SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 26,
1998
WHEREHOUSE ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-22289 95-4608339
- -----------------------------------------------------------------
- -----
(State or other (Commission File (IRS
Employer
jurisdiction Number) Identification
No.)
of incorporation)
19701 Hamilton Avenue, Torrance, California 90502-
1334
- -----------------------------------------------------------------
- -----
(Address of Principal Executive Offices) (Zip
Code)
Registrant's telephone number including area code: (310) 538-
2314
(Former name or former address, if changed since last report.)
Not applicable.
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On October 26, 1998, pursuant to a Stock Purchase
Agreement dated as of August 10, 1998, Wherehouse Entertainment,
Inc. (the "Registrant") acquired from Viacom International Inc.
(the "Seller") all the capital stock of certain retail music
subsidiaries of Seller (collectively, "Blockbuster Music") for a
purchase price of $117.7 million, subject to final adjustments.
The acquisition involves 378 Blockbuster Music stores operating
in 33 states. The purchase price was the result of arms length
negotiations between the Registrant and Seller. Registrant
intends to continue to operate the acquired stores, but will do
so under the Wherehouse name. Pursuant to a Transition License
Agreement, Registrant may continue to use certain trade names,
trademarks, or service marks used in the conduct of the
Blockbuster Music business for a limited time. (See Exhibit 2.2
hereto.)
The Registrant funded the acquisition with a combination
of
excess cash and the proceeds of a loan pursuant to a new loan
agreement entered into with its lender, Congress Financial Corp.
In the normal course of operations, Registrant
purchases products from subsidiaries of Seller. No other
material relationship exists between Seller and Registrant or any
of Registrant's directors or officers.
In connection with the acquisition, the Registrant and
Seller also entered into a Transition Services Agreement whereby
the Registrant may utilize certain services and facilities of
Seller for a transition period of up to one year following
October 26, 1998. (See Exhibit 2.3 hereto.)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(a) Financial Statements of Business Acquired. The financial
statements of the business acquired are not included herewith and
will be filed by amendment as soon as practicable, but not later
than 60 days after the date on which this Current Report on Form
8-K is required to be filed.
(b) Pro Forma Financial Information of Registrant. Pro forma
financial information is not included herewith and will be filed
by amendment as soon as practicable, but not later than 60 days
after the date on which this Current Report on Form 8-K is
required to be filed.
<PAGE>
(c) Exhibits.
Exhibit
Number Description
2.1 Stock Purchase Agreement dated as of
August 10, 1998 by and among Wherehouse
Entertainment, Inc. and Viacom International Inc.
(incorporated herein by reference from
Registrant's Quarterly Report on Form 10-Q, dated
September 14, 1998).
2.2 Transition License Agreement dated as of
October 26, 1998 between Wherehouse Entertainment,
Inc., the Blockbuster Music subsidiaries, and
Blockbuster Entertainment Inc.
2.3 Transition Services Agreement dated as
of August 10, 1998 between Wherehouse
Entertainment, Inc. and Viacom International Inc.
<PAGE>
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
WHEREHOUSE ENTERTAINMENT, INC.
By: /s/ Robert S. Kelleher
-------------------------------
Robert S. Kelleher
Chief Financial Officer
Senior Vice-President
DATED: November 10, 1998
<PAGE>
EXHIBIT
2.2
TRANSITION LICENSE AGREEMENT
TRADEMARK LICENSE AGREEMENT (the "Agreement") dated as of
September 26, 1998 by and between BLOCKBUSTER ENTERTAINMENT INC.,
a Delaware corporation ("Licensor") and Wherehouse Entertainment,
Inc., a Delaware corporation, Blockbuster Music Holding
Corporation, a Delaware corporation, Blockbuster SC Holding
Corporation, a Delaware corporation, Blockbuster Music Retail,
Inc., a Delaware corporation, Show Industries, Inc., a California
corporation, and Blockbuster SC Music Corporation, a Delaware
corporation (collectively "Licensee").
WHEREAS, pursuant to the Stock Purchase Agreement dated
August 10, 1998 between Viacom International Inc. ("Seller") and
Licensee (the "Purchase Agreement"), Seller has agreed to sell to
Licensee and Licensee has agreed to purchase from Seller the
Shares of the Holding Subsidiaries (the "Acquisition");
WHEREAS, Licensor, a direct subsidiary of Seller, is the
owner of certain trademarks, trade names and service marks that
are, as of the date hereof, used in the conduct of the Business;
WHEREAS, Licensee desires to use certain trade names,
trademarks or service marks owned by Licensor and used in the
conduct of the Business and Licensor is willing to grant certain
limited rights thereto in accordance with the terms, and subject
to the conditions of this License Agreement; and
WHEREAS, it is a condition to the closing of the Acquisition
that Licensor and Licensee enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants hereinafter set forth, the
parties hereto agree as follows:
1. Definitions.
1.1 Capitalized terms used herein and not otherwise defined
shall have their respective meanings set forth in the Purchase
Agreement.
1.2 As used in this License Agreement, the following terms
shall
have the meanings set forth below.
(a) "License Period" shall commence as of the date of
this
Agreement and continue through the following time periods for
each region more fully set forth on Schedule A hereto:
Los Angeles - February 28, 1999
Dallas - April 15, 1999
Atlanta - May 30, 1999
Chicago - June 30, 1999
(b) "Marks" shall refer to the trademarks, trade names
or
service marks owned by Licensor, including those specifically
listed on Schedule B hereto ("Schedule B Marks"), but excluding
any such Marks referring to Blockbuster Video.
(c) "Pornographic Materials" shall mean adult or
pornographic
material the sale or rental of which is inconsistent with the
standards in effect as of the date of the Agreement of
Blockbuster Video and Blockbuster Music.
(d) "Related Materials" shall mean stationery,
business cards,
invoices, catalogs, signs, purchase orders, brochures, labels,
letterheads, advertising, promotional goods, packaging and other
products and materials bearing the Marks.
(e) "Territory" shall mean the United States.
2. License.
2.1 Grant.
(a) Subject to the terms and conditions of this
Agreement,
Licensor hereby grants to Licensee a nonexclusive,
nontransferable license throughout the Territory to use the Marks
solely in the course of the Business (including on and in
connection with Related Materials) prior to removal or
destruction referred to in Section 2.l(b) below. Subject to 6.1
below, this Agreement is revocable by Licensor in the event of a
breach by Licensee.
(b) The license granted in Section 2.l(a) shall expire
for each
region as set forth in Section 1.2(a). Following the expiration
of the license granted in Section 2.l(a) in each region, Licensee
shall discontinue further use of the Marks and the Related
Materials and shall, at Licensee's option, return, destroy,
sticker or otherwise remove or cover the Marks from all remaining
Related Materials.
2.2 Limitation On Grant.
(a) Except as specifically set forth in Section 2.1,
no right or
license is granted to Licensee by implication or otherwise.
(b) Licensee shall have no right whatsoever to:
(i) sublicense or otherwise grant any rights to
any Mark to
any Person; or
(ii) use any trademarks, trade names, service
marks, logos,
imprint or other distinctive marks or
designations of
Licensor or its Affiliates other than the
Marks.
(iii) use the Marks as an Internet domain name or
address.
(iv) use the Marks in any manner for any purpose
other than as
expressly provided herein.
3. Ownership of Trademarks.
3.1 Right, Title and Interest.
(a) Licensor represents that there are no pending
Actions, and
to Licensor's knowledge none are threatened in writing, alleging
that Licensor is, through its use of the Marks infringing or
otherwise violating any rights of third parties.
(b) Licensee acknowledges that Licensor is the owner
of the
Marks and of all goodwill now or hereafter associated therewith.
Licensee shall not take any action that is inconsistent with
Licensor's ownership of the Marks. Licensee agrees that nothing
in this Agreement and no use of the Marks by Licensee pursuant to
this Agreement shall vest in Licensee, or shall be construed to
vest in Licensee, any right, ownership or interest in or to the
Marks or the goodwill now or hereafter associated therewith,
other than the right to use the Marks in accordance with this
Agreement.
3.2 Execute Documents.
(a) Licensee agrees both during the License Period and
thereafter, to perform all lawful acts and execute such
instruments as Licensor may reasonably request to confirm,
evidence, maintain or protect Licensor's rights in, and ownership
of the Marks at Licensor's cost.
(b) Without the prior written consent of Licensor,
Licensee
shall not during the License Period or thereafter register or
attempt to register any Mark or any variations thereof, or any
trade names, trademarks, service marks, collective marks,
certification marks or logos that are confusingly similar to, any
Mark in any country or jurisdiction.
3.3 Goodwill. All goodwill and improved reputation
generated by
Licensee's use of the Marks as set forth herein shall inure to
the benefit of Licensor.
3.4 Reservation of Rights. All rights not expressly
granted to
Licensee hereunder shall remain the exclusive property and right
of Licensor. Without limiting the foregoing, subject to this
Agreement, Licensor shall retain the exclusive right to use and
to license others to use the Marks (either alone or as a
composite mark with other marks), in connection with the
manufacture, marketing, advertising, promotion, distribution, and
sale of products.
4. Licensee Use of Trademarks.
4.1 Form of Use. Licensee shall use the Marks, other than
the
Schedule B Marks, only in a manner in all respects consistent
with the Acquired Subsidiaries' use of the Marks at the Closing
Date and subject to the quality control restrictions in 4.2
below. Licensee may use the Schedule B Marks (i) in a manner in
all respects consistent with the Acquired Subsidiaries' use of
the Schedule B Marks at the Closing Date and subject to such
Section 4.2, and (ii) in such other manners as Licensor may from
time to time during the term hereof approve in writing upon
presentment to Licensor under 4.4 below, such approval not to be
unreasonably withheld or delayed.
4.2 Quality Standard. Licensee acknowledges that Licensor
has
valuable property rights in the Marks and, accordingly, the
license granted hereunder is granted in reliance on Licensee's
acknowledgement that the reproduction of the Marks will be at a
level that meets or exceeds the industry standard for products of
a similar kind and value and at least commensurate with the
quality of the products used in connection with the Marks by the
Acquired Subsidiaries as of the date of this Agreement. Licensee
agrees that it shall not use any Mark in such a manner as could
cause Licensor to reasonably perceive any denigration or
tarnishment of such Mark.
4.3 Labeling. Licensee warrants that all Related Materials
used
under this Agreement will be manufactured, labeled, sold,
distributed and advertised in compliance with all applicable
federal, state and local laws and regulations. Licensee will
cause to appear on all materials displaying the Marks the
trademark notice R or TM, as requested by Licensor, and/or the
legend: "[Mark] is a trademark of Blockbuster Entertainment Inc.
used under license" and/or such other legend as reasonably
requested by Licensor from time to time, to appear on the first
and most prominent use of the Mark on Related Products.
4.4 Restrictions Upon Use. Nothing contained herein shall
be
deemed license or authority to use the Marks on or in connection
with the (i) rental of (x) video tapes, (y) DVD, or (z) Divix, or
(ii) any advertisement, promotion, sale, rental, display,
distribution or other use of any Pornographic Material. It is
expressly acknowledged and agreed that Licensee shall not use the
Marks for any of the aforesaid purposes at any time.
4.5 Right of Inspection. Licensee shall submit samples of
the
Related Products to Licensor, free of cost, for review by
Licensor in order to assure itself that the provisions of this
Agreement are being observed.
5. Infringement.
5.1 Notification of Infringement. During the License
Period and
six months thereafter, Licensee agrees promptly to notify
Licensor in writing of any conflicting uses of, or any
applications or registrations to use, any mark, name, symbol,
device or word that become known to Licensee that Licensee
believes, in good faith, constitute an act of infringement or of
unfair competition in relation to any Mark. Licensor shall have
the exclusive right to bring and defend all actions or
proceedings relating to the Marks.
5.2 Action Against Infringer. The maintenance,
enforcement, and
protection of the Marks shall be in the sole discretion and
control of Licensor, and any and all recoveries resulting from
such actions shall be retained by Licensor. Upon Licensor's
request and at Licensor's expense, Licensee shall cooperate with
and assist Licensor in any of Licensor's enforcement efforts with
respect to the Marks. In the event Licensor takes enforcement
action solely at Licensee's request, Licensee shall be solely
responsible for all costs and expenses (including, without
limitation, reasonable attorneys' fees) related to any such
action. Licensee shall not institute or take any action on
account of any unauthorized use, or enter into any agreement with
a third party with respect to such use, without the prior written
consent of Licensor.
6. Termination; Rights on Termination.
6.1 Termination. This Agreement may be terminated in
accordance
with any of the following provisions:
(a) Licensor may terminate this Agreement with respect
to any or
all uses of the Marks at any time in the event that Licensee is
in default or breach of any provision of this License Agreement,
and Licensee fails to cure such default or breach to Licensor's
reasonable satisfaction within 15 Business Days after written
notice thereof.
(b) Licensor may, at its option, immediately terminate
this
License Agreement if Licensee becomes insolvent or unable to pay
its debts as they mature, or makes an assignment for the benefit
of its creditors; seeks relief or if proceedings are commenced
against Licensee or on its behalf under any bankruptcy,
insolvency or debtors' relief law and such proceedings have not
been vacated or set aside within 60 days from the date of
commencement thereof.
6.2 Following Expiration or Termination. Upon expiration
of the
license(s) granted herein, or in the event of the termination of
this Agreement in accordance with any of the provisions of
Section 6.1, the parties agree to the following:
(a) Licensee, at its sole cost and expense, shall
immediately:
(i) cease any and all use of the Marks, as
applicable, in any
manner whatsoever;
(ii) destroy, sticker or otherwise remove or cover
the Marks
from all products and other materials bearing
any such
Marks; and
(iii) purge or otherwise delete any such Marks from
any
electronic media.
(b) Upon the termination of this Agreement, Licensee
agrees to
cooperate with Licensor or its appointed agent to apply to the
appropriate authorities to cancel all recording of this Agreement
as to the Marks and to destroy all products and printed materials
bearing any of the Marks.
7. Indemnification.
Licensee shall be solely responsible for and hereby agrees
to indemnify and defend Licensor, its affiliates, and their
respective officers, directors, shareholders, employees and
agents, and to hold each of them harmless from any and all
claims, demands, causes of action, or damages, including, without
limitation, attorneys' fees, (i) arising out of or in connection
with the use by Licensee, or anyone under Licensee's direct or
indirect control, of the Marks in breach of this Agreement; or
(ii) resulting from any claims in the nature of product liability
with respect to Licensee's use of the Marks. Licensee shall
obtain or maintain customary insurance coverage, in an amount
usual and customary for comparable companies against insurable
losses covered by this indemnification naming Licensor as an
additional insured and shall provide Licensor with proof that
such coverage is in full force and effect at all times. Licensor
shall keep Licensee fully informed of the status of each such
claim, demand or cause of action brought against Licensor, and
Licensee shall keep Licensor fully informed of the status of each
such claim, demand or cause of action brought against Licensee.
8. Remedies.
8.1 For Cause Termination. If Licensor terminates this
License
Agreement because of a default or breach under Section 6.l(a)
Licensor, in addition to such termination, shall have all rights
and remedies available at law and in equity.
8.2 Irreparable Injury. Licensee acknowledges and agrees
that
each covenant and agreement set forth herein is reasonable and
necessary to protect and preserve Licensor's ownership in the
Marks and that any breach by Licensee thereof will result in
irreparable injury to Licensor. Licensee, therefore, consents
and agrees that Licensor shall be entitled to seek and obtain a
temporary restraining order and a permanent injunction to prevent
a breach or contemplated breach hereof and waives any requirement
that Licensor post a bond in connection with such injunctive
relief.
8.3 Trademark Infringement. Licensee acknowledges and
agrees
that each covenant and agreement set forth herein is reasonable
and necessary to protect and preserve the goodwill in the Marks
and Licensor's ownership thereof and that any use of the Marks by
Licensor (i) during the term hereof in any manner inconsistent
with the covenants and agreements set forth herein; and (ii)
following termination hereof (whether pursuant to Section 2.l(b)
or Section 6 hereof); shall constitute trademark infringement,
unfair competition and/or trademark dilution under federal and
state law.
9. General.
9.1 Amendment and Waiver. No amendment of any provision of
this
Agreement shall in any event be effective, unless the same shall
be in writing and signed by the parties hereto. Any failure of
any party to comply with any obligation, agreement or condition
hereunder may only be waived in writing by the other party but
such waiver shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. No failure by any
party to take any action against any breach of this Agreement or
default by the other party shall constitute a waiver of such
party's right to enforce any provision hereof or to take any such
action.
9.2 Assignment. This Agreement shall bind and inure to the
benefit of the parties named herein and their respective heirs,
successors and permitted assigns. No party to this Agreement may
assign any of its rights or obligations under this Agreement
without the prior written consent of the other party hereto.
Notwithstanding the foregoing, Licensor may assign all or any
portion of its rights and obligations pursuant to this Agreement
to one or more of its affiliates and/or in connection with a
merger, consolidation or sale of substantially all of the stock
or assets of Licensor or any affiliate that licenses a mark
hereunder, and in the event of such assignment the Licensor shall
remain secondarily liable.
9.3 Notices. Any notices or other communications required
to be
given pursuant to this Agreement shall be in writing and shall be
effective upon delivery by hand or upon receipt if sent by mail
(registered or certified mail, postage prepaid, return receipt
requested) or by express mail courier or upon transmission if
sent by telex or facsimile (with request for confirmation of
receipt in a manner customary for communications of such
respective type), except that if notice is received by telex or
facsimile after 5:00 P.M. on a business day at the place of
receipt, it shall be effective as of the following business day.
All notices hereunder shall be given as follows:
(a) If to Licensor:
Blockbuster Entertainment Inc.
1201 Elm Street
Dallas, TX 75270
Attention: General Counsel
Fax: (214) 854-3677
with a copy to:
Viacom International Inc.
1515 Broadway
New York, NY 10036
Attention: Deputy General Counsel
Fax: (212) 258-6099
(b) If to Licensee:
Wherehouse Entertainment, Inc.
19701 Hamilton Avenue
Torrence, CA 90502
Attention: Chief Executive Officer
Fax: (310) 329-8420
Any party may change its address for receiving notice by
written notice given to the others names above in the manner
provided above.
9.4 Counterparts. This Agreement may be executed in two or
more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same Agreement.
9.5 Entire Transaction. This Agreement, together with the
Purchase Agreement, and the ancillary agreements thereto,
contains the entire understanding between the parties with
respect to the transactions contemplated hereby and supersedes
all other agreements, discussions, negotiations, and
understandings between the parties or any affiliate of the
parties. There are no warranties, representations or other
agreements between the parties in connection with the subject
matter of this Agreement except as specifically provided herein
and in any document delivered pursuant hereto. No supplement,
modification, waiver or termination of this Agreement shall be
binding unless executed in writing by the party or parties to be
bound thereby.
9.6 No Binding Agreement. The parties hereto understand
and
agree that no contract or agreement providing for the
transactions contemplated hereby shall be deemed to exist unless
and until a definitive agreement has been executed and delivered.
Each party hereto also agrees that unless and until a definitive
agreement has been executed and delivered, neither party hereto
will have any legal obligations of any kind whatsoever with
respect to the transactions contemplated hereby.
9.7 APPLICABLE LAW; JURISDICTION. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH INTERNAL SUBSTANTIVE
LAWS OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICTS OF LAWS THEREOF AND SHALL IN ALL RESPECTS BE REGARDED
AS A NEW YORK CONTRACT. The parties hereto consent to the
jurisdiction of the U.S. federal and state courts sitting in the
State of New York, Borough of Manhattan, and the parties hereto
shall not raise in connection therewith, and hereby irrevocably
waive, any defenses based upon venue, inconvenience of the forum,
lack of personal jurisdiction, sufficiency of service of process
or the like in any action or suit brought in the State of New
York.
9.8 Headings. The section and other headings contained in
this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
9.9 Third Parties. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any
person or entity other than the parties hereto and their
affiliates, successors or assigns, any rights or remedies under
or by reason of this Agreement.
9.10 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by
any Law or public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of the date and year first above written.
Wherehouse Entertainment, Inc. Blockbuster Entertainment
Inc.
By: /s/ Robert S. Kelleher By: /s/ Michael D. Fricklas
--------------------------- ------------------------
- ---
Robert S. Kelleher Michael D. Fricklas
Title: Senior Vice President- Title: Senior Vice
President
Chief Financial Officer
Blockbuster Music Holding Corporation
By: /s/ Michael D. Fricklas
--------------------------
Michael D. Fricklas
Title: Senior Vice President
Blockbuster SC Holding Corporation
By: /s/ Michael D. Fricklas
--------------------------
Michael D. Fricklas
Title: Senior Vice President
Blockbuster Music Retail, Inc.
By: /s/ Michael D. Fricklas
--------------------------
Michael D. Fricklas
Title: Senior Vice President
Show Industries, Inc.
By: /s/ Michael D. Fricklas
--------------------------
Michael D. Fricklas
Title: Senior Vice President
Blockbuster SC Music Corporation
By: /s/ Michael D. Fricklas
--------------------------
Michael D. Fricklas
Title: Senior Vice President
<PAGE>
EXHIBIT
2.3
TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT (the "Agreement") entered
into as of August 10, 1998 by and between WHEREHOUSE
ENTERTAINMENT, INC., a Delaware corporation (the "Purchaser"),
and VIACOM INTERNATIONAL INC., a Delaware corporation (the
"Seller"). Capitalized terms used herein without definition
shall have the same meanings herein as in the Purchase Agreement
(as hereinafter defined).
W I T N E S S E T H:
WHEREAS, the Seller and the Purchaser are parties to a
certain Stock Purchase Agreement (the "Purchase Agreement") dated
as of the date hereof pursuant to which the Purchaser has agreed
to acquire from the Seller all of the outstanding capital stock
of the Holding Subsidiaries (the "Acquisition"); and
WHEREAS, pursuant to the Purchase Agreement, the
Purchaser and the Seller are entering into this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Good Faith Efforts: Transition Teams. (a) The
Blockbuster Entertainment Group family of companies ("BEG") and
the Purchaser shall cooperate in good faith with the other to
effectuate an orderly transition of the Business to the
Purchaser. The Seller shall cause BEG to perform its duties
under this Agreement. The parties agree that such transition will
entail, from BEG personnel, responses to reasonable inquiries of
the Purchaser that would not have been a component of such
personnel's efforts in respect of the Business but for the
transition. In addition, in completing the transition of
Services for which the Purchaser has assumed responsibility BEG
shall provide copies of non-confidential or non-proprietary
information used to support the Business. At the same time the
parties agree that BEG will not be burdened with transition
obligations so in excess of the efforts it currently exerts in
respect of the Business as to unreasonably interfere with BEG's
normal business operations.
(b) The parties agree that promptly following the execution
of this Agreement each of the Purchaser and BEG shall establish
and identify to the other a team of employees reasonably suited
to facilitate the transition that will be responsible for
coordinating the transition of the Business to the Purchaser as
contemplated hereunder. Each team will have a leader, reasonably
acceptable to the other team. The teams will meet on an as
needed basis, as determined by the team leaders, and the team
leaders will be available to meet weekly. The parties anticipate
that promptly following execution hereof the team leaders will
meet to establish an agenda for transition.
2. Services: Liability. (a) During the Term (as
defined below), the Seller agrees to cause BEG to continue to
provide to the Music Subsidiaries the services, facilities and
the financial, inventory and other information systems and
reports currently and customarily being provided to the Music
Subsidiaries by BEG (collectively, the "Services"), and to cause
BEG to use its commercially reasonable efforts to perform and
maintain the Services at a performance, quality and timeliness
level commensurate with the level at which the Services have been
provided for and to the Music Subsidiaries by BEG on the date
hereof
(b) Exhibit A attached hereto sets forth a list of
transition efforts that Purchaser has requested and BEG will
provide whether or not they constitute Services.
(c) From the date hereof to the Closing Date, BEG will
provide such access during business hours as is reasonably
necessary to enable the Purchaser to install (but not operate)
its POS system next to the existing POS system in any store
included in the Business; provided that such placement shall not
interfere in the day-to-day operations of any location at which
it has been placed. The Purchaser shall remain solely
responsible for the security and condition of any such installed
POS system. In the event Purchaser utilizes the Services for
advertising, the Purchaser shall pay all third party costs
incurred with respect thereto, including, without limitation, the
cost of ad space or time.
(d) The Purchaser shall hold harmless the Seller, BEG, each
of their Affiliates and each of Seller's, BEG's and such
Affiliate's officers, directors, employees, agents, shareholders
and representatives (collectively "BEG Indemnitees") from and
against any and all damages, losses, claims, costs, expenses,
liabilities and obligations of any kind (including reasonable
attorney's fees and other legal costs and expenses (collectively
"Claims") which may be incurred or suffered by such BEG
Indemnitee, Purchaser or any Affiliate of Purchaser, arising
from, out of, or in connection with the provision of any (i)
Service involving the provision of consultation or advice
(whether legal or otherwise) in respect of the operation of the
Business, (ii) the installation of the Purchaser's POS system in
any store or (iii) any errors or omissions contained in any
advertisement placed by BEG as part of the Services, in each such
case except to the extent such Claim is determined in a final non-
appealable judgement of a court of competent jurisdiction to have
resulted directly from such BEG Indemnity's willful misconduct or
gross negligence.
3. Costs. During the four month period commencing on the
Closing Date, there will be no charge for transition efforts as
contemplated hereunder. Thereafter, the Purchaser shall pay to
BEG, by wire transfer to an account designated by BEG, monthly in
advance, the sum of $150,000 for the provision of the Services
throughout the remainder of the Term, except to the extent
Exhibit A sets forth a separate charge, in which event such
charge shall be additional. Such fee shall be subject to
adjustment pursuant to Section 5 below.
4. Term. The term of this Agreement shall commence on the
date hereof and terminate, subject to Section 5 below, not later
than the first anniversary of the Closing Date (the "Term"). BEG
shall have no obligation whatsoever to perform any Service beyond
the end of the Term. Unless otherwise identified with an
asterisk, the efforts indicated on Exhibit A shall commence
promptly following the Closing Date. Those efforts identified
with an asterisk shall commence promptly following the date
hereof.
5. Right to Terminate Services. If the Purchaser desires
to terminate this Agreement in whole or in part with respect to
any Services, the Purchaser shall give BEG 30 days prior written
notice thereof (a "Reduction Notice"), which shall include
reasonable details relating to the request. Any requested
termination of Services pursuant to this Section 5 shall become
effective at the end of such 30-day period. The Purchaser and
the Seller shall negotiate in good faith a reasonable reduction
in the monthly charge to reflect such termination
6. General Conduct of Services. (a) To the extent BEG
may be requested to provide or cause to be provided to the
Purchaser access to files or information, BEG shall provide such
access only to existing records, files and information systems of
BEG, and only to the extent such information is reasonably
available in BEG's records, files and information systems and
only in the form and format so available at the time of the
Purchaser's request. All access shall be provided where such
information is customarily situated. To the extent BEG may be
requested to provide the Purchaser with reports or information,
BEG shall provide same only to the extent such information exists
in BEG's records, files and information systems and in such form
and format as is customarily generated by BEG.
(b) Subject to the terms hereof, BEG shall cause the
following employees to continue to provide Services as provided
by them on the date hereof and subject to the performance
criteria in Section 2 (a) hereof:
BEG Employees
John Butler Robert Wasilewski
Debra Moody Michelle Dodd
Sal Di Pietro Mike Todd
Lisa (NT Ordering Wayne Jones
System)
Dan (POS) Jimmy Carter
George Gewimer David Parker
Joe Phillips Dave Edmondson
Tony Carvalho Mike Frederick
Mark Nadolny Ted Kolman
Jim Bourne Mike McKinney
Jim Samps Bill Rhodes
James F. Rose Mark Donovan
Renee Geddis Joan Baxter
Suzanne Czarny Richard McDowell
Marcia Donaldson John Schmitz
Manuel Guzman Stephen R. DeBarre
Beth Miller Gary Spinell
(c) BEG retains the right to terminate or reassign any of
the employees listed above. If any such employee has been
reassigned or is no longer employed by BEG, BEG shall consult
with the Purchaser regarding the appropriate individual to
perform the Services previously performed by such reassigned or
departed employee.
(d) The Provisions of this Section 6 shall apply to all
items listed on Exhibit A.
(e) From and after the Closing, the Seller shall be liable
for any shrink of any inventory of the Purchaser or any Acquired
Subsidiary which is stored at BEG's distribution center.
7. Warranties. EXCEPT AS PROVIDED IN SECTIONS 1 AND 2,
NEITHER SELLER NOR BEG MAKE ANY WARRANTY, EXPRESS OR IMPLIED,
WITH RESPECT TO THE SERVICES PROVIDED HEREUNDER.
8. Confidentiality. (a) BEG's materials and/or
information that may be provided to the Purchaser concerning
BEG's business or operations and the Purchaser's materials and/or
information provided to BEG concerning the Purchaser's business
and operations, are proprietary trade secrets and confidential
information ("Confidential Information") of BEG and the
Purchaser, respectively; provided, however, that nothing herein
shall serve to affect any proprietary or confidential information
transferred to the Purchaser under the Purchase Agreement. Each
party agrees not to (i) disclose the Confidential Information of
the other party to any third party, (other than its
Representatives) or (ii) use the Confidential Information except
as necessary to perform its obligations under this Agreement, in
either case without the express written consent of the other
party, and each party shall be responsible for any breaches of
this Section 8 by its directors, officers, employees,
representatives (including, without limitation, financial
advisors, attorneys and accountants) or agents (the
"Representatives").
(b) The term Confidential Information will not, however,
include information which (i) is or becomes publicly available
other than as a result of a disclosure by the party receiving the
Confidential Information ("Receiving Party") or its
Representatives or (ii) is or becomes available to the Receiving
Party on a nonconfidential basis from a source (other than the
party providing, directly or indirectly, its Confidential
Information ("Providing Party") or its Representatives) which, to
the best of the Receiving Party's knowledge after due inquiry, is
not prohibited from disclosing such information to it by a legal,
contractual or fiduciary obligation to the Providing Party.
(c) Upon the earliest to occur of termination of this
Agreement, such time as any Confidential Information ceases to be
required by the Receiving Party to perform or receive Services
hereunder or at the request of a Providing Party when such
Confidential Information is not necessary for BEG to perform the
Services hereunder, a Receiving Party shall promptly return, and
cause to be returned, all or any requested portion of such
Confidential Information and shall destroy, or cause to be
destroyed, all copies (including electronic versions) of any
compilations, analyses, studies or other documents prepared by
the Receiving Party or its Representatives containing or
reflecting any such Confidential Information.
9. No License. Nothing contained in this Agreement shall
be construed as conferring by implication, estoppel or otherwise
any license of any intellectual property owned or controlled by a
party following consummation of the Acquisition.
10. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be
given or made (and shall be deemed to have been duly given or
made upon receipt) by delivery in person, by overnight courier
service, by cable, by facsimile, by telegram, by telex or by
registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a
notice given in accordance with this Section 10):
If to the Purchaser:
Wherehouse Entertainment, Inc.
19701 Hamilton Avenue, Suite 200
Torrance, CA 90502
Attention: Antonio C. Alvarez, II
Telecopier: 310-329-8420
If to BEG:
Blockbuster Entertainment Group
1201 Elm Street
Dallas, TX 75270
Attention: General Counsel
Telecopier: (214) 854-3677
with a copy to:
Viacom International Inc.
1515 Broadway
New York, NY 10036
Attention: Deputy General Counsel
Telecopier: (212) 258-6099
11. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by
any Law or public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.
12. Entire Agreement. This Agreement constitutes the
entire agreement of the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and
undertakings with respect to the subject matter hereof.
13. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of all parties and their
respective successors and assigns. This Agreement may not be
assigned by the Purchaser without the prior written consent of
the Seller. The Seller may assign all or any portion of its
rights and obligations pursuant to this Agreement to one or more
of Viacom's direct or indirect Affiliates and/or in connection
with a merger, consolidation or sale of substantially all of the
stock or assets of the Seller. Any assignment in violation of
this section 13 shall be void ab initio.
14. No Third Party Beneficiaries. Nothing in this
Agreement is intended to confer any rights or remedies under or
by reason of this Agreement on any persons other than the parties
and their respective successors and permitted assigns.
15. Relationship of the Parties. The parties hereto are
independent contractors and neither party is an employee, agent,
partner or joint venture of the other. Under no circumstances
shall any of the employees of a party hereto be deemed to be
employees of the other party for any purpose. Neither party
shall have the right to bind the other to any agreement with a
third party nor to represent itself as an agent, partner or joint
venturer of the other or to incur any obligation or liability on
behalf of the other party.
16. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the Laws of the State of New
York. All actions and proceedings arising out of or relating to
this Agreement shall be heard and determined in a New York state
or federal court sitting in the City of New York, and the parties
hereto hereby irrevocably submit to the exclusive jurisdiction of
such courts in any such action or proceeding and irrevocably
waive the defense of an inconvenient forum to the maintenance of
any such action
17. Certain Remedies. It is specifically understood and
agreed that any breach of this Agreement by any of the parties
hereto will result in irreparable injury to the aggrieved party,
that the remedy at law alone will be an inadequate remedy for
such breach and that, in addition to any other remedy for such
breach, such aggrieved party shall be entitled to seek to enforce
the specific performance of this Agreement by the breaching party
through both temporary and permanent injunctive relief, without
the necessity of proving actual damages, but without limitation
of their rights to recover such damages.
18. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be
deemed to be an original but all of which taken together shall
constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telecopier
shall be effective as delivery of a manually executed counterpart
of this Agreement.
19. Purchaser Remedies. The Purchaser's sole and exclusive
remedy for any and all breaches of this Agreement by the Seller
prior to Closing shall be to exercise its rights under the
Purchase Agreement. Except to the extent any BEG Indemnitee may
be entitled to receive indemnification hereunder, Seller shall
indemnify and hold harmless each Purchaser Indemnified Party
against any and all Claims arising out of, from or in connection
with a failure by Seller or BEG to perform in all material
respects its obligations hereunder following the Closing. The
Purchaser's sole and exclusive remedy for breaches hereunder
shall be in accordance with this Section 19.
20. Reliance on Instructions. To the extent any Service
requires BEG to exercise discretion, BEG may request instructions
from the Purchaser with respect to the exercise of such
discretion. The Purchaser shall promptly provide such
instruction in reasonable detail and BEG shall not be deemed to
have breached this Agreement if it relies upon such written
instruction. Notwithstanding anything in this Agreement to the
contrary, neither the Seller nor BEG shall be responsible or
liable for their failure to perform under this Agreement form any
event beyond the reasonable control of Seller or BEG including
labor strikes, acts of war or terrorism or acts of God.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
VIACOM INTERNATIONAL INC.
By: /s/ Philippe P. Dauman
------------------------------
Name: Philippe P. Dauman
Title: Executive Vice
President
WHEREHOUSE ENTERTAINMENT, INC.
By: /s/ Antonio C. Alvarez, II
------------------------------
Name: Antonio C. Alvarez, II
Title: Chief Executive
Officer
and Chairman
AGREED:
BLOCKBUSTER ENTERTAINMENT GROUP
By: /s/ Gary J. Peterson
-----------------------------
Name: Gary J. Peterson
Title: Executive Vice President
and Chief Operations Officer
<PAGE>
