiliates) or (ii) any disclosure of such information in any
financial statements of Manager, Lessee or affiliates thereof to
the extent such disclosures are required by law (including,
without limitation, any federal or state securities law and any
rule or regulation promulgated by the SEC or any state agency or
authority having jurisdiction over the parties or their
affiliates).
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
MANAGER: LESSEE:
WHEREHOUSE ENTERTAINMENT, INC., THE RECORD SHOP, INC.
a Delaware corporation a Minnesota corporation
By: _______________________ By: ______________________
Scott Young Mary Ann Levitt
Its: President Its: President
By: _______________________
Cathy Wood
Its: Secretary
SCHEDULE 2
List of Store Contracts
List of Equipment Leases
SCHEDULE 4.1
Provisions of the Lease:
Provisions of the Store Contracts:
Provisions of the Equipment Leases:
EXHIBIT E
FORM OF SELLER'S COUNSEL'S OPINION
SEE ATTACHED
EXHIBIT F
ASSIGNMENT AND ASSUMPTION OF
LEASES, SENSORMATIC LEASES AND STORE CONTRACTS
THIS ASSIGNMENT AND ASSUMPTION OF LEASES, SENSORMATIC
LEASES AND STORE CONTRACTS is made and entered into as of this
21st day of June, 1993 by and between THE RECORD SHOP, INC., a
Minnesota corporation ("Assignor"), and WHEREHOUSE ENTERTAINMENT,
INC., a Delaware corporation ("Assignee"), with reference to the
following facts:
A. Assignor owns and operates music retail stores in
the States of Arizona, California, Iowa, Minnesota, Nevada, North
Dakota and Utah.
B. Pursuant to the terms of that certain Agreement of
Purchase and Sale dated as of May 10, 1993 by and between
Assignor and Assignee, as amended (the "Purchase Agreement"),
Assignor has agreed to sell the "Transferred Assets" (as such
term is defined in the Purchase Agreement) to Assignee.
C. In connection with the Purchase Agreement,
Assignor desires to assign to Assignee (i) all right, title and
interest of Assignor as lessee in, to and under the real property
leases described on Exhibit A attached hereto (collectively, the
"Leases"), (ii) all right, title and interest of Assignor as
lessee in, to and under the personal property leases for certain
Sensormatic security systems described on Exhibit B attached
hereto (collectively, the "Sensormatic Leases"), and (iii) all
right, title and interest of Assignor as a party in, to and under
the contracts and leases for goods and services provided to
Assignor described on Exhibit C attached hereto (collectively,
the "Store Contracts"), and Assignee desires to assume certain
obligations of Assignor in, to and under the Leases, the Sensor-
matic Leases and the Store Contracts, on the terms and conditions
hereafter set forth.
NOW, THEREFORE, in consideration of the mutual
covenants, agreements, representations and warranties herein
contained, the parties hereto hereby agree as follows:
1. Assignments of Leases, Sensormatic Leases and
Store Contracts by Assignor. Assignor hereby irrevocably sells,
transfers and assigns to Assignee, and Assignee hereby irrevo-
cably purchases and accepts from Assignor, (i) all right, title
and interest of Assignor as lessee in, to and under the Leases,
(ii) all right, title and interest of Assignor as lessee in, to
and under the Sensormatic Leases, and (iii) all right, title and
interest of Assignor as a party in, to and under the Store
Contracts.
2. Assumption of Obligations by Assignee. Assignee
hereby irrevocably assumes and agrees to perform and observe all
of the terms, covenants, conditions, liabilities and obligations
to be performed or observed by Assignor under or in connection
with the Leases, the Sensormatic Leases, and the Store Contracts
arising and accruing after the "Closing" (as such term is defined
in the Purchase Agreement).
3. Representation and Warranty by Assignor. Assignor
hereby represents, warrants, covenants and agrees that it is
hereby conveying good and marketable title to the interests being
transferred to Assignee pursuant to the terms of this Agreement,
free and clear of all security interests, liens, pledges,
encumbrances, claims, charges, agreements, rights, options,
warranties, equities and restrictions.
4. Binding Effect. This Agreement and the respective
rights and obligations of the parties hereunder shall be binding
upon and inure to the benefit of the parties hereto and their
respective legal representatives, successors and assigns.
5. Further Assurances. Assignor and Assignee each
further covenants and agrees that it will, from time to time,
make, execute and deliver such instruments, consents and assur-
ances as the other party may reasonably request in order to
effectuate the transactions contemplated by this Agreement.
6. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
California, without reference to its principles of conflict of
laws.
7. Captions. All captions and headings are inserted
for the convenience of the parties, and shall not be used in any
way to modify, limit, construe or otherwise affect this Agree-
ment.
8. Counterparts. This Agreement may be executed in
several counterparts each of which shall be deemed to be an
original and which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the undersigned have executed this
Assignment and Assumption of Leases, Sensormatic Leases and Store
Contracts as of the date first above written.
THE RECORD SHOP, INC.,
a Minnesota corporation
By: ______________________________
Mary Ann Levitt
Its: President
WHEREHOUSE ENTERTAINMENT, INC.,
a Delaware corporation
By: ______________________________
Its: ______________________________
EXHIBIT A
LEASES
1. Lease Agreement dated as of February 10, 1993, executed by
and between New River Associates, an Arizona general
partnership, as landlord, and The Record Shop, Inc., a
Minnesota corporation, as tenant (WEI #466, Arrowhead Mall,
Arizona).
2. Lease Agreement dated as of May 12, 1989, executed by and
between Westday Associates Limited Partnership, an Arizona
limited partnership, as landlord, and The Record Shop, Inc.,
a Minnesota corporation, as tenant (WEI #468, Paradise
Valley Mall R.S., Arizona).
3. Lease Agreement dated as of February 28, 1991, executed by
and between Westday Associates Limited Partnership, an
Arizona limited partnership, as landlord, and The Record
Shop, Inc., a Minnesota corporation, as tenant, as amended
by that certain First Amendment to Lease dated as of January
14, 1992, and further amended by that certain Second Amend-
ment to Lease dated as of July 23, 1992 (WEI #469, Paradise
Valley Mall P.M., Arizona).
4. Lease dated as of July 21, 1988 executed by and between
Noble "Park Central" Associates, a Texas joint venture, as
landlord, and The Record Shop, Inc., a Minnesota corpora-
tion, as tenant, as amended by that certain First Amendment
to Lease dated as of June 24, 1991, and further amended by
that certain Second Amendment to Lease dated as of January
30, 1992, and further amended by that certain Third Amend-
ment to Lease dated as of December 11, 1992 (WEI #470, Park
Central Mall, Arizona).
5. Lease Agreement dated as of May 16, 1990, executed by and
between East Mesa Associates, a partnership, as landlord,
and The Record Shop, Inc., a California corporation [sic],
as tenant, as amended by that certain Amendment to Lease
dated as of November 16, 1987 (WEI #471, Superstition
Springs, Arizona).
6. Lease Agreement dated as of March 1, 1985, executed by and
between Westpen Associates, a partnership, as landlord, and
The Record Shop, Inc., a Minnesota corporation, as tenant
(WEI #472, Westridge Mall, Arizona).
7. Lease Agreement dated as of March 7, 1990, executed by and
between Macerich Northwestern Associates, a California
general partnership, as landlord, and The Record Shop, Inc.,
a Minnesota corporation dba The Record Shop, Inc., as tenant
(WEI #473, Broadway Plaza Shopping Center, California).
8. Lease dated as of June 23, 1989 executed by and between
George A. Vlantis and James A. Vlantis, as Landlord, and The
Record Shop, Inc., a Minnesota corporation, as tenant (WEI
#474, Chestnut Street, California).
9. Lease dated as of June 19, 1990, executed by and between
Fred J. Russell d.b.a. Manchester Account, as landlord, and
The Record Shop, Inc., a Minnesota corporation d.b.a. Record
Shop, as tenant (WEI #475, Manchester Center, California).
10. Lease dated as of March 29, 1990, executed by and between
The Board of Trustees of the Leland Stanford Junior Univer-
sity, a body having corporate powers under the laws of the
State of California, as landlord, and The Record Shop, Inc.,
a Minnesota corporation, as tenant (WEI #477, Stanford
Shopping Center, California).
11. Shopping Center Lease dated as of March 14, 1986, executed
by and between Stevens Creek Associates, a California
general partnership dba Valley Fair, as landlord, and The
Record Shop, Inc., a Minnesota corporation dba The Record
Shop, as tenant (WEI #478, Valley Fair Mall, California).
12. Shopping Center Lease dated as of July 20, 1992, executed by
and between EWH Escondido Associates dba North County Fair,
as landlord, and The Record Shop, Inc., a Minnesota corpora-
tion dba Record Shop, as tenant (WEI #481, North County
Fair, California).
13. Lease Agreement dated as of April 4, 1989, executed by and
between Merle Hay Mall, an Iowa limited partnership, as
landlord, and The Record Shop, Inc., a Minnesota corpora-
tion, as tenant (WEI #483, Merle Hay Mall, Iowa).
14. Lease Agreement dated as of October 15, 1990, executed by
and between Calhoun Square Associates Limited Partnership,
as landlord, and The Record Shop, Inc., as tenant (WEI #487,
Calhoun Square, Minnesota).
15. Lease dated as of February 3, 1987, executed by and between
International Income Property, Inc., as landlord, and The
Record Shop, Inc., as tenant (WEI #493, The Meadows Mall,
Nevada).
16. Lease dated as of December 10, 1991, executed by and between
Crossroads Plaza Associates, as landlord, and The Record
Shop, Inc., a Minnesota corporation d/b/a Paradise Musick,
as tenant (WEI #495, Crossroads Plaza Mall P.M., Utah).
17. Lease dated as of June 27, 1989, executed by and between
Crossroads Plaza Associates, as landlord, and The Record
Shop, Inc., a Minnesota corporation d/b/a The Record Shop,
Inc., as tenant (WEI #496, Crossroads Plaza Mall R.S.,
Utah).
EXHIBIT B
SENSORMATIC LEASES
1. Lease and Lease with Purchase Option Agreement dated August
7, _____ by and between General Electric Capital Corp., as
successor-in-interest to Sensormatic Electronics Corpora-
tion, as lessor, and The Record Shop, Inc., as lessee
(Calhoun Square, Minnesota).
2. Lease and Lease with Purchase Option Agreement dated May 31,
1990 by and between General Electric Capital Corp., as
successor-in-interest to Sensormatic Electronics Corpora-
tion, as lessor, and The Record Shop, Inc., as lessee
(transferred from Mission Valley to Chestnut Street,
California).
3. Lease and Lease with Purchase Option Agreement dated May 19,
1992 by and between General Electric Capital Corp., as
successor-in-interest to Sensormatic Electronics Corpora-
tion, as lessor, and The Record Shop, Inc., as lessee
(Valley Fair Mall, California).
4. Lease and Lease with Purchase Option Agreement by and
between General Electric Capital Corp., as successor-in-
interest to Sensormatic Electronics Corporation, as lessor,
and The Record Shop, Inc., as lessee (Stanford Mall,
California ).
5. Lease and Lease with Purchase Option Agreement dated as of
January 24, 1989 by and between General Electric Capital
Corp., as successor-in-interest to Sensormatic Electronics
Corporation, as lessor, and The Record Shop, Inc., as lessee
(North County Fair, California).
6. Lease and Lease with Purchase Option Agreement by and
between General Electric Capital Corp., as successor-in-
interest to Sensormatic Electronics Corporation, as lessor,
and The Record Shop, Inc., as lessee (Crossroads Mall, Utah
- Record Shop).
7. Lease and Lease with Purchase Option Agreement dated as of
September 20, 1988 by and between General Electric Capital
Corp., as successor-in-interest to Sensormatic Electronics
Corporation, as lessor, and The Record Shop, Inc., as
lessee, but only to the extent of the Sensormatic Equipment
located at Crossroads Mall, Utah - Paradise Music and
Westridge Mall, Arizona.
8. Lease and Lease with Purchase Option Agreement dated as of
November 16, 1988 by and between General Electric Capital
Corp., as successor-in-interest to Sensormatic Electronics
Corporation, as lessor, and The Record Shop, Inc., as lessee
(The Meadows Mall, Nevada).
EXHIBIT C
STORE CONTRACTS
1. Agreement dated May 29, 1991 by and between ADT Security
Systems and The Record Shop, Inc.
EXHIBITS G and H
FORM OF STORE CONTRACT AND SENSORMATIC LEASE CONSENT
[THE RECORD SHOP, INC. LETTERHEAD]
May __, 1993
[ADDRESSEE]
Ladies/Gentlemen:
On or about June 21, 1993, certain of the assets of The
Record Shop, Inc. will be transferred to Wherehouse Entertain-
ment, Inc. Included among the assets to be transferred is an
agreement with your company (the "Agreement"). In order to
facilitate the transfer of the assets, we hereby cordially
request (i) your consent to thetransfer of all rights and obliga-
tions of The Record Shop, Inc. under the Agreement to Wherehouse
Entertainment, Inc., and (ii) your certification as to the state-
ments set forth on Exhibit A attached hereto.
Please acknowledge your consent to this transfer and
your certification as to the statements set forth on Exhibit A
attached hereto by signing the enclosed copy of this letter and
returning it to us in the enclosed postage-paid envelope. We
thank you in advance for your cooperation.
Very truly yours,
THE RECORD SHOP, INC.
Mary Ann Levitt, President
AGREED AND ACCEPTED:
[ADDRESSEE]
By: _______________________ Dated: _____________, 1993
Its: ______________________
EXHIBIT A
1. Attached hereto is a true and complete copy of the Agreement
and all amendments, modifications, supplements and assign-
ments thereof and thereto.
2. As of the date hereof, all payments and other charges to be
paid by The Record Shop, Inc. under the Agreement have been
paid in full.
3. To our best knowledge, no default has occurred under the
Agreement and no event has occurred which, with the passage
of time or the giving of notice or both, would constitute a
default under the Agreement.
EXHIBIT I-1
SECTION 3.8 ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Escrow Agreement") is made and
entered into as of the 21st day of June, 1993, by and between
WHEREHOUSE ENTERTAINMENT, INC., a Delaware corporation ("Purchas-
er"), THE RECORD SHOP, INC., a Minnesota corporation ("Seller"),
and LAWYERS TITLE OF ARIZONA, INC. ("Escrow Agent"), with
reference to the following facts:
A. Purchaser and Seller have entered into that certain
Agreement of Purchase and Sale dated as of May 10, 1993 , as
amended (the "Purchase Agreement"), pursuant to which Purchaser
will purchase certain of the assets of Seller. Each initially
capitalized term used but not defined in this Escrow Agreement is
used herein as defined in the Purchase Agreement.
B. Pursuant to the Purchase Agreement, Purchaser is
required to deposit certain sums with a mutually agreed-upon
escrow agent at the Closing and the Delayed Closings.
C. Purchaser and Seller have agreed that Escrow Agent
shall serve as the escrow agent hereunder, and Escrow Agent has
agreed to serve in that capacity, pursuant to the terms hereof
and the terms set forth on Exhibit A attached hereto and incorpo-
rated herein by this reference.
NOW, THEREFORE, in consideration of the promises and the
mutual agreements hereinafter set forth and for other good and
valuable consideration, receipt of which is hereby acknowledged,
the parties hereto hereby agree as follows:
1. Appointment of Escrow Agent; Acceptance.
Purchaser and Seller hereby appoint Escrow Agent to act
as escrow agent in accordance with the terms and provisions of
this Escrow Agreement, and Escrow Agent hereby accepts such
appointment subject to the terms and conditions hereof.
2. Deposit of Funds; Minimum Balance of Escrow Funds.
2.1 At the Closing and each Delayed Closing,
Purchaser shall deliver to the Escrow Agent an amount equal to
$20,689.66 multiplied by the number of Stores possession of which
are being transferred to Purchaser pursuant to a Store Leasehold
Assignment at such Closing or Delayed Closing (and together with
any interest earned on each such deposit, an "Escrow Deposit";
the Escrow Deposits are referred to herein collectively as the
"Escrow Funds"). The Escrow Deposits shall be deposited by
Escrow Agent into an interest-bearing account at Bank One or any
other federally insured lending institution approved by Purchaser
and Seller. The Escrow Agent is directed to hold, deal with and
dispose of the Escrow Funds as hereinafter set forth, and agrees
not to commingle such funds with any other funds held by the
Escrow Agent.
2.2 Subject to Section 3.3 hereof, at no time
between the Closing and the distribution of the Final Escrow
Deposit in accordance with Section 4.1 hereof shall the balance
(the "Minimum Balance") of the Escrow Funds be less than $60,000,
provided, however, that in the event Purchaser and Seller obtain
a Store Leasehold Consent with respect to any Store Lease which
does not contain all Essential Estoppel Terms (a "Non-Conforming
Store Leasehold Consent"), at no time between the Closing and the
expiration of the Estoppel Representations shall the Minimum
Balance of the Escrow Funds be less than $100,000. At the
Closing and at each Delayed Closing, Purchaser shall give written
notice to both Escrow Agent and Seller regarding whether any of
the Store Leasehold Consents are Non-Conforming Store Leasehold
Consents, in which event the proviso in the immediately preceding
sentence shall apply. Notwithstanding anything herein to the
contrary, Purchaser may waive the requirement of the Minimum
Balance. To be effective such waiver must be in writing executed
by Purchaser.
3. Disbursement of Escrow Funds During Any Escrow
Period.
3.1 During any Escrow Period, Purchaser may, by
submitting a "Claim Notice" (as hereinafter defined), request the
Escrow Agent to disburse the Escrow Funds (a) to reimburse
Purchaser for any actual damages it has incurred as a result of
any breach of any representations and warranties of Seller under
the Purchase Agreement or any other covenants or agreements of
Seller to Purchaser contained in the Purchase Agreement, any
Management Agreement, the Service Mark License or any other
document or agreement contemplated thereby (it being understood
that any such application of the Escrow Funds shall not release
Seller from its liability to Purchaser for any breach of the
representations and warranties of Seller or any other covenants
or agreements of Seller to Purchaser to the extent such breaches
cause Purchaser to incur damages in excess of the amount of the
Escrow Funds applied against any such damages), (b) to pay
Seller's actual prorated Current Property Taxes, Sales Taxes and
Payroll Taxes as contemplated in Sections 3.5, 3.6 and 3.7 of the
Purchase Agreement, respectively, that exceed the amount for
which Purchaser previously received credit against the Trans-
ferred Assets Purchase Price and/or (c) to reimburse Purchaser
for all Gift Certificates and Merchandise Credits redeemed or
honored during the Escrow Period in excess of the aggregate
amount of $30,000. Notwithstanding anything in this Section 3.1
or Sections 3.5, 3.6, 3.7 or 3.8 of the Purchase Agreement to the
contrary, Purchaser shall use the Escrow Funds to pay Seller's
actual prorated Property Taxes, Sales Taxes and Payroll Taxes in
excess of the reserves established therefor unless and until the
balance of the Escrow Funds after paying such taxes therefrom is
less than the then applicable Minimum Balance. In the event
that, and from time to time as, Purchaser determines that there
exists a claim for reimbursement from the Escrow Funds pursuant
to this Section 3.1, Purchaser shall submit written notice (such
notice, a "Claim Notice") of such claim (a "Claim") in accordance
with the terms of Section 10 hereof to the Escrow Agent and
Seller, including a description of the claim and stating the
dollar amount thereof (the "Claim Amount").
3.2 Unless the Escrow Agent and Purchaser receive
written notice in accordance with the terms of Section 10 hereof
that Seller disputes a Claim within ten (10) business days
following receipt by the Escrow Agent and Seller of the appli-
cable Claim Notice (such notice, a "Dispute Notice"), which
notice shall include in reasonable detail the basis for Seller's
dispute, the Escrow Agent shall disburse funds from the Escrow
Funds to Purchaser in the amount of the Claim Amount. The Escrow
Agent shall have no responsibility for verifying the Claim Amount
or the facts or circumstances proposed as a basis for the Claim.
All disputes as to Claims hereunder shall be arbitrated in
accordance with Section 7 hereof and the Claim Amount of any
disputed Claim shall be held in escrow hereunder pending resolu-
tion of such dispute.
3.3 Notwithstanding anything herein to the
contrary, in the event the aggregate amount of the Escrow Funds
becomes less than the then applicable Minimum Balance, the Escrow
Agent shall give written notice of such fact to Purchaser and
Seller, and after receipt of such notice, Seller shall within ten
(10) business days thereof deliver to the Escrow Agent for
deposit into the Escrow Funds an amount equal to the difference
between the then applicable Minimum Balance and the then remain-
ing aggregate amount of the Escrow Funds.
4. Termination; Release of Escrow Funds.
4.1 Subject to Sections 2.2 and 4.2 hereof, the
then remaining balance of each particular Escrow Deposit after
the satisfaction of all Claims previously received by the Escrow
Agent or the withholding of any Claim Amounts pursuant to
Sections 3.2 and 4.2 hereof shall be paid to Seller on the first
business day after the later of (i) the expiration of the Escrow
Period with respect to such Escrow Deposit, and (ii) the date on
which Seller provides the Escrow Agent with written notice that,
to the best of its knowledge, there have been no breaches, nor
does Seller anticipate any breaches, of any of Seller's represen-
tations, warranties, covenants or agreements contained in the
Purchase Agreement, any Management Agreement, the Service Mark
License or in any other document or agreement contemplated
thereby other than breaches for which a Claim has previously been
made. A true and correct accounting of all Escrow Funds expended
by the Escrow Agent shall accompany the distribution of the then
remaining balance of the most recently deposited Escrow Deposit
(the "Final Escrow Deposit") prior to the date on which both
Purchaser and Seller provide the Escrow Agent with written notice
that the parties have agreed, such agreement not to be unrea-
sonably withheld, that they will not be able to obtain Store
Leasehold Consents for any remaining Non-Transferred Leases and
Extensions and Store Leasehold Consents for any remaining Non-
Extended Short Term Leases.
4.2 Notwithstanding anything herein to the
contrary, the aggregate unpaid Claim Amounts shall either be paid
to Purchaser or retained by Escrow Agent until a final determina-
tion of the validity of Purchaser's Claims is made in accordance
with the terms of this Escrow Agreement.
5. Fees of Escrow Agent.
Escrow Agent shall be entitled to compensation for
Escrow Agent's services hereunder in accordance with the provi-
sions of Exhibit "A" attached hereto and to reimbursement for
reasonable expenses incurred in connection herewith. Purchaser
and Seller shall each pay one-half (1/2) of such fees and
expenses.
6. Duties of Escrow Agent.
Escrow Agent shall perform only such duties as are
expressly set forth in this Escrow Agreement, including those
duties set forth on Exhibit A attached hereto and incorporated
herein. Escrow Agent may resign and may be discharged from its
duties or obligations hereunder by giving at least twenty (20)
days' prior written notice of such resignation to Purchaser and
Seller, specifying the date when such resignation shall take
effect, which shall not be prior to the appointment of a
successor Escrow Agent. Following receipt of such notice,
Purchaser and Seller shall designate a successor Escrow Agent.
Upon the mutual agreement of Purchaser and Seller, they shall
have the right to remove Escrow Agent by giving written notice of
such removal to Escrow Agent, which notice shall designate a
successor Escrow Agent. Within five (5) calendar days after
receipt of such notice, Escrow Agent shall deliver the Escrow
Funds to the designated successor Escrow Agent.
7. Disputes and Controversies.
7.1 The parties hereto agree that arbitration
shall constitute the exclusive remedy for the resolution of any
dispute, controversy or claim between the parties arising out of
or relating to this Escrow Agreement. The arbitration proceed-
ings shall be accomplished in accordance with the provisions of
this Section 7.
7.2 Except as expressly provided herein to the
contrary, the arbitration proceeding shall be conducted under the
Commercial Arbitration Rules of the American Arbitration Associa-
tion in effect at the time a demand for arbitration is made. To
the extent that there is any conflict between the rules of the
American Arbitration Association and this Section 7, this Section
7 shall govern and determine the rights of the parties hereto.
7.3 The arbitration will take place in Los
Angeles, California before a single arbitrator selected as
follows: Either Purchaser or Seller may request the American
Arbitration Association to provide a list of proposed arbitra-
tors, all of whom must be retired judges. Purchaser and Seller
shall then take turns crossing off one name at a time from such
list with the last remaining retired judge being appointed the
arbitrator. Purchaser and Seller shall select by lot which of
them strikes the first name from the list of proposed arbitra-
tors. If the person selected in this method to be the arbitrator
declines or is otherwise unavailable to serve as the arbitrator
of the dispute, the arbitrator shall be selected from the same
list of proposed arbitrators selected in the reverse order to
which those proposed arbitrators' names were struck from the list
until one of such individuals selected to be the arbitrator
accepts the appointment and is able to serve as the arbitrator.
7.4 The arbitrator selected in the manner set
forth in Section 7.3 shall be requested to honor the intention of
the parties hereto to resolve the disputes quickly and inexpen-
sively. All decisions shall be made with this intention in mind.
The decision of the arbitrator, including determination of the
amount of any damages suffered, shall be exclusive, final and
binding on all parties, their successors and assigns as appli-
cable.
7.5 Except as expressly set forth in this Escrow
Agreement, the arbitrator shall determine the manner in which the
arbitration proceeding is conducted, including the time and place
of all hearings, the order of presentation of evidence and all of
the questions that arise with respect to the arbitration proceed-
ing.
7.6 The arbitrator shall be required to determine
all issues in accordance with California law. The rules of
evidence applicable to proceedings at law in the State of
California will be applicable to the arbitration proceedings.
7.7 The arbitrator shall issue a single judgment
at the close of the arbitration proceeding, which shall dispose
of all of the claims of the parties that are the subject of the
arbitration. Any party to the arbitration may seek a judgment
from a court of competent jurisdiction to enforce the award of
the arbitrator.
7.8 The cost of arbitration, including admini-
strative fees, fees for a record and a transcript, and the
arbitrator's fees shall be borne equally by the parties to the
arbitration, except that the arbitrator shall have the right to
award reasonable attorneys' fees to the party determined by the
arbitrator to be the prevailing party.
8. Interest on Escrow Funds.
All interest earned on the Escrow Funds shall inure to
the benefit of Seller, provided that all such interest may be
disbursed by the Escrow Agent as provided herein to satisfy any
Claim.
9. Method of Payment.
Any amounts to be paid to Purchaser or Seller hereunder
shall be paid by wire transfer or by cashier's check.
10. Notices.
All notices, statements or other documents which
any party shall be required or shall desire to give to the other
hereunder shall be in writing and shall be given by said party
only by telecopier, or by courier or personal delivery or by
addressing it as indicated below, and depositing it certified
first-class mail, return receipt requested, postage prepaid, in
the U.S. mail. The addresses of the parties shall be those of
which the other party actually receives written notice pursuant
to this Section 10, and until further notice:
If to Purchaser: Wherehouse Entertainment, Inc.
19701 Hamilton Avenue
Torrance, CA 90502-1334
Facsimile: (310) 538-2583
Attention: Cathy Wood,
Senior Vice President
With a copy to: Mitchell, Silberberg & Knupp
11377 West Olympic Boulevard
Los Angeles, California 90064
Facsimile: (310) 312-3787
Attention: Roy Shults, Esq.
If to Seller: The Record Shop, Inc.
74 Cloudview Road
Sausalito, CA 94695
Facsimile: (415) 331-2657
Attention: Mort Gerber
With a copy to: Snell & Wilmer
400 East Van Buren
One Arizona Center
Phoenix, AZ 85004-0001
Facsimile: (602) 382-6070
Attention: Jody Pokorski, Esq.
If to Escrow Agent: Lawyers Title of Arizona, Inc.
2425 E. Camelback Road, Suite 700
Phoenix, AZ 85016
Facsimile: (602) 954-7006
Attention: Lynne Peoples
Any such communications given by courier or personal
delivery shall be deemed given when delivered if during normal
business hours on a business day (or if not, the next business
day after delivery); any such communications given by telecopier
shall be deemed given when received if during normal business
hours on a business day (or if not, the next business day after
delivery) provided that such telecopy is legible and that at the
time such telecopy is sent the sending party receives written
confirmation of receipt and forwards a copy of the notice by
courier or personal delivery or by mail; and any such communi-
cations sent by certified first-class mail, return receipt
requested, postage prepaid shall be deemed given two business
days after the date of mailing.
11. Governing Law.
This Escrow Agreement shall be construed in accordance
with and governed by the laws of the State of California, without
giving effect to that State's conflicts of law rules.
12. Risk of Loss.
As between Purchaser and Seller, the risk of loss of
any funds deposited into escrow pursuant to the terms of this
Escrow Agreement shall be borne equally by Purchaser and Seller,
provided, however, that such assumption of the risk of loss by
Purchaser and Seller shall not release Escrow Agent from liabil-
ity to Purchaser and Seller for Escrow Agent's acts or omissions
which result in or cause a loss of any of the Escrow Funds.
13. Entire Agreement.
This Escrow Agreement and the Purchase Agreement
contain all of the terms and conditions agreed upon by the
parties hereto with respect to the subject matter hereof, and
all prior agreements (other than the Purchase Agreement) whether
oral or written between the parties hereto are merged herein and
superseded hereby. No other agreements not specifically referred
to herein, oral or otherwise, shall be deemed to exist or to bind
any of the parties hereto. This Escrow Agreement may not be
modified or changed except by written instrument signed by all of
the parties hereto. This Escrow Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors and assigns. Nothing in this Escrow Agree-
ment, expressed or implied, is intended to confer on any person
other than the parties hereto and their respective successors and
assigns any rights or remedies under or by reason of this Escrow
Agreement.
14. Further Assurances.
Each party to this Escrow Agreement agrees on the
written request of any other party hereto to execute and deliver
from time to time any additional instruments or documents
reasonably considered necessary by a party or its counsel to
effect or complete the transactions contemplated hereunder.
15. Counterparts.
This Escrow Agreement may be executed in one or more
counterparts, each of which is deemed an original, but all of
which together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have duly executed this
Escrow Agreement as of the date first above written.
PURCHASER: SELLER:
WHEREHOUSE ENTERTAINMENT, INC., THE RECORD SHOP, INC.
a Delaware corporation a Minnesota corporation
By: _______________________ By: ______________________
Scott Young Mary Ann Levitt
Its: President Its: President
By: _______________________
Cathy Wood
Its: Secretary
ESCROW AGENT:
LAWYERS TITLE OF ARIZONA, INC.
By: ______________________________
Its: _____________________________
EXHIBIT A
SELLER and PURCHASER:
1. AGREE that they will deposit with Escrow Agent all docu-
ments, all funds and do or cause to be done all other things
necessary to enable it to comply with the terms of the
Escrow Agreement, direct that all monies payable hereunder
shall be paid in United States Dollars to the Escrow Agent,
and that upon receipt the Escrow Agent shall initially
deposit such funds in a general (noninterest bearing) escrow
account in a financial institution doing business in the
State of Arizona, and Escrow Agent shall not be liable for
any loss or impairment of funds so deposited in any said
bank, savings bank or savings institution resulting from the
failure, insolvency or suspension of such institution and
authorize Escrow Agent to pay from funds held the amounts
necessary to consummate this transaction. Immediately upon
notification to Escrow Agent that funds deposited into the
general escrow account as described above have cleared,
Escrow Agent shall deposit those funds into the interest
bearing account described in the escrow agreement to which
this Exhibit A is attached (the "Escrow Agreement").
2. AGREE that disbursement of any funds may be made by check of
Escrow Agent; that Escrow Agent shall be under no obligation
to disburse any funds represented by check or draft, and no
check or draft shall be payment to Escrow Agent in compli-
ance with any of the requirements hereof, until it is
advised by the Bank in which is its deposited that such
check or draft has been honored; and agree to pay Escrow
Agent upon demand, all charges payable by them respectively,
as provided herein.
3. AGREE to pay to Escrow Agent, upon demand, an escrow fee of
$750, representing payment in full of all escrow fees to be
paid to Escrow Agent for its services under the Escrow
Agreement, except as provided in the immediately succeeding
clause and charges for extraordinary services approved in
writing in advance by Purchaser and Seller, which fees and
charges, unless otherwise provided in writing, shall be paid
one-half by the Seller and one-half by the Purchaser.
4. AGREE that Escrow Agent may destroy its file or files, and
the contents thereof after three (3) years from the final
disbursement and that no action against Escrow Agent shall
be commenced more than three (3) years from the date the
cause of action accrues.
5. AGREE that they will, jointly and severally, indemnify and
save harmless Escrow Agent against all costs, damages,
attorneys' fees, expenses and liabilities (collectively, the
"Liabilities"), which it may incur or sustain in connection
with the Escrow Agent except for any Liabilities resulting
from the willful misconduct or gross negligence of Escrow
Agent.
6. AGREE that the day established within which compliance with
any requirements must be met shall end at the close of then
regularly established public business hours of Escrow Agent
for that day, provided, however, that should the Escrow
Agent be closed for all or any portion of that day, any such
requirement may be met at any time during normal business
hours on the next succeeding business day.
EXHIBIT I-2
SECTION 3.9 ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Escrow Agreement") is made and
entered into as of the 21st day of June, 1993, by and between
WHEREHOUSE ENTERTAINMENT, INC., a Delaware corporation ("Purchas-
er"), THE RECORD SHOP, INC., a Minnesota corporation ("Seller"),
and LAWYERS TITLE OF ARIZONA, INC. ("Escrow Agent"), with
reference to the following facts:
A. Purchaser and Seller have entered into that certain
Agreement of Purchase and Sale dated as of May 10, 1993 , as
amended (the "Purchase Agreement"), pursuant to which Purchaser
will purchase certain of the assets of Seller. Each initially
capitalized term used but not defined in this Escrow Agreement is
used herein as defined in the Purchase Agreement.
B. Pursuant to the Purchase Agreement, Purchaser is
required to deposit certain sums with a mutually agreed-upon
escrow agent at the Closing and the Delayed Closings.
C. Purchaser and Seller have agreed that Escrow Agent
shall serve as the escrow agent hereunder, and Escrow Agent has
agreed to serve in that capacity, pursuant to the terms hereof
and the terms set forth on Exhibit A attached hereto and
incorporated herein by this reference.
NOW, THEREFORE, in consideration of the promises and the
mutual agreements hereinafter set forth and for other good and
valuable consideration, receipt of which is hereby acknowledged,
the parties hereto hereby agree as follows:
1. Appointment of Escrow Agent; Acceptance.
Purchaser and Seller hereby appoint Escrow Agent to act
as escrow agent in accordance with the terms and provisions of
this Escrow Agreement, and Escrow Agent hereby accepts such
appointment subject to the terms and conditions hereof.
2. Deposit of Funds.
At the Closing, Purchaser shall deliver to the Escrow
Agent an amount equal to the lesser of (i) $500,000 and (ii) the
Non-Transferred Lease Reduced Amount (the "Escrow Deposit"; and
together with any interest earned on the Escrow Deposit, the
"Escrow Funds"). The Escrow Deposit shall be deposited by Escrow
Agent into an interest-bearing account at Bank One or any other
federally insured lending institution approved by Purchaser and
Seller. The Escrow Agent is directed to hold, deal with and
dispose of the Escrow Funds as hereinafter set forth, and agrees
not to commingle such funds with any other funds held by the
Escrow Agent.
3. Disbursement of Escrow Funds.
During the term of the Escrow Agreement, Seller and
Purchaser may from time to time deliver to Escrow Agent written
instructions executed by both Seller and Purchaser to pay all or
a portion of the Escrow Funds to Seller (the "Joint Instruc-
tions") and the Escrow Agent shall comply with such Joint
Instructions (provided such Joint Instructions are executed
by both Seller and Purchaser) to the extent there are then
sufficient amounts of Escrow Funds to comply with such
instructions.
4. Termination; Release of Escrow Funds.
The then remaining balance of the Escrow Funds shall be
paid to Purchaser (accompanied by a true and correct accounting
of all Escrow Funds so expended) on the first business day after
the earlier of (i) the date Seller and Purchaser agree in
writing, such agreement not to be unreasonably withheld, that the
parties will not be able to obtain Store Leasehold Consents for
any remaining Non-Transferred Leases, and Extensions and Store
Leasehold Consents for any remaining Non-Extended Short Term
Leases, and (ii) January 15, 1994.
5. Fees of Escrow Agent.
Escrow Agent shall be entitled to compensation for
Escrow Agent's services hereunder in accordance with the
provisions of Exhibit A attached hereto and to reimbursement
for reasonable expenses incurred in connection herewith.
Purchaser and Seller shall each pay one-half (1/2) of such fees
and expenses.
6. Duties of Escrow Agent.
Escrow Agent shall perform only such duties as are
expressly set forth in this Escrow Agreement, including those
duties set forth on Exhibit A attached hereto and incorporated
herein. Escrow Agent may resign and may be discharged from its
duties or obligations hereunder by giving at least twenty (20)
days' prior written notice of such resignation to Purchaser and
Seller, specifying the date when such resignation shall take
effect, which shall not be prior to the appointment of a
successor Escrow Agent. Following receipt of such notice,
Purchaser and Seller shall designate a successor Escrow Agent.
Upon the mutual agreement of Purchaser and Seller, they shall
have the right to remove Escrow Agent by giving written notice of
such removal to Escrow Agent, which notice shall designate a
successor Escrow Agent. Within five (5) calendar days after
receipt of such notice, Escrow Agent shall deliver the Escrow
Funds to the designated successor Escrow Agent.
7. Disputes and Controversies.
7.1 The parties hereto agree that arbitration
shall constitute the exclusive remedy for the resolution of any
dispute, controversy or claim between the parties arising out of
or relating to this Escrow Agreement. The arbitration proceed-
ings shall be accomplished in accordance with the provisions of
this Section 7.
7.2 Except as expressly provided herein to the
contrary, the arbitration proceeding shall be conducted under the
Commercial Arbitration Rules of the American Arbitration Associa-
tion in effect at the time a demand for arbitration is made. To
the extent that there is any conflict between the rules of the
American Arbitration Association and this Section 7, this Section
7 shall govern and determine the rights of the parties hereto.
7.3 The arbitration will take place in Los
Angeles, California before a single arbitrator selected as
follows: Either Purchaser or Seller may request the American
Arbitration Association to provide a list of proposed arbitra-
tors, all of whom must be retired judges. Purchaser and Seller
shall then take turns crossing off one name at a time from such
list with the last remaining retired judge being appointed the
arbitrator. Purchaser and Seller shall select by lot which of
them strikes the first name from the list of proposed arbitra-
tors. If the person selected in this method to be the arbitrator
declines or is otherwise unavailable to serve as the arbitrator
of the dispute, the arbitrator shall be selected from the same
list of proposed arbitrators selected in the reverse order to
which those proposed arbitrators' names were struck from the list
until one of such individuals selected to be the arbitrator
accepts the appointment and is able to serve as the arbitrator.
7.4 The arbitrator selected in the manner set
forth in Section 7.3 shall be requested to honor the intention of
the parties hereto to resolve the disputes quickly and inexpen-
sively. All decisions shall be made with this intention in mind.
The decision of the arbitrator, including determination of the
amount of any damages suffered, shall be exclusive, final and
binding on all parties, their successors and assigns as appli-
cable.
7.5 Except as expressly set forth in this Escrow
Agreement, the arbitrator shall determine the manner in which the
arbitration proceeding is conducted, including the time and place
of all hearings, the order of presentation of evidence and all of
the questions that arise with respect to the arbitration proceed-
ing.
7.6 The arbitrator shall be required to determine
all issues in accordance with California law. The rules of
evidence applicable to proceedings at law in the State of
California will be applicable to the arbitration proceedings.
7.7 The arbitrator shall issue a single judgment
at the close of the arbitration proceeding, which shall dispose
of all of the claims of the parties that are the subject of the
arbitration. Any party to the arbitration may seek a judgment
from a court of competent jurisdiction to enforce the award of
the arbitrator.
7.8 The cost of arbitration, including admini-
strative fees, fees for a record and a transcript, and the
arbitrator's fees shall be borne equally by the parties to the
arbitration, except that the arbitrator shall have the right to
award reasonable attorneys' fees to the party determined by the
arbitrator to be the prevailing party.
8. Interest on Escrow Funds.
All interest earned on the Escrow Funds shall inure to
the benefit of Purchaser.
9. Method of Payment.
Any amounts to be paid to Purchaser or Seller hereunder
shall be paid by wire transfer or by cashier's check.
10. Notices.
All notices, statements or other documents which any
party shall be required or shall desire to give to the other
hereunder shall be in writing and shall be given by said party
only by telecopier, or by courier or personal delivery or by
addressing it as indicated below, and depositing it certified
first-class mail, return receipt requested, postage prepaid, in
the U.S. mail. The addresses of the parties shall be those of
which the other party actually receives written notice pursuant
to this Section 10, and until further notice:
If to Purchaser: Wherehouse Entertainment, Inc.
19701 Hamilton Avenue
Torrance, CA 90502-1334
Facsimile: (310) 538-2583
Attention: Cathy Wood,
Senior Vice President
With a copy to: Mitchell, Silberberg & Knupp
11377 West Olympic Boulevard
Los Angeles, California 90064
Facsimile: (310) 312-3787
Attention: Roy Shults, Esq.
If to Seller: The Record Shop, Inc.
74 Cloudview Road
Sausalito, CA 94695
Facsimile: (415) 331-2657
Attention: Mort Gerber
With a copy to: Snell & Wilmer
400 East Van Buren
One Arizona Center
Phoenix, AZ 85004-0001
Facsimile: (602) 382-6070
Attention: Jody Pokorski, Esq.
If to Escrow Agent: Lawyers Title of Arizona, Inc.
2425 E. Camelback Road, Suite 700
Phoenix, AZ 85016
Facsimile: (602) 954-7006
Attention: Lynne Peoples
Any such communications given by courier or personal
delivery shall be deemed given when delivered if during normal
business hours on a business day (or if not, the next business
day after delivery); any such communications given by telecopier
shall be deemed given when received if during normal business
hours on a business day (or if not, the next business day after
delivery) provided that such telecopy is legible and that at the
time such telecopy is sent the sending party receives written
confirmation of receipt and forwards a copy of the notice by
courier or personal delivery or by mail; and any such communi-
cations sent by certified first-class mail, return receipt
requested, postage prepaid shall be deemed given two business
days after the date of mailing.
11. Governing Law.
This Escrow Agreement shall be construed in accordance
with and governed by the laws of the State of California, without
giving effect to that State's conflicts of law rules.
12. Risk of Loss.
As between Purchaser and Seller, the risk of loss of
any funds deposited into escrow pursuant to the terms of this
Escrow Agreement shall be borne equally by Purchaser and Seller,
provided, however, that such assumption of the risk of loss by
Purchaser and Seller shall not release Escrow Agent from liabil-
ity to Purchaser and Seller for Escrow Agent's acts or omissions
which result in or cause a loss of any of the Escrow Funds.
13. Entire Agreement.
This Escrow Agreement and the Purchase Agreement
contain all of the terms and conditions agreed upon by the
parties hereto with respect to the subject matter hereof, and
all prior agreements (other than the Purchase Agreement) whether
oral or written between the parties hereto are merged herein and
superseded hereby. No other agreements not specifically referred
to herein, oral or otherwise, shall be deemed to exist or to bind
any of the parties hereto. This Escrow Agreement may not be
modified or changed except by written instrument signed by all of
the parties hereto. This Escrow Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors and assigns. Nothing in this Escrow Agree-
ment, expressed or implied, is intended to confer on any person
other than the parties hereto and their respective successors and
assigns any rights or remedies under or by reason of this Escrow
Agreement.
14. Further Assurances.
Each party to this Escrow Agreement agrees on the
written request of any other party hereto to execute and deliver
from time to time any additional instruments or documents
reasonably considered necessary by a party or its counsel to
effect or complete the transactions contemplated hereunder.
15. Counterparts.
This Escrow Agreement may be executed in one or more
counterparts, each of which is deemed an original, but all of
which together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have duly executed this
Escrow Agreement as of the date first above written.
PURCHASER: SELLER:
WHEREHOUSE ENTERTAINMENT, INC., THE RECORD SHOP, INC.
a Delaware corporation a Minnesota corporation
By: ______________________ By: ____________________
Scott Young Mary Ann Levitt
Its: President Its: President
By: ______________________
Cathy Wood
Its: Secretary
ESCROW AGENT:
LAWYERS TITLE OF ARIZONA, INC.
By: ______________________________
Its: _____________________________
EXHIBIT A
SELLER and PURCHASER:
1. AGREE that they will deposit with Escrow Agent all docu-
ments, all funds and do or cause to be done all other things
necessary to enable it to comply with the terms of the
Escrow Agreement, direct that all monies payable hereunder
shall be paid in United States Dollars to the Escrow Agent,
and that upon receipt the Escrow Agent shall initially
deposit such funds in a general (noninterest bearing) escrow
account in a financial institution doing business in the
State of Arizona, and Escrow Agent shall not be liable for
any loss or impairment of funds so deposited in any said
bank, savings bank or savings institution resulting from the
failure, insolvency or suspension of such institution and
authorize Escrow Agent to pay from funds held the amounts
necessary to consummate this transaction. Immediately upon
notification to Escrow Agent that funds deposited into the
general escrow account as described above have cleared,
Escrow Agent shall deposit those funds into the interest
bearing account described in the escrow agreement to which
this Exhibit A is attached (the "Escrow Agreement").
2. AGREE that disbursement of any funds may be made by check of
Escrow Agent; that Escrow Agent shall be under no obligation
to disburse any funds represented by check or draft, and no
check or draft shall be payment to Escrow Agent in compli-
ance with any of the requirements hereof, until it is
advised by the Bank in which it is deposited that such check
or draft has been honored; and agree to pay Escrow Agent
upon demand, all charges payable by them respectively, as
provided herein.
3. AGREE to pay to Escrow Agent, upon demand, an escrow fee of
$750, representing payment in full of all escrow fees to be
paid to Escrow Agent for its services under the Escrow
Agreement, except as provided in the immediately succeeding
clause and charges for extraordinary services approved in
writing in advance by Purchaser and Seller, which fees and
charges, unless otherwise provided in writing, shall be paid
one-half by the Seller and one-half by the Purchaser.
4. AGREE that Escrow Agent may destroy its file or files, and
the contents thereof after three (3) years from the final
disbursement and that no action against Escrow Agent shall
be commenced more than three (3) years from the date the
cause of action accrues.
5. AGREE that they will, jointly and severally, indemnify and
save harmless Escrow Agent against all costs, damages,
attorneys' fees, expenses and liabilities (collectively, the
"Liabilities"), which it may incur or sustain in connection
with the Escrow Agent except for any Liabilities resulting
from the willful misconduct or gross negligence of Escrow
Agent.
6. AGREE that the day established within which compliance with
any requirements must be met shall end at the close of then
regularly established public business hours of Escrow Agent
for that day, provided, however, that should the Escrow
Agent be closed for all or any portion of that day, any such
requirement may be met at any time during normal business
hours on the next succeeding business day.
EXHIBIT J
FORM OF PURCHASER'S COUNSEL'S OPINION
SEE ATTACHED
SCHEDULE 1.2.1
STORES
Arrowhead Towne Center
Broadway Mall
Brookdale Mall
Calhoun Center
Chestnut Street
Columbia Mall
Crossroads Center
Crossroads Plaza P.M.
Crossroads Plaza R.S.
Flagstaff Mall
Lindale Mall
Manchester Center
Meadows Mall
Merle Hay Mall
Minneapolis City Center
Mission Valley Mall
NewPark Mall
North County Fair
Paradise Valley Mall P.M.
Paradise Valley Mall R.S.
Park Central Mall
Ridgedale Center
Rosedale Center
Santa Ana Mainplace
Southdale Center
Southridge Mall
Stanford Mall
Superstition Springs
Valley Fair Mall
Valley West Mall
Westridge Mall
SCHEDULE 1.2.2
F.F & E
SEE ATTACHED
SCHEDULE 1.2.3
LIST OF SENSORMATIC LEASES
Leases and Leases with Options to Purchase by and between
G.E. Capital, as successor to Sensormatic Electronics Corpo-
ration, as lessor, and Record Shop, Inc., as lessee, as
follows:
Record Shop Store: G.E. Account: Lease Date:
73 7038065-001 01/24/89
18 7035927-001 09/20/88
19 7035925-001 08/07/--
75 7035924-001 09/20/88
77 7035928-001 05/31/90
87 7035926-001 09/20/88
88 7037232-001 11/16/88
15 7047469-001 05/31/90
94 7035925-002 09/20/88
70 7047468-001 09/20/88
76 7002935-001 05/19/92
79 7060258-001 Undated
83 7060259-001 Undated
86 7060261-001 Undated
SCHEDULE 1.2.5
LIST OF STORE TRADENAMES
Tradenames
Record Shop
Paradise Music
Logos
Record Shop
(logo)
Paradise Music
(logo)
SCHEDULE 1.2.6
STORE CONTRACTS
1. Proposal/Agreement, dated May 29, 1991, by and between ADT
Security System and The Record Shop, Inc.
SCHEDULE 2.5.1.1
ESSENTIAL PROVISIONS
The "Essential Provisions" are agreements by the applicable
lessor to amend the applicable Store Lease in the following
respects, if applicable:
1. To modify any radius restrictions contained in the appli-
cable Store Lease to permit the operation of stores
currently operated by Purchaser which would otherwise
violate the applicable radius restriction.
2. To delete any landlord's lien contained in the applicable
Store Lease.
3. To include reasonable assignment and sublet provisions
allowing Purchaser to assign and/or sublet the applicable
Store Lease generally in accordance with Section 16.9 of the
form of Store Leasehold Consent attached hereto as Exhibit A
to this Agreement (the "Form Store Leasehold Consent").
4. To include one or more provisions (i) allowing Purchaser to
remodel the leased premises of the applicable Store Lease
generally in accordance with Section 16.4 of the Form Store
Leasehold Consent, and (ii) waiving any continuous operation
clause in the applicable Store Lease for a reasonable period
of time for the purpose of completing such remodeling.
SCHEDULE 2.5.1.2
SHORT TERM STORE LEASES
Westridge Mall
NewPark Mall
Stanford Mall
Valley West Mall
Brookdale Center
Crossroads Center (Minnesota)
Minneapolis City Center
Ridgedale Center
Southdale Center
SCHEDULE 4.7
STORES SUBJECT TO MANAGEMENT AGREEMENTS
Flagstaff
NewPark Mall
Lindale Mall
Southridge Mall
Valley West Mall
Crossroads Center
Minneapolis City Center
Ridgedale Center
Rosedale Center
Columbia Mall
SCHEDULE 6.1.1
CONFLICTS
1. Seller must obtain UCC releases from the parties listed on
the UCC Lien Searches obtained by Purchaser and provided to
Seller.
2. Any breach of a Store Lease as a result of the failure to
obtain the applicable lessor's consent to the Management
Agreement relating to such Store Lease.
3. Any breach of a Store Lease as a result of the failure to
obtain the applicable lessor's consent to Purchaser's
closing of the Store for remodeling purposes.
SCHEDULE 6.1.3
EXCEPTIONS TO AGREEMENTS
None
SCHEDULE 6.1.4
LITIGATION
1. Abbey Road v. The Record Shop, Marin Municipal Court;
Case No. V-930144.
2. Jocelyn Monique Bessard v. The Record Shop, MDCR No.
91256-EM-1A, EEOC No. 26D920028.
3. Melissa Jane Rolfhus v. The Record Shop, MDCR
91251-EM-7, EEOC No. 26D920018.
SCHEDULE 6.1.7
STORE LEASE DEFAULTS
1. Pursuant to Seller's lease with General Growth for the
Store in Southridge Mall located in Des Moines, Seller agreed to
remodel the interior of the Store by April 15, 1993. Seller has
not commenced this remodel. However, Judge Nagle, a Vice Presi-
dent at General Growth, has orally agreed to defer this remodel
until after Buyer takes possession of the Store.
SCHEDULE 6.1.8
SENSORMATIC LEASE OR STORE CONTRACT DEFAULTS
None
SCHEDULE 6.1.9
PHYSICAL CONDITION OF STORES AND F,F &E
Items to be repaired or replaced by Seller:
1. One of the two compressors in the air conditioning unit for
the Store located in Park Center Mall is inoperative (WEI
#470).
2. Air conditioning unit at the Store located in Crossroads
Plaza, Utah (Paradise Music) is inoperative (WEI #495).
3. Flood light at back of the Store located in Crossroads
Plaza, Utah (Paradise Music) is inoperative due to broken
fixture (WEI #495).
4. No electrical power to backroom and bathroom at the Store
located in the Merle Hay Mall (WEI #483).
5. HVAC inoperative at the Store located in the Merle Hay Mall
(WEI #483).
6. HVAC inoperative at the Store located in the Southridge Mall
(WEI #484).
7. Sink in bathroom at the Store located in the Southridge Mall
in inoperative (WEI #484).
8. HVAC inoperative at the Store located in the Columbia Mall
(WEI #494).
9. Electrical gate at Store located in the Ridgedale Center is
inoperative (WEI #490).
Items to be repaired or replaced by Purchaser, at Seller's cost:
1. No emergency bar on the back door at the Store located in
Park Central Mall (WEI #470).
2. Circuits in the electrical box at the Store located in
Flagstaff, Arizona are periodically inoperative (WEI #467).
3. No hot water from sink in the Store located at the Meadows
Mall (WEI #493).
4. Back door at the Store located in the Lindale Mall is broken
and cannot be secured properly (WEI #482).
5. Light fixtures in the Store located in the Lindale Mall do
not conform to the applicable building code (WEI #482).
6. Painted sprinkler heads in the Store located in the Calhoun
Square Mall need to be replaced (WEI #487).
SCHEDULE 6.1.10.3
POLLUTING SUBSTANCES
None
SCHEDULE 6.1.15
EMPLOYEE PLANS
1. Group Medical and Dental Insurance plans with Select
Group Plus, Massachusetts Mutual and Canada Life (depending on
location of Store) as evidenced by group insurance plan booklets,
copies of which were provided to Buyer.
2. Incentive plan providing monetary awards to store
managers for exceptional sales increases as described in the
Employee Manual, a copy of which was provided to Buyer.
3. Policies relating to funeral leave, holiday pay, jury
duty, maternity leave, sick days, and vacation, all as described
in the Employee Manual.
SCHEDULE 6.1.16
EMPLOYEE CLAIMS
1. Jocelyn Monique Bessard v. The Record Shop, MDCR No.
91256-EM-1A, EEOC No. 26D920028.
2. Melissa Jane Rolfhus v. The Record Shop, MDCFR
91251-EM-7, EEOC No. 26D920018.
SCHEDULE 6.1.21
CLAIMS AGAINST HEALTH INSURANCE PLANS
1. During the applicable period, the wife ("Wife") of one of
Seller's employees ("Husband") filed claims against Seller's
health insurance plan in an aggregate amount of $43,000.
Husband voluntarily terminated his employment with Seller
approximately six months ago and declined continuing
coverage under COBRA, and no claims have been filed by Wife
during the six month period following such termination.
SCHEDULE 6.2
PURCHASER'S CONFLICTS
1. Any breach of a Store Lease as a result of the failure to
obtain the applicable lessor's consent to the Management
Agreement relating to such Store Lease.
2. Any breach of a Store Lease as a result of the failure to
obtain the applicable lessor's consent to Purchaser's
closing of the Store for remodeling purposes.