ASSET PURCHASE AGREEMENT
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This ASSET PURCHASE AGREEMENT (this "Agreement") is made effective as of
the 1st day of January, 1995 (the "EFFECTIVE DATE"), by and between MADACY MUSIC
GROUP, INC., a Canadian corporation incorporated under the Canada Business
Corporations Act (the "CORPORATION"), and MADACY MUSIC GROUP, INC., a Michigan
corporation ("MAI").
RECITALS:
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1. The Corporation's business operations consist of licensing, duplicating,
marketing, packaging and supplying music and video products and related
activities in Canada, in the United States and in other countries.
2. MAI wishes to acquire from the Corporation, and the Corporation desires to
sell to MAI, the assets and business of the Corporation related to the
Corporation's sales of products in the United States and in all other
jurisdictions outside of Canada (the "US BUSINESS").
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the sufficiency and receipt of
which is hereby acknowledged, the parties do hereby bind themselves and their
successors and assigns, and agree as follows:
Section l. SALE OF ASSETS. The Corporation hereby conveys, transfers,
sells, assigns and delivers to MAI the following assets (the "ASSETS"):
(a) All machinery, equipment, parts, furniture, tools, supplies, and other
miscellaneous personal property owned by the Corporation and used in
the US Business;
(b) All inventories of raw materials, work in process, finished goods,
product packaging and other items held for sale in the ordinary course
of the US Business, as designated on EXHIBIT 1.B attached hereto;
(c) All accounts receivable, notes receivable and other rights to receive
monies from customers, vendors or others in the ordinary course of the
US Business, as designated on EXHIBIT 1.C attached hereto;
(d) All licenses, sublicenses, distribution contracts or other agreements
or arrangements to manufacture, use, distribute or sell products in
any jurisdiction outside of Canada, except for those which the
Corporation is not permitted to assign and except to the extent that
any does not relate to the US Business;
(e) The Corporation's interest in all customer purchase orders, customer
commitments and customer arrangements related to the US Business;
Page 5 of 22 Pages
(f) All of the outstanding shares of (and all of the Corporation's rights
to acquire any shares of or other interests in) * and in * ,
and 80% of the outstanding shares of (and 100% of the Corporation's
rights to acquire any additional shares of or other interests in)*
(g) All of the goodwill and going concern relating to the US Business, all
of the Corporation's rights in and to its patents, trademarks,
tradenames, copyrights and proprietary rights except the Corporation's
rights to use such patents, trademarks, tradenames, copyrights and
proprietary rights in Canada, and all records and books of account
which relate to the US Business.
Section 2. CONSIDERATION FOR ASSETS. The purchase price to be paid for
the Assets (the "PURCHASE PRICE") shall be $31,698,086.60 (Canadian). The
purchase price is being paid as follows: upon the execution of this Agreement,
MAI is paying the Corporation the sum of $24,698,086.60 (Canadian), by check or
by wire transfer of immediately available funds, and MAI is paying the balance
of sale in 12 installments of $333,333 (Canadian) each on the last day of each
month in 1995, and one installment of $3,000,004 (Canadian) on February 29,
1996, each such payment to be accompanied by interest at the rate of 7% per
annum. To evidence the balance of sale, MAI is delivering to the Corporation
its $7,000,000 (Canadian) promissory note in the form attached as EXHIBIT 2.
The consideration for the Assets shall be allocated first to those Assets other
than the Corporation's licenses, second to goodwill, and third and finally to
the Corporation's licenses.
Section 3. ASSUMPTION OF LIABILITIES. MAI hereby assumes the liabilities
of the Corporation entered into in the ordinary course of its business, related
to the US Business and exhaustively described on EXHIBIT 3 attached hereto. MAI
shall assume no other liabilities of the Corporation except as expressly
provided herein.
Section 4. THE CORPORATION'S REPRESENTATIONS. The Corporation hereby
represents and warrants to MAI as follows:
(a) The Corporation is a corporation incorporated as a close company (as
defined under Securities Act [Quebec]), validly existing and in
standing under the laws of Canada. The Corporation has the corporate
power and authority to own and hold its properties, to carry on its
business as currently conducted and to execute, deliver and perform
this Agreement. The execution, delivery and performance of this
Agreement have been duly approved by the Corporation's Board of
Directors and this Agreement constitutes the valid and legally binding
obligation of the Corporation.
_______________________
*Information has been omitted pursuant to a request for confidential treatment
made by Handleman Company.
Page 6 of 22 Pages
(b) The Corporation has the corporate power and authority to sell and
deliver the Assets, and neither the execution and delivery of this
Agreement, the consummation by the Corporation of the transactions
contemplated hereby, nor the sale or delivery of the Assets requires
any authorization, consent or approval of any governmental or
regulatory authority (except for those which have been obtained, and
except to the extent that any license, sublicense or distribution
contract is not assignable without consent) or of any other person or
entity or conflicts with, accelerates any obligation under, violates
or breaches any provision of, constitutes a default under, results in
creation of any lien or security interest under or results in the
termination of, any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, registration, or other authorization,
lease, contract, agreement, or other instrument, commitment or
obligation to which it is a party or by which any of its property may
be bound, or violates any order, writ, injunction, decree, judgment,
arbitration award, statute, regulation, or ruling applicable to it or
to its properties. The execution, delivery and performance of this
Agreement have been duly approved by the Corporation's shareholders.
(c) The Corporation owns the Assets free and clear of any lien, security
interest, pledge, charge, encumbrance, or restriction of any kind or
nature.
(d) Upon consummation of the transactions contemplated hereby, MAI shall
own the Assets free and clear of any lien, security interest, pledge,
charge, encumbrance, or restriction of any kind or nature or any
ownership interest of any other person or entity, other than those
arising out of the activities of MAI.
(e) EXHIBIT 4.E, attached hereto contains a true and complete listing of
all products of the Corporation ("Products") owned by, used by or
subject to license agreements of the Corporation in connection with
the US Business. Copies of all license and other agreements relating
to the Products have heretofore been delivered to MAI. Such license
and other agreements are valid and binding on the Corporation, and
there are no breaches or facts or events that with the giving of
notice or the passage of time or both could result in a breach of such
license and other agreements. EXHIBIT 4.E and such licenses and other
agreements accurately describe the Corporation's rights with respect
to the Products. There are no claims pending or, to the best of the
Corporation's knowledge, threatened against the Corporation which
involve the Products or the materials embodied therein. Neither the
Products nor the materials embodied therein nor any use thereof by the
Corporation will violate or infringe upon the rights of any third
parties, and, to the best of the Corporation's knowledge, no third
party is infringing on the Corporation's rights in and to the
Products.
(f) Except as set forth on EXHIBIT 4.F attached hereto, the Corporation
does not own or control, directly or indirectly, any corporation,
association, joint venture, partnership, or other business entity.
Page 7 of 22 Pages
(g) Except for that certain Common Stock Option Agreement dated as of
November 1, 1993 by and among Amos Entertainment, Inc., the
Corporation and Handleman Company, the Corporation is not a party to
any agreement, arrangement or understanding relating to the sale of
its stock or relating to the sale of any of its assets outside of the
ordinary course of the Corporation's business.
Section 5. MAI'S REPRESENTATIONS. MAI hereby represents and warrants to
the Corporation as follows:
(a) MAI is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Michigan. MAI has the
corporate power and authority: (i) to own and hold its properties and
to carry on its business as currently conducted; (ii) to execute,
deliver and perform this Agreement; and (iii) to purchase the Assets
in accordance with the terms hereof. This Agreement constitutes the
valid and legally binding obligation of MAI.
(b) MAI has the corporate power and authority to purchase, own and operate
the Assets, and neither the execution and delivery of this Agreement,
the consummation by MAI of the transactions contemplated hereby, nor
the purchase or ownership of the Assets requires any authorization,
consent or approval of any governmental or regulatory authority or of
any other person or entity or conflicts with, accelerates any
obligation under, violates or breaches any provision of, constitutes a
default under, results in creation of any lien or security interest
under or results in the termination of, any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, registration, or
other authorization, lease, contract, agreement, or other instrument,
commitment or obligation to which it is a party or by which any of its
property may be bound, or violates any order, writ, injunction,
decree, judgment, arbitration award, statute, regulation, or ruling
applicable to it or to its properties. The execution, delivery and
performance of this Agreement have been duly approved by MAI's
shareholders.
Section 6. INDEMNIFICATION; PRORATIONS.
6.1 SURVIVAL OF REPRESENTATIONS. All of the representations and
warranties and the covenants and agreements contained or referred to in this
Agreement shall survive the consummation of the transactions contemplated
hereby. The liability of any of the parties by reason of its covenants,
representations and warranties shall not be affected by any investigation made
by or on behalf of any other party.
6.2 INDEMNIFICATION. MAI hereby indemnifies and holds harmless the
Corporation from and against any and all losses or liabilities (including
without limitation, reasonable counsel fees and disbursements in respect
thereof) arising out of any breach of any covenant, warranty, representation or
agreement made by MAI herein or in any document delivered pursuant thereto. The
Corporation hereby indemnifies and holds harmless MAI from and against all
losses or
Page 8 of 22 Pages
liabilities (including without limitation, reasonable counsel fees and
disbursements in respect thereof) arising out of any breach of any covenant,
warranty, representation or agreement made by the Corporation herein or in any
document delivered pursuant hereto or arising out of ownership or operation of
the Assets or the business herein conveyed if such losses or liabilities arise
in whole or in part out of acts of the Corporation prior to the Effective Date,
or facts existing prior to the Effective Date, if such liabilities are not
assumed by MAI.
6.3 NOTICE OF CLAIMS. Each party hereto shall give to the other party
hereto prompt notice of the assertion of any claim or demand or the institution
of any legal process for which such other party might be liable under the
foregoing indemnity or any other provision of this Agreement. The indemnifying
party shall be entitled, at its own option and expense, to conduct or
participate in any such legal proceedings or the negotiation and settlement of
any such claim or demand. The indemnified party will not make any settlement
thereof without the prior consent of the indemnifying party, which shall not be
unreasonably withheld.
6.4 BULK SALES LAWS. The parties recognize that, if the bulk transfer
provisions of the Michigan Uniform Commercial Code or of any other jurisdiction
shall be applicable to this transaction (the parties, however, do not
acknowledge that such provisions are applicable hereto), it would be impractical
to comply with such provisions and, accordingly, the Corporation agrees to
indemnify and to hold MAI harmless from any claims and demands of the
Corporation's creditors, which are not assumed by MAI, arising out of failure to
comply with such bulk transfer provisions, if such provisions are applicable,
including any loss, damages, liability, cost or expense of any kind whatsoever
(including reasonable counsel fees) which MAI may incur, sustain, suffer, or
become subject to as a result of non-compliance by the Corporation with such
bulk transfer provisions.
6.5 PRORATIONS. Following the date hereof, the parties shall prorate, as
of the Effective Date, (i) all ordinary operating costs under any contracts,
agreements or licenses assigned to MAI by the Corporation, (ii) all applicable
utilities, (iii) all applicable real estate taxes, calculated on a fiscal year
basis, and (iv) all other ongoing operating costs of the US Business.
Section 7. MISCELLANEOUS.
7.1 NOTICES. Any and all notices, requests or other communications
hereunder shall be given in writing and delivered by regular mail, overnight
mail, hand delivery or by registered or certified mail, return receipt
requested, with first class postage prepaid. Such notices shall be addressed:
(a) if to the Corporation, to the principal office of the Corporation; and (b)
if to MAI, to 500 Kirts Blvd., Troy, Michigan 48084, attn: President, with a
copy to Honigman Miller Schwartz and Cohn, 2290 First National Building,
Detroit, Michigan 48226, attn: Donald J. Kunz, unless notice of a change of
address is furnished to the other parties in the manner provided in this Section
7.1. Any notice which is required to be made hereunder shall be deemed made on
the date such notice is received by the party to whom it is directed.
Page 9 of 22 Pages
7.2 INVALID OR UNENFORCEABLE PROVISIONS. The invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provision were omitted.
7.3 BENEFIT AND BURDEN. This Agreement shall inure to the benefit of, and
shall be binding upon, the parties hereto and their successors and permitted
assigns.
7.4 AMENDMENTS AND WAIVER. No amendment, modification, change,
supersession, or cancellation of this Agreement shall be valid unless the same
is in writing and signed by the parties hereto. No waiver of any provision of
this Agreement shall be valid unless in writing and signed by the person against
whom that waiver is sought to be enforced. The failure of any party at any time
to insist upon strict performance of any condition, promise, agreement, or
understanding set forth herein shall not be construed as a waiver or
relinquishment of the right to insist upon strict performance of the same or any
other condition, promise, agreement, or understanding at a future time.
7.5 ENTIRE AGREEMENT. This Agreement sets forth all of the promises,
agreements, conditions, understandings, warranties, and representations between
the Corporation and MAI with respect to the transactions contemplated hereby,
and supersedes all prior agreements, arrangements and understandings among all
or some of the parties hereto, whether written, oral or otherwise. There are no
promises, agreements, conditions, understandings, warranties, or
representations, oral or written, express or implied, among the parties except
as set forth herein.
7.6 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Quebec, Canada, except that if any
provision of this Agreement would be illegal, void, invalid, or unenforceable
under such laws in connection with a suit or proceeding validly instituted in
another jurisdiction, then the laws of such other jurisdiction shall govern
insofar as is necessary to sustain the validity or enforceability of the terms
of this Agreement.
7.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original and together which
shall constitute one instrument.
7.8 ATTORNEYS' FEES. If any party commences an action against any other
party to enforce any of the terms, covenants, conditions, or provisions of this
Agreement or because of a default by a party under this Agreement, any
prevailing party in any such action shall be entitled to recover its reasonable
attorneys' fees, costs and expenses incurred in connection with the prosecution
or defense of such action from the losing party or parties.
7.9 NO THIRD PARTY RIGHTS. Nothing in this Agreement shall be deemed to
create any right in any creditor or other person or entity not a party hereto
and this Agreement shall not be construed in any respect to be a contract in
whole or in part for the benefit of any third party.
Page 10 of 22 Pages
7.10 FURTHER DOCUMENTS. All of the parties agree to execute any and all
bills of sale, assignments, instruments or other documents, and to perform any
and all other acts, reasonably necessary to accomplish the purposes of this
Agreement, including but limited to the execution and delivery of any or all
assignments or licenses of any patents, trademarks, copyrights or other
proprietary rights of the Corporation.
7.11 NUMBER AND GENDER OF WORDS. All pronouns, nouns and other terms used
in this Agreement shall include the masculine, feminine, neuter, singular, and
plural forms thereof, wherever appropriate to the context.
7.12 CAPTIONS. The captions or headings contained in this Agreement are
inserted and included solely for convenience and shall not be considered or
given any effect in construing the provisions hereof if any question of intent
should arise.
7.13 CONSTRUCTION. The parties acknowledge that each of them has had the
benefit of legal counsel of its own choice and has been afforded an opportunity
to review this Agreement with its legal counsel and that this Agreement shall be
construed as if jointly drafted by the parties hereto.
7.14 ARBITRATION. Any Disputes (as hereinafter defined) between the
parties under this Agreement shall be resolved by binding arbitration according
to the rules of the American Arbitration Association ("AAA"), at the location of
the AAA in or nearest to Troy, Michigan. Upon the occurrence of any Dispute,
the parties subject to such Dispute shall each promptly appoint one (l)
arbitrator, each of whom shall be experienced in the subject matter of the
Dispute. A third arbitrator, who shall also be experienced in the subject
matter of the Dispute, shall be promptly selected by such appointed arbitrators;
provided, however, that if such appointed arbitrators cannot agree on the
selection of a third arbitrator, then either arbitrator, on behalf of both such
arbitrators, may request that the third arbitrator be appointed by a presiding
judge of the United States District Court for the Eastern District of Michigan.
Each of the parties subject to the Dispute shall bear one-half (1/2) of the
expense of the arbitration. The resolution of the Dispute, as determined by the
majority vote of the three (3) arbitrators: (a) shall be binding upon the
parties; and (b) shall have the effect of an arbitration pursuant to Michigan
Compiled Laws Annotated Section 600.5001. In addition, a judgment of any Quebec
or Michigan circuit court may be rendered upon such resolution of the
arbitrators. For purposes of this Agreement, a "DISPUTE" means any disagreement
under this Agreement between any of the parties hereto which dispute remains
unresolved for a period of thirty (30) days from the date of its inception
despite the good faith efforts of the parties to resolve such dispute.
Page 11 of 22 Pages
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above written.
MADACY MUSIC GROUP, INC., A
MICHIGAN CORPORATION
By: /s/ LOUIS A. KIRCOS
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Printed Name: Louis A. Kircos
Title: Chairman of the Board of Directors
MADACY MUSIC GROUP, INC., A
CANADIAN CORPORATION
By: /s/ AMOS ALTER
----------------------------------------
Printed Name: Amos Alter
Title: President
Page 12 of 22 Pages
INDEX TO EXHIBITS
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1.b - Inventories of Raw Materials
1.c - Receivables
1.d - Licenses and Distribution Contracts
2 - Promissory Note
3 - Assumed Liabilities
4.c - Products
4.f - Subsidiaries
Page 13 of 22 Pages