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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) August 22, 1996
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SUNRISE PRESCHOOLS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-16425 86-0532619
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
Number)
9128 East San Salvador Road, Suite 200, Scottsdale, Arizona 85258
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 860-1611
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N/A
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(Former name, former address and former fiscal year,
if changed since last report)
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Item 2. Acquisition or Disposition of Assets
On August 22, 1996 pursuant to the terms of an Asset Purchase Agreement,
Sunrise Preschools, Inc. (the "Company") acquired the assets (equipment,
licenses and any and all other property of any nature, whether tangible or
intangible, used in connection with the business except trade names and
trademarks) of four preschool centers in the Phoenix, Arizona metropolitan area
owned by Calman Corporation, LKG, Inc. and Country Air, Inc. (the "selling
parties"). These centers operated under the trade name Tots Unlimited.
The consideration paid by Sunrise in connection with the acquisition was
$775,000, of which $350,000 was paid at the closing of the acquisition on
August 22, 1996, and $425,000 was a note payable. The cash portion of the
consideration was paid from Sunrise's cash and cash equivalents. The purchase
price was determined through arm's length negotiations between representatives
of Sunrise and the selling parties. Neither Sunrise nor, to the knowledge of
Sunrise, any affiliate, director or officer of Sunrise, or any associate of any
director or officer of Sunrise, had any material relationship with the selling
parties or any shareholder of the selling parties prior to the acquisition.
The purchased assets consisted primarily of vehicles, equipment and other
intangible assets. Following the acquisition, Sunrise will continue to use the
assets for substantially the same purposes as they were used before the
acquisition.
Item 7. Financial Statements and Exhibits
(a) Financial Statements
As of the time of the filing of this report on Form 8-K, it
is impractical to provide the required financial statements
for the Tots Unlimited centers. The required financial
statements will be filed by Sunrise not later than 60 days
following the date upon which this report on Form 8-K must be
filed.
(b) Pro Forma Financial Information
As of the time of the filing of this report on Form 8-K, it
is impractical to provide the required pro forma financial
information. The required pro forma financial information
will be filed by Sunrise not later than 60 days following the
date upon which this report on Form 8-K must be filed.
(c) Exhibits
(1) Asset Purchase Agreement between Calman Corporation,
LKG, Inc., Country Air, Inc. and Sunrise Preschools,
Inc. dated August 22, 1996.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
By: /s/ James R. Evans
----------------------------------
James R. Evans
Chairman of the Board of Directors
and President (Principal Executive
Officer)
Date: September 5, 1996
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ASSET PURCHASE AGREEMENT
between
SUNRISE PRESCHOOLS, INC.
A Delaware corporation
and
CALMAN CORPORATION, an Arizona corporation,
LKG, INC., an Arizona corporation, and
COUNTRY AIR, INC., an Arizona corporation
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS........................................... 1
1.1 Business.............................................. 1
1.2 Closing............................................... 1
1.3 Closing Date.......................................... 1
1.4 Contracts............................................. 1
1.5 Due Diligence Period.................................. 2
1.6 Equipment............................................. 2
1.7 Leased Locations...................................... 2
1.8 Leases to be Assigned................................. 2
1.9 Purchase Price........................................ 2
1.10 Purchased Assets...................................... 2
1.11 Termination Date...................................... 2
1.12 Trade Accounts Payable................................ 2
1.13 Trade Accounts Receivable............................. 3
1.14 Selling Parties....................................... 3
ARTICLE II PURCHASE AND SALE..................................... 3
2.1 Purchase and Sale..................................... 3
ARTICLE III PURCHASE PRICE........................................ 3
3.1 Purchase Price........................................ 3
3.2 Security Interest..................................... 4
ARTICLE IV ASSUMPTION OF LIABILITIES............................. 4
4.1 Contracts and Leases.................................. 4
4.2 Nonassumption of Other Liabilities.................... 4
4.3 Consents to Assignment................................ 4
ARTICLE V COLLECTION OF TRADE ACCOUNTS RECEIVABLE............... 5
5.1 Collection of Trade Accounts Receivable............... 5
ARTICLE VI DUE DILIGENCE......................................... 5
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6.1 Buyer's Financial Information............................... 5
6.2 Due Diligence............................................... 5
6.3 Access...................................................... 5
6.4 Termination of Agreement.................................... 6
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES........... 6
7.1 Status...................................................... 6
7.2 Authority................................................... 6
7.3 Title to Purchased Assets................................... 7
7.4 Tax Matters................................................. 7
7.5 Litigation.................................................. 7
7.6 Environmental Matters....................................... 7
7.7 Banking and Financial Records............................... 7
7.8 Trade Accounts Receivable................................... 7
ARTICLE VIII REPRESENTATIONS AND WARRANTIES OF BUYER..................... 7
8.1 Corporate Status............................................ 7
8.2 Corporate Authority......................................... 8
8.3 Inspection.................................................. 8
ARTICLE IX EMPLOYEES................................................... 8
9.1 Definition.................................................. 8
9.2 Termination................................................. 8
9.3 Labor Contracts............................................. 8
9.4 Pension Plans............................................... 9
9.5 Workmen's Compensation...................................... 9
9.6 Nonassumption of Obligations Owed Employees................. 9
ARTICLE X REALTY...................................................... 9
10.1 Warranty of Title........................................... 9
10.2 Conveyance.................................................. 9
10.3 Insurance................................................... 9
ARTICLE XI INDEMNITIES................................................ 9
11.1 Selling Parties............................................ 9
11.2 Buyer...................................................... 10
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ARTICLE XII TAXES AND UTILITIES.......................................... 10
12.1 Transfer Taxes............................................... 10
ARTICLE XIII CONDUCT OF OPERATIONS PRIOR TO CLOSING....................... 10
13.1 Conduct of Operations........................................ 10
13.2 Requisite Government Approvals............................... 10
ARTICLE XIV CLOSING...................................................... 11
14.1 Closing...................................................... 11
ARTICLE XV CONDITIONS PRECEDENT TO BUYER'S DUTY TO CLOSE................ 11
15.1 Continued Truth of Warranties................................ 11
15.2 Performance of Obligations................................... 11
15.3 Delivery of Closing Documents................................ 11
15.4 Litigation................................................... 11
15.5 No Material Adverse Change................................... 11
15.6 Government Approvals......................................... 11
15.7 Board of Directors' Approval................................. 12
15.8 Assignment of Leases......................................... 12
ARTICLE XVI CONDITIONS PRECEDENT TO SELLING PARTIES' DUTY TO CLOSE....... 12
16.1 Continued Truth of Warranties................................ 12
16.2 Performance of Obligations................................... 12
16.3 Delivery of Closing Documents................................ 12
16.4 Litigation................................................... 12
16.5 No Material Adverse Change................................... 12
16.6 Government Approvals......................................... 12
16.7 Board of Directors' Approval................................. 13
16.8 Assignment of Leases......................................... 13
ARTICLE XVII ITEMS TO BE DELIVERED AT CLOSING BY SELLING PARTIES.......... 13
17.1 Bill of Sale................................................. 13
17.2 Assignment and Assumption Agreements......................... 13
17.3 Lease Assignment, Consent and Estoppel Certificate........... 13
17.4 Representations and Warranties............................... 13
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17.5 Consents.............................................. 13
17.6 UCC Termination Statements............................ 13
17.7 Customer Records...................................... 14
17.8 Covenant Not to Compete............................... 14
17.9 Security Agreement.................................... 14
ARTICLE XVIII ITEMS TO BE DELIVERED AT CLOSING BY BUYER............. 14
18.1 Certified Resolution.................................. 14
18.2 Representations and Warranties........................ 14
18.3 Assignment and Assumption Agreements.................. 14
18.4 Purchase Price........................................ 14
18.5 Certificates of Good Standing......................... 14
18.6 Security Agreement.................................... 14
18.7 UCC-1 Financing Statements............................ 14
18.8 Promissory Note....................................... 15
18.9 Conditional Assignment of Lease....................... 15
ARTICLE XIX DEFAULT............................................... 15
ARTICLE XX MISCELLANEOUS......................................... 15
20.1 Further Assurances.................................... 15
20.2 No Other Agreements................................... 15
20.3 Waiver................................................ 15
20.4 Public Announcements.................................. 15
20.5 Notices............................................... 15
20.6 Brokers............................................... 16
20.7 Risk of Loss.......................................... 16
20.8 Third-Party Beneficiary............................... 17
20.9 Confidential Information.............................. 17
20.10 Assignment............................................ 17
20.11 Paragraph Headings.................................... 17
20.12 Exhibits.............................................. 17
20.13 Counterparts.......................................... 17
20.14 Time Is of the Essence................................ 17
20.15 Attorney Fees......................................... 17
20.16 No Partnership........................................ 18
20.17 Remedies.............................................. 18
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EXHIBIT "A" -- CONTRACTS
EXHIBIT "B" -- TOTS UNLIMITED INVENTORY LIST
EXHIBIT "C" -- LEASED LOCATIONS
EXHIBIT "D" -- LEASES TO BE ASSIGNED
EXHIBIT "E" -- TRADE ACCOUNTS RECEIVABLE
EXHIBIT "F" -- LIENS
EXHIBIT "G" -- BILL OF SALE
EXHIBIT "H" -- ASSIGNMENT AND ASSUMPTION OF LEASE
EXHIBIT "I" -- CERTIFICATE
EXHIBIT "J" -- AGREEMENT NOT TO COMPETE
EXHIBIT "K" -- CERTIFICATE
EXHIBIT "L" -- PROMISSORY NOTE
EXHIBIT "M" -- SECURITY AGREEMENT
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT dated as of August 22, 1996, is by and
between CALMAN CORPORATION, an Arizona corporation, LKG, INC., an Arizona
corporation, and COUNTRY AIR, INC., an Arizona corporation (jointly and
severally "Selling Parties"), and SUNRISE PRESCHOOLS, INC., a Delaware
corporation ("Buyer").
RECITALS
Selling Parties desire to sell and Buyer desires to purchase the assets
and assume certain liabilities of the children's preschool business conducted by
Selling Parties at four (4) locations in the greater Phoenix metropolitan area.
Calman Corporation exclusively owns and operates two locations located
on Price Road and Alma School Road. Country Air, Inc. exclusively owns and
operates the location on Ray Road. LKG, Inc. exclusively owns and operates the
location on Guadalupe Road.
Selling Parties and Buyer agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the terms identified in this Article
shall have the meanings assigned to them as follows:
1.1 Business. The term "Business" shall mean Selling Parties' operations
conducted under the trade name Tots Unlimited at the Leased Locations.
1.2 Closing. The term "Closing" shall mean the exchange of Closing
documents together with the simultaneous conveyance by Selling Parties to Buyer
of the Purchased Assets and the payment by Buyer to Selling Parties of the
Purchase Price due under the terms of this Agreement, as well as the assumption
by Buyer of the obligations which it has agreed to assume hereunder.
1.3 Closing Date. The term "Closing Date" shall mean the date on which
Closing occurs.
1.4 Contracts. The term "Contracts" shall mean the contracts and
agreements necessary for the conduct of the Business at the Leased Locations
which Selling Parties, in the ordinary course of business, entered into prior to
Closing, a complete list of which is described in Exhibit "A" to be attached to
this Agreement during the due diligence period.
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1.5 Due Diligence Period. The term "Due Diligence Period" shall mean the
period of time commencing on execution of this Agreement and expiring on the day
preceding Closing, and any written extension thereof.
1.6 Equipment. The term "Equipment" shall mean all furniture, fixtures
and equipment and other pieces of tangible personal property owned or leased by
Selling Parties and used at the Leased Locations including those items described
in Exhibit "B" to be attached to this Agreement during the Due Diligence Period.
All items of Equipment comprising Purchased Assets are received and accepted by
Buyer in a "used" condition and accepted by Buyer "AS IS." Buyer acknowledges
that with the exception of Selling Parties' ownership and right to sell each of
such assets, Selling Party has not issued, and Buyer is not relying, upon any
warranties, guarantees or promises whatsoever relating to any item of the
Purchased Assets, including but not limited to any condition and/or
appropriateness for intended use of any such Asset.
1.7 Leased Locations. The term "Leased Locations" shall mean the
locations described in Exhibit "C" attached hereto together with deposits of any
nature whatsoever in connection with the operation of the Business.
1.8 Leases to be Assigned. The term "Leases to be Assigned" shall mean
those leases of real and/or personal property, as identified in Exhibit "D" to
be attached to this Agreement during the Due Diligence Period.
1.9 Purchase Price. The term "Purchase Price" shall mean the price being
paid for the Purchased Assets as defined elsewhere in this Agreement.
1.10 Purchased Assets. The term "Purchased Assets" shall mean the
Equipment, Contracts to be Assigned (if any), Leases to be Assigned, Covenant
not to Compete, telephone numbers, any and all deposits referred to herein,
except lease deposits for the Leases to be Assigned, and all other items,
whether tangible or intangible, used by Selling Parties in connection with the
Business.
1.11 Termination Date. The term "Termination Date" shall mean the last
business day immediately preceding the Closing Date.
1.12 Trade Accounts Payable. The term "Trade Accounts Payable" shall
mean the obligation of Selling Parties to make payment to third parties owed,
including those owed but not yet due, as of Closing for goods and/or services
sold to Selling Parties in the ordinary course of the Business prior to Closing.
1.13 Trade Accounts Receivable. The term "Trade Accounts Receivable"
shall mean the obligation of a third party to make payment to Selling Parties,
including those owed but not yet due, as of Closing by all third-party
purchasers of goods and/or services or otherwise from Selling Parties
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in the ordinary course of the Business prior to Closing, a list of which is to
be attached as Exhibit "E" to this Agreement during the Due Diligence Period and
updated as of the Closing Date.
1.14 Selling Parties. The term "Selling Parties" shall be construed to
mean, as the context requires, that corporation or corporations transferring its
assets as the Purchased Assets being referenced under the terms and conditions
of this Agreement.
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale. At Closing, Selling Parties, as their interests
may appear, agree to sell and convey the Purchased Assets to Buyer, and Buyer
agrees to pay the Purchase Price to Selling Parties and assume certain specified
obligations hereunder on the covenants, terms and conditions contained herein.
At Closing, Buyer, shall reimburse Selling Parties for any security
deposit for any Lease to be Assigned that the landlord retains.
ARTICLE III
PURCHASE PRICE
3.1 Purchase Price. The Purchase Price for the Purchased Assets shall be
SEVEN HUNDRED SEVENTY-FIVE THOUSAND AND NO/100 DOLLARS ($775,000.00), payable as
follows:
(a) Buyer has paid Selling Parties TEN THOUSAND AND NO/100
DOLLARS ($10,000.00) as an earnest money deposit into that escrow
account established at Arizona Escrow & Financial Corporation for this
transaction, which funds Arizona Escrow & Financial Corporation will be
instructed to deliver to Seller at Closing;
(b) THREE HUNDRED FORTY THOUSAND AND NO/100 DOLLARS ($340,000.00)
shall be paid to the Selling Parties by cashier's check at Closing; and
(c) Buyer shall deliver a note to Selling Parties at Closing in
the amount of FOUR HUNDRED TWENTY-FIVE THOUSAND AND NO/100 DOLLARS
($425,000.00) ("Promissory Note") which shall accrue interest at the
rate of eight percent (8%) and shall be payable in forty-eight (48)
monthly payments of TEN
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THOUSAND THREE HUNDRED SEVENTY-FIVE AND 49/100 DOLLARS ($10,375.49), due
and payable on the first day of every month following Closing.
3.2 Security Interest. Buyer agrees that Selling Parties shall have
security interest in, on and against all Purchased Assets (the condition of
title to be as received by Buyer from Selling Parties at Closing) and Leases to
be Assigned (subject to obtaining Landlords' consents thereto) which lien and
security interest shall secure the payment of each and every payment and/or
payments as same becomes due under the Promissory Note. Buyer further agrees to
execute and deliver to Selling Parties a financing statement in connection with
such security interest, all as set forth in the Security Agreement attached as
Exhibit "N."
Selling Parties designate LKG, Inc., an Arizona corporation, as the
agent for the Selling Parties to receive all payments under the Promissory Note
and any and all notices related to the Security Agreement and any related
documents.
ARTICLE IV
ASSUMPTION OF LIABILITIES
4.1 Contracts and Leases. At Closing, Selling Parties shall assign to
Buyer and Buyer shall assume the Contracts (if any) and Leases to be Assigned.
Buyer shall fully and faithfully perform all obligations of Selling Parties
under the Contracts and Leases to be Assigned. The parties shall cooperate with
reasonable third-party requests necessary for such assignments.
4.2 Nonassumption of Other Liabilities. EXCEPT AS SPECIFICALLY SET FORTH
IN THIS AGREEMENT AND ASSUMED BY BUYER, BUYER DOES NOT BY THIS AGREEMENT, AND
WILL NOT BE OBLIGATED TO ASSUME ANY OBLIGATION, LIABILITY OR DUTY OF SELLING
PARTIES OF ANY FORM OR NATURE, WHETHER INCURRED IN CONNECTION WITH THE BUSINESS
OR OTHERWISE.
4.3 Consents to Assignment. Selling Parties shall obtain prior to the
date of Closing, with respect to any of the Contracts and Leases to be Assigned,
the consent of any person or entity necessary to the assignment of Selling
Parties' rights under such Contracts and such Leases to be Assigned to Buyer
without modification of the terms of Contracts or Leases to be Assigned unless
agreed to by Buyer in writing. The Closing is subject to and conditioned upon
Buyer receiving fully executed Lease Assignments for the Lease to be Assigned in
form, substance and content acceptable to Buyer in its sole and absolute
discretion.
4.4 Liability Under Leases. Buyer agrees to remain liable under the
Leases so long as Kay Goodman retains any liability under the Leases for the
personal guaranties executed by Kay Goodman under the Leases.
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ARTICLE V
COLLECTION OF TRADE ACCOUNTS RECEIVABLE
5.1 Collection of Trade Accounts Receivable. Commencing on the date of
Closing and continuing for a period of forty-five (45) days, Buyer shall use
reasonable efforts to collect the Trade Accounts Receivable which relate to
services performed prior to the Closing and shall account to and pay to Selling
Parties all monies collected without any charge or deduction by Buyer for
collection services. If any of the Trade Accounts Receivable have not been
collected by Buyer during such forty-five (45) day period, Buyer shall have no
further responsibilities to Selling Parties in connection therewith.
ARTICLE VI
DUE DILIGENCE
6.1 Buyer's Financial Information. Buyer shall provide to Selling
Parties reasonable financial information reasonably necessary for Selling
Parties to conduct its due diligence regarding the Promissory Note.
6.2 Due Diligence. Buyer shall have the Due Diligence Period to perform
such investigations and inspections of the Business and Purchased Assets as
Buyer, in Buyer's sole discretion, shall require for the purpose of determining
the suitability of the Business and Purchased Assets for Buyer's acquisition.
Buyer will be entitled to review Selling Parties's files and documents, as well
as conduct on-site studies and investigations including interviews with Selling
Parties's employees. Minimally, the due diligence shall include all leases,
environmental reports or issues, if any, books and records, files, bank
accounts, accounting records, and employee records and such other documents as
may be reasonably needed in connection herewith.
6.3 Access. During the Due Diligence Period, and in order to assist
Buyer with Buyer's inspections and investigations of the Purchased Assets,
Selling Parties shall provide Buyer and Buyer's representatives with reasonable
access to and copies of all matters referred to in this Section including, but
not limited to, existing studies, reports, and records of the Business and
Purchased Assets, financial, customer and employee records; and bank statements,
verified deposits, and any other bank record reasonably relating to the Business
and Purchased Assets. Selling Parties shall fully cooperate with Buyer and shall
promptly provide Buyer with all relevant information currently available to
Selling Parties and requested by Buyer during the Due Diligence Period.
6.4 Termination of Agreement. During the Due Diligence Period, if Buyer,
in Buyer's sole discretion, shall determine that for any reason whatsoever the
Business or Purchased Assets are not suitable for Buyer's acquisition, then
Buyer may cancel this Agreement by giving written notice
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as soon as reasonably possible to Selling Parties but not later than the
expiration of the Due Diligence Period.
If the Business and Purchased Assets are otherwise suitable for Buyer's
intended use but Buyer discovers any problem or defect with respect thereto,
then Buyer may advise Selling Parties in writing on or before the expiration of
the Due Diligence Period of the nature of each defect or problem with respect to
the Purchased Assets with the request that Selling Parties remedy each problem
or defect within ten (10) business days of receipt of such notice. Selling
Parties may correct such problems within the ten (10) business day cure period
or cancel the Agreement by providing written notice to Buyer of cancellation
within such ten (10) business day period. If Selling Parties fail to respond to
such notice, is unable to cure such problem and/or elects to cancel the
Agreement, Buyer shall have ten (10) business days thereafter to elect to waive
such problem and close the transaction.
Buyer's failure to give written notice of Buyer's exercise of Buyer's
right to cancel this Agreement in accordance with the foregoing provisions shall
constitute Buyer's approval of the suitability and condition of the Purchased
Assets, except for and limited to any problems or defects specified in Buyer's
notice.
In the event that this Agreement is terminated pursuant to the
provisions of this Article, the parties shall return all due diligence materials
to the party providing such materials and shall not disclose to any third-party
any information obtained under this Article.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES
Selling Parties hereby represent and warrant to Buyer as follows, and
the warranties and representations contained in this Article or elsewhere in
this Agreement shall be deemed remade as of Closing and shall survive closing:
7.1 Status. Selling Parties are corporations duly organized, validly
existing and in good standing under the laws of the state of Arizona and
qualified to do business in Arizona.
7.2 Authority. Selling Parties have full power and authority to execute
and perform their respective parts in this Agreement and all action necessary to
confirm such authority has been duly and lawfully taken. Upon execution hereof,
this shall be a valid, legally binding obligation of Selling Parties,
enforceable in accordance with its terms.
7.3 Title to Purchased Assets. Each corporation comprising Selling
Parties has good and marketable title to those of its respective assets which
jointly comprise the Purchased Assets, free and clear of all liens, claims and
encumbrances, except for such liens disclosed in Exhibit "F"
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attached hereto and by this reference incorporated herein, and each has full
power and authority to transfer title to those respective assets to Buyer.
7.4 Tax Matters. All required federal, state and local tax returns have
been filed by Selling Parties, including those with respect to income, sales,
property, withholding, social security and employment taxes. Selling Parties
will satisfy all tax obligations incurred prior to Closing or the date such
taxes are due.
7.5 Litigation. There is no pending litigation, arbitration, or
administrative hearing, and to the best of Selling Parties' knowledge there is
no threatened litigation, arbitration, or administrative hearing, concerning or
affecting the operation of the Business or the Purchased Assets or Leased
Locations which may affect the Buyer in any way whatsoever (specifically with
regard to any sexual or physical abuse of any child).
7.6 Environmental Matters. There are no pending notices, and to the best
of Selling Parties' knowledge no threatened notices, of violation of
environmental laws, rules, or regulations with respect to the Purchased Assets.
7.7 Banking and Financial Records. Selling Parties' banking and
financial records have been prepared by Selling Parties in the ordinary course
of business in accordance with generally acceptable accounting principles or
such other accounting practices fully and fairly disclosed to Buyer and were not
specially prepared for Buyer.
7.8 Trade Accounts Receivable. The Trade Accounts Receivable listed in
Exhibit "E" updated as of Closing set forth all accounts generated in the
ordinary course of the Business and due and owing by third parties without, to
the knowledge of Selling Parties, defenses to payment.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Selling Parties as follows and
the warranties and representations contained in this Article or elsewhere in
this Agreement shall be deemed remade as of Closing and shall survive closing:
8.1 Corporate Status. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and prior
to Closing, it is or will be qualified or licensed to do business in Arizona and
all states which will require such qualification and license for the continued
conduct of Business as operated by Buyer.
8.2 Corporate Authority. Buyer has full power and authority to execute
and perform this Agreement and all corporate action necessary to confirm such
authority has been duly and lawfully
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taken. Upon execution hereof, this shall be a valid and legally binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Neither the execution nor the performance of this Agreement will violate the
terms or any provision of Buyer's Articles of Incorporation, Bylaws or any
Standing Resolution of its Board of Directors, or any note, loan agreement,
commitment agreement, lease or other material contract or agreement to which
Buyer is a party, including any loan agreement which it will become a party to
as a result of or in connection with this transaction.
8.3 Inspection. Buyer hereby grants Selling Parties the right to inspect
the Centers sold hereunder and any of the Purchased Assets upon five (5) days
written notice. Selling Parties will endeavor to minimize any unnecessary
intrusion into the ongoing business of Buyers during its inspection. Any such
inspection shall not occur during business hours and not more than once
quarterly provided, however, that to the extent that any default exists under
this Agreement, Selling Parties shall be entitled to follow-up inspections until
such default is cured. Any violation by Buyer under this paragraph shall be
deemed a default under this Agreement.
ARTICLE IX
EMPLOYEES
9.1 Definition. During the Due Diligence Period, Selling Parties shall
provide to Buyer a complete list of all persons regularly employed on either a
part-time or full-time basis by Selling Parties in connection with the Business
at the Leased Locations. For purposes of this Article, the term "Employees"
shall mean all persons included on such list including curtailed and disabled
employees and employees on leave of absence, as well as those persons who become
regularly employed by Selling Parties between the date of the list and the date
immediately preceding the Closing Date ("Termination Date"). During the due
diligence period Buyer and Selling Parties agree to meet jointly with all
employees to explain the nature of the proposed transaction and the potential
impact to them.
9.2 Termination. On the Closing Date, Selling Parties shall terminate
all Employees employed at the Leased Locations as of such date. With respect to
terminated Employees, Selling Parties shall be solely responsible for payment,
when and if due, of any claims by or obligations to Employees including any
accrued vacation pay or bonuses. Such Selling Parties termination shall occur
notwithstanding the fact that Buyer may employ some or all of such employees in
the future.
9.3 Labor Contracts. Selling Parties represent and warrant to Buyer that
it is not a party to any organized labor contracts.
9.4 Pension Plans. Selling Parties have no liability or obligation with
respect to pension plans.
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9.5 Workmen's Compensation. Selling Parties agree to assume all
responsibility for liability arising from workmen's compensation claims, both
medical and disability, which have been filed at or prior to the time of Closing
or which arose out of incidents that occurred prior to Closing. Buyer shall be
responsible for all claims which arise out of, or are based upon, incidents
which occur subsequent to Closing.
9.6 Nonassumption of Obligations Owed Employees. Buyer assumes no
responsibility whatsoever for obligations and/or benefits owed by Selling
Parties to its Employees, nor in any way adopts existing employee benefit
programs currently offered by Selling Parties.
ARTICLE X
REALTY
10.1 Warranty of Title. Selling Parties hereby warrant that they have
good and marketable leasehold interest in the respective Leased Locations except
for covenants, easements and restrictions of record and the lien for current
taxes and assessments and subject to the terms of the specific lease relating to
each of the subject properties, a copy of which has been provided to Buyer and
Buyer has reviewed.
10.2 Conveyance. At Closing, Selling Parties shall assign the Leases to
Buyer and deliver to Buyer the lessor's consent to the assignment of the Leases
as well as a lessor's estoppel certificate in form, substance and content
acceptable to Buyer in its sole and absolute discretion.
10.3 Insurance. Buyer shall add Selling Parties and Kay Goodman as
additional insured parties under the applicable insurance policies at the
respective Leased Locations, but only to the extent that any Selling Party or
Kay Goodman retain liability at the respective Leased Locations.
ARTICLE XI
INDEMNITIES
11.1 Selling Parties. Selling Parties agrees to hold harmless, indemnify
and defend Buyer (by counsel reasonably satisfactory to Buyer) from and against
any and all loss, claim, damage, liability or expense arising out of or
occurring as the result of (i) any breach by Selling Parties of any of its
covenants, representations or warranties hereunder or (ii) any liability of
Selling Parties, other than those liabilities which Buyer has agreed to assume
hereunder. Such indemnification shall include any claims pertaining to events or
actions occurring prior to the date of Closing.
11.2 Buyer. Buyer agrees to hold harmless, indemnify and defend (by
counsel reasonably satisfactory to Selling Parties) Selling Parties (such
indemnity to include Kay Goodman to the extent that Kay Goodman has any personal
liability under the Leases at the Four Leased Locations for
-9-
<PAGE> 16
personal guaranties) from and against any and all loss, claim, damage, liability
or expense arising out of or occurring in connection with (i) any breach by
Buyer of any of its covenants, representations or warranties hereunder, or (ii)
any personal injury and/or other claims, demands and damages arising out of or
by virtue of Buyer's use of any of the Purchased Assets, including but not
limited to the subject Leases, which occur after the date of Closing. Such
indemnification shall include any claims pertaining to events or actions
occurring after the date of the Closing.
ARTICLE XII
TAXES AND UTILITIES
12.1 Transfer Taxes. All sales taxes, real estate transfer taxes, real
estate recording taxes and fees, excise taxes, use taxes and other taxes or fees
of any form or nature levied upon either party by any governmental entity by
reason of the transfer of the Purchased Assets or recording of such transfers,
but excluding any tax based on the income of either party, shall be paid at
Closing by Selling Parties.
ARTICLE XIII
CONDUCT OF OPERATIONS PRIOR TO CLOSING
13.1 Conduct of Operations. From the date hereof until Closing, Selling
Parties shall conduct its operation of the Business in the ordinary course and
consistent with its prior practices. Selling Parties may only sell assets of the
Business or any of the Purchased Assets in the ordinary course of business,
during the period from execution of this Agreement until Closing but only with
the written consent of Buyer which may be withheld in Buyer's sole discretion.
13.2 Requisite Government Approvals. The parties shall make all other
required filings and any requisite notice to all government agencies and shall
have received all required government approvals for the transactions
contemplated herein on or before Date of Closing. Selling Parties and Buyer
agree to cooperate in obtaining any and all licenses required by Buyer to
operate the Business. In the event all such licenses have not been received by
the Date of Closing then such date shall be extended for a reasonable period of
time. Buyer acknowledges that (a) none of the Selling Parties' governmental
licenses or contracts are transferable to Buyer; (b) Buyer is solely responsible
for securing in its own name all of the license and contracts necessary for it
to operate and maintain each of the four Centers, (c) Buyer has already made all
required filings and any requisite notices to all governmental agencies
responsible for issuing any such licenses and contracts and (d) with the
exception of the D.E.S. contracts and the Child & Adult Care Food Program
contracts it will have received all required governmental approvals for the
transactions contemplated herein on or before the Date of Closing and will
proceed with Closing notwithstanding its not having been issued the D.E.S. or
Child & Adult Care Food Program contracts.
-10-
<PAGE> 17
ARTICLE XIV
CLOSING
14.1 Closing. Closing shall occur at the offices of Streich Lang, P.A.,
on August 22, 1996, or at such other time or place as the parties may agree upon
subject to the satisfaction of the Conditions Precedent set forth in Article XV
and XVI hereof.
ARTICLE XV
CONDITIONS PRECEDENT TO BUYER'S DUTY TO CLOSE
Buyer shall have no duty to Close unless and until each and every one of
the following conditions precedent have been fully and completely satisfied:
15.1 Continued Truth of Warranties. All of the representations and
warranties of Selling Parties contained herein shall continue to be true and
correct at Closing in all material respects.
15.2 Performance of Obligations. Selling Parties shall have
substantially performed or tendered performance of each and every one of its
obligations hereunder which by its terms is capable of performance before
Closing.
15.3 Delivery of Closing Documents. Selling Parties shall have tendered
delivery to Buyer of all the documents required to be delivered to Buyer by
Selling Parties at Closing pursuant to this Agreement in form and substance
acceptable to the parties.
15.4 Litigation. No lawsuit, administrative proceedings or other legal
action shall have been filed which seeks to restrain or enjoin the acquisition
of the Purchased Assets or the operation of such Purchased Assets in any
respect.
15.5 No Material Adverse Change. The Business shall not have suffered
any material adverse change. Buyer and Selling Parties acknowledge that
enrollment and tuition receipts are lower during the months of June, July, and
August; however, there has been no material adverse change during these months
as has typically occurred during similar time periods.
15.6 Government Approvals. Buyer shall have received all government
approvals and shall have made all necessary filings with government agencies
required by the transactions contemplated herein and, in particular, Buyer shall
have received the appropriate licenses required to operate preschools at the
Leased Locations in form and substance acceptable to Buyer.
15.7 Board of Directors' Approval. Buyer shall have obtained approval
for this transaction by its Board of Directors.
-11-
<PAGE> 18
15.8 Assignment of Leases. Selling Parties shall have obtained (i)
consent from the lessors of the assignment of the Leased Locations to Buyer with
no changes in the terms of the Lease, and (ii) confirmation from the lessor that
the Lease is in full force and effect without any default of Selling Parties
under the terms of the Lease in the form of a signed lessor's estoppel
certificate in form and substance acceptable to Buyer.
ARTICLE XVI
CONDITIONS PRECEDENT TO SELLING PARTIES' DUTY TO CLOSE
Selling Parties shall have no duty to Close this transaction unless and
until each and every one of the following conditions precedent have been fully
and completely satisfied:
16.1 Continued Truth of Warranties. All of the representations and
warranties of Buyer contained herein shall continue to be true and correct at
Closing in all material respects.
16.2 Performance of Obligations. Buyer shall have substantially
performed or tendered substantial performance of each and every one of its
obligations hereunder which by its terms is capable of performance before
Closing.
16.3 Delivery of Closing Documents. Buyer shall have tendered delivery
to Selling Parties of all the documents required to be delivered to Selling
Parties by Buyer at Closing pursuant to this Agreement in form and substance
acceptable to the parties.
16.4 Litigation. No lawsuit, administrative proceedings or other legal
action shall be pending or threatened against Buyer or Selling Parties which
seeks to restrain or enjoin Selling Parties' sale or Buyer's acquisition of the
Purchased Assets or any material part thereof.
16.5 No Material Adverse Change. The Business shall not have suffered
any material adverse change. Buyer and Selling Parties acknowledge that
enrollment and tuition receipts are lower during the months of June, July, and
August; however, there has been no material adverse change during these months
as compared with the same months from last year and years prior.
16.6 Government Approvals. Buyer shall have received all government
approvals and shall have made all necessary filings with government agencies
required by the transactions contemplated herein and, in particular, Buyer shall
have received the appropriate licenses required to operate preschools at the
Leased Locations in form and substance acceptable to Buyer.
16.7 Board of Directors' Approval. Selling Parties shall have obtained
approval for this transaction by its Board of Directors.
-12-
<PAGE> 19
16.8 Assignment of Leases. Selling Parties shall have obtained (i)
consent from the lessors of the assignment of the Leased Locations to Buyer with
no changes in the terms of the Lease, and (ii) confirmation from the lessor that
the Lease is in full force and effect without any default of Selling Parties
under the terms of the Lease in the form of a signed lessor's estoppel
certificate in form and substance acceptable to Buyer.
ARTICLE XVII
ITEMS TO BE DELIVERED AT CLOSING BY SELLING PARTIES
At Closing, Selling Parties shall, unless waived by Buyer, deliver the
following items to Buyer:
17.1 Bill of Sale. A duly executed warranty bill of sale conveying all
personal property of the Business and the Purchased Assets including, but not
limited to, the Equipment to Buyer, in the form attached as Exhibit "G" hereto.
17.2 Assignment and Assumption Agreements. Executed copies of each
assignment and assumption agreement required by Article IV, together with all
other documents required thereby, all duly executed by Selling Parties.
17.3 Lease Assignment, Consent and Estoppel Certificate. Duly executed
and acknowledged assignment of Leases consented to by the lessors and a lessor's
estoppel certificate as required by Article IV.
17.4 Representations and Warranties. A certificate signed by Selling
Parties to the effect that all of the representations and warranties of Selling
Parties contained herein are true and correct in all material respects as of
Closing in the form attached as Exhibit "I".
17.5 Consents. All consents and other third-party agreements Selling
Parties are required to obtain with respect to any Contracts and Leases to be
Assigned are completed and are available to Buyer.
17.6 UCC Termination Statements. All Uniform Commercial Code termination
or release statements, if any, necessary to transfer the Purchased Assets free
and clear of all security interests, liens or encumbrances.
17.7 Customer Records. Records of all of Selling Parties' past and
present customers at the Leased Locations.
17.8 Covenant Not to Compete. A Covenant Not to Compete in the form
attached as Exhibit "J" hereto signed by Selling Parties.
-13-
<PAGE> 20
17.9 Security Agreement. Duly executed Security Agreement in the form
attached as Exhibit "M".
ARTICLE XVIII
ITEMS TO BE DELIVERED AT CLOSING BY BUYER
At Closing, Buyer shall, unless waived by Selling Parties, deliver the
following items to Selling Parties:
18.1 Certified Resolution. A copy of the resolution of Buyer's Board of
Directors authorizing the execution and performance of this Agreement, certified
by the secretary of Buyer.
18.2 Representations and Warranties. A certificate signed by an officer
of Buyer to the effect that all the representations and warranties of Buyer
contained herein are true and correct in all material respects as of Closing in
the form attached hereto as Exhibit "K".
18.3 Assignment and Assumption Agreements. Executed copies of each
Assignment and Assumption Agreement required by Article IV, together with all
other documents required thereby, all duly executed by Buyer.
18.4 Purchase Price. The Purchase Price as described in Article III of
this Agreement in immediately available funds in the amount of the down payment
together with a duly executed Promissory Note for the balance in the form
attached as Exhibit "L" and by this reference incorporated herein.
18.5 Certificates of Good Standing. Certificates of good standing from
the Secretary of State of Delaware and Arizona, dated within a reasonable period
before Closing.
18.6 Security Agreement. Duly executed Security Agreement in the form
attached as Exhibit "M".
18.7 UCC-1 Financing Statements. UCC-1 financing statements executed by
Buyer securing Selling Parties' interest in all assets secured in the Security
Agreement.
18.8 Promissory Note. Duly executed Promissory Note in the form attached
as Exhibit "L".
18.9 Conditional Assignment of Lease. Conditional Assignment of Lease
executed by Buyer and the corresponding Landlord for each of the four Leased
Locations in the form attached hereto as Exhibit "N".
-14-
<PAGE> 21
ARTICLE XIX
DEFAULT
In the event of default by either party under this Agreement, or any of
the agreements related hereto and entered into contemporaneously by the parties,
the non-defaulting party shall have any and all remedies available to it at law
or equity or pursuant to this Agreement.
ARTICLE XX
MISCELLANEOUS
20.1 Further Assurances. Each party shall, at any time after Closing,
execute and deliver to the other party all such additional instruments of
conveyance and assignments, certificates or similar documents as such other
party may reasonably request which are consistent with this Agreement.
20.2 No Other Agreements. This Agreement constitutes the entire
agreement between the parties with respect to its subject matter. All prior and
contemporaneous negotiations, proposals and agreements between the parties are
included in this Agreement. Any changes to this Agreement must be agreed to in
writing by both parties.
20.3 Waiver. Either party may waive the performance of any obligation
owed to it by the other party hereunder for the satisfaction of any condition
precedent to the waiving party's duty to perform any of its covenants, including
its obligations to Close. Any such waiver shall be valid only if contained in a
writing signed by the party to be charged.
20.4 Public Announcements. Prior to close of escrow, no public
announcements of this Agreement shall be made unless Buyer and Selling Parties
has agreed on the timing, distribution, and contents of such announcements,
except as may be required by law.
20.5 Notices. Any notices required or allowed in this Agreement shall be
effectively given if placed in a sealed envelope, postage prepaid, and deposited
in the United States mail, registered or certified, addressed as follows:
To Selling Parties: Ms. Kay Goodman
3157 East Irwin
Mesa, Arizona 85204
-15-
<PAGE> 22
Copy To: Jerome Allan Landau, P.C.
8711 East Pinnacle Peak Road
Box 208
Scottsdale, Arizona 85255-3517
To Buyer: Sunrise Preschools, Inc.
9128 East San Salvador
Suite 200
Scottsdale, Arizona 85258
Copy To: R. Neil Irwin
c/o Streich Lang, P.A.
Two North Central Avenue
Phoenix, Arizona 85004
20.6 Brokers. Any and all brokerage fees or commissions incurred in any
manner in relation to this Agreement shall be paid at Closing by Selling
Parties, including those owed to Berman & Associates, Jim Burton Realty (and
John Wharton through B. R. Brown & Company Real Estate). Selling Parties agree
to indemnify and defend Buyer (with counsel acceptable to Buyer) against any and
all claims which may arise out of any such commissions or fees.
Buyer has not used any other broker in connection with this Agreement
and agrees to indemnify and defend Selling Parties (with counsel acceptable to
Selling Parties) against any and all claims which may arise out of any use of a
broker by Buyer in breach of this section.
20.7 Risk of Loss. The risk of loss, damage, condemnation or destruction
of the Purchased Assets shall be borne by Selling Parties until Closing. In the
event any loss or damage to or taking of any such Purchased Assets is material
in the context of this transaction and occurs before Closing, Selling Parties
shall promptly notify Buyer of the nature and extent of such loss, damage or
taking, and Buyer shall, at its option, by written notice to Selling Parties,
either terminate this Agreement without further liability or obligation to
Selling Parties or it may proceed with this transaction at a mutually agreeable
reduction in the Purchase Price. If Buyer elects not to terminate this Agreement
and the parties are unable to agree upon a reduction in the Purchase Price
within twenty (20) days after the effective date of Buyer's notice to Selling
Parties, either party may at any time thereafter terminate this Agreement.
In the event of a closing of this Agreement, all insurance proceeds and
condemnation awards or claims received or accrued to Selling Parties by reason
of any loss, damage or taking shall be for the account of Buyer and shall be
included in the Purchased Assets, except that any proceeds for lost income which
accrue prior to the Closing shall remain the property of Selling Parties.
-16-
<PAGE> 23
20.8 Third-Party Beneficiary. Nothing contained herein shall create or
give rise to any third-party beneficiary rights for any individual as a result
of the terms and provisions of this Agreement.
20.9 Confidential Information. The parties agree that all information
acquired from the other in connection with the negotiation, execution and
consummation of this Agreement is confidential and shall not be disclosed to any
other party (other than attorneys, accountants and agents of the party) without
the written consent of the other, and shall not be used by either party for any
purpose without the written consent of the other. If this transaction shall fail
to close and this Agreement terminates, the parties shall return to each other
the originals and all copies of any materials received from the other party for
due diligence purposes.
20.10 Assignment. Neither party shall assign this Agreement without the
prior written consent of the other party. Any attempt to assign this Agreement
without prior written consent shall be void.
20.11 Paragraph Headings. The Section and Article paragraph headings
contained herein are for convenience only and shall have no substantive bearing
on the interpretation of this Agreement.
20.12 Exhibits. All Exhibits referenced in this Agreement are
incorporated herein as if fully and completely set forth herein.
20.13 Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be deemed an original and all of which,
together, shall constitute one and the same instrument.
20.14 Time Is of the Essence. Time is of the essence in the performance
and observance of all obligations and duties under this Agreement.
20.15 Attorney Fees. Each party shall bear its own legal fees and costs
incurred in the negotiation and closing of this transaction. In the event of a
dispute arising between the parties under
-17-
<PAGE> 24
this Agreement, the prevailing party shall be entitled to reasonable attorneys'
fees and costs of suit from the non-prevailing party.
20.16 No Partnership. This Agreement in no way creates any partnership
or other relationship between Buyer and Selling Parties other than that of buyer
and seller under this Agreement.
20.17 Remedies. No remedy conferred by any of the specific provisions of
this Agreement is intended to be exclusive of any other remedy, and each remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. The election of any one or more remedies shall not constitute a
waiver of the right to pursue other remedies available under this Agreement at
law or in equity.
20.18 Successors and Assigns. This Agreement shall be binding upon the
parties' successors and assigns and shall inure to the benefit of the parties'
successors and assigns.
IN WITNESS WHEREOF, the parties hereto have set their hands effective
the date set forth above.
"SELLING PARTIES"
CALMAN CORPORATION, an Arizona
corporation
By: /s/ Kay Goodman
---------------------------------------
Printed Name: Kay Goodman
-----------------------------
Its: President
--------------------------------------
LKG, INC., an Arizona corporation
By: /s/ Kay Goodman
---------------------------------------
Printed Name: Kay Goodman
-----------------------------
Its: President
--------------------------------------
-18-
<PAGE> 25
COUNTRY AIR, INC., an Arizona corporation
By: /s/ Kay Goodman
---------------------------------------
Printed Name: Kay Goodman
-----------------------------
Its: President
--------------------------------------
"BUYER"
SUNRISE PRESCHOOLS, INC., a Delaware
corporation
By: /s/ James R. Evans
--------------------------------------
Printed Name: James R. Evans
----------------------------
Title: President
-----------------------------------
-19-
<PAGE> 26
EXHIBIT "A"
CONTRACTS
Parent Financial Agreement Cards.
<PAGE> 27
EXHIBIT "B"
TOTS UNLIMITED INVENTORY LIST
<TABLE>
<CAPTION>
PRICE LOCATION (Owned by Calman Corporation)
- --------------
<S> <C>
1
Office Chair 1
Computer Stand 1
CTX Monitor 1
Hewlett Packard 286/2511 Computer 1
Hewlett Packard Keyboard 1
GSX-190 Citizen Printer 1
Tatuny Monitor & Key Pad 1
4 Drawer File Cabinets - Letter 2
Casio Adding Machine 1
Phones 2
Stacking Files 15
Electric Pencil Sharpener 1
Rolodex 1
Radio/Cassette Players 7
Bulletin Boards 16
Tables 13
Chairs 80
Shelves 21
Cubby Baskets
Stove (Housekeeping Area) 4
Tables 3
Chairs 6
High Chairs 2
Doll Beds 4
Assorted Dolls and Stuffed Animals
Toy Box 1
Puzzles
Trucks
Assorted Books
Books for the Teacher Story Time 65
Hanging Mats 39
Folding mats 36
</TABLE>
<PAGE> 28
INVENTORY LIST
(Continued)
<TABLE>
<S> <C>
Folding Chairs 3
VCR 1
TV 1
Clocks 4
Book Stands 1
Puppets 6
Tapes
Movies
Paper Towel Holders 7
Bulletin Board Aids
Fire Extinguishers 3
Easel 1
Igloo Water Container 1
Set of Large Blocks Wooden 1
Set of Water Blocks 1
Assorted Table Games
Waste Paper Containers 8
Washing Machine 1
Dryer 1
Refrigerator 1
Toaster 1
Serving Cart 1
Desks - Teacher 2
Movable Walls 2
Book Rack 1
Chalk Board
Extra Large Rubber Main Tubs w/Lids 3
Soap Dispenser 7
Toilet Paper Holders 5
Mounted Air Freshener 3
Vacuum 1
Large Garbage Can (Plastic) 1
Commercial Stainless Steel Sink 1
Wall Pencil Sharpener 1
</TABLE>
-2-
<PAGE> 29
<TABLE>
<CAPTION>
PRICE PLAYGROUND
- ----------------
<S> <C>
Sport Rocker 1
Tether Ball 1
Little Tike Picnic Tables 3
Little Tikes Slide 1
Little Tikes Scooter 2
Metal Tricycles 2
Plastic Slides - Large 3
Little Tikes Gas Pump 1
Little Tikes Bus 1
Metal Drivers 2
Large Wooden 4 Swing Play Unit 1
</TABLE>
-3-
<PAGE> 30
TOTS UNLIMITED INVENTORY LIST
<TABLE>
<CAPTION>
ALMA SCHOOL LOCATION (Owned by Calman Corporation)
- --------------------
<S> <C>
Refrigerator - 1 large, 1 Small 2
TV 2
VCR 2
Nintendo and 12 Games
Serving Carts 2
Aquarium 3
Small Lobby Table 1
Refrigerator Stand 1
Listening Center 1
8 Head Sets 8
Washer 1
Dryer 1
Vacuum Cleaner 2
Folding Chair 1
Soap Dispenser 9
Towel Dispenser 8
Baby Gate (Door) 2
Radio/Tape Player 7
Storage Racks 3
Samsung Monitor 2
Samsung Computer 1
Keytonic Keyboard 1
Panisonic Printer 1
Key Pad 1
Phones 3
Safe 1
Casco Adding Machine 1
Cardx 1
Filing Cabinets 3
Microwave 1
Toaster 1
3 Hole Punch 1
Clocks 5
Fire Extinguisher 3
Chairs 112
</TABLE>
-4-
<PAGE> 31
INVENTORY LIST
(Continued)
<TABLE>
<S> <C>
Tables 18
Shelves 38
Water Fountain 3
Office Chair 1
Book Rack 1
Picnic Table 3
Plastic Cubby Holders 3
Mats & Covers 79
Popcorn Maker 1
Wall Deodorizers 4
White Locking Closet 4
Toy Box 2
Little Tikes Kitchen
Doll Bed
Stroller
Small Housekeeping Units 2
Tables 2
Chairs 6
High Chair
Doll House 2
Shopping Cart 1
Dressing Table
Toy Vacuum Cleaner
Baby Carriage
Music Instruments 8
Puzzles 10
Assorted Books
Table Games
Set of Wood Blocks 1
Ping Pong Table 1
Rocker 2
Outside Climber 2
Inside Climber 2
Tether Ball 1
Bicycles 3
Easel 1
Mop & Pail 1
Crayon Board 1
Assorted Yard Toys
</TABLE>
-5-
<PAGE> 32
TOTS UNLIMITED INVENTORY LIST
<TABLE>
<CAPTION>
MCCLINTOCK LOCATION (Owned by LKG, Inc.)
- -------------------
<S> <C>
Microwave 1
Large Refrigerator 1
Small Refrigerator with Stands 2
Garbage Can on Wheels
Step Stool 3
Assorted Plastic Tubs
Telephones 3
Washer 1
Dryer 1
Large Ladder 1
Dust Pans - Long Handle 2
Mop - Commercial 1
Aquarium 2
Chalkboard 1
Assorted Manipulative Games
Easel 1
Waste Paper Basket 13
Folding Chairs - Adult 3
Sink Stepping Stools 3
Chairs - Child 158
TV 2
TV Stand 1
VCR 1
Plastic Plant 1
Radios 7
Cloth Racks with Shelves 3
Wall Deodorizer 3
Door Alarms, Fisher Price 2
Fire Extinguisher 5
Towel Dispenser
Soap Dispenser 1
Clocks 8
Electric Pencil Sharpener 1
Bulletin Boards 25
Tables 33
Mylar Daily Message Board
</TABLE>
-6-
<PAGE> 33
INVENTORY LIST
(Continued)
<TABLE>
<S> <C>
Shelves 51
Mats 60
Hanging Mats 38
HOUSEKEEPING CORNER
- -------------------
Toy Box 1
Table 1
Chairs 2
Little Tikes Kitchen 1
Pantry 1
Washing Machine 1
Clothes Dryer 1
Rocking Chair 1
Doll Bed 1
Changing Table 1
Sink 1
Mail Box 1
Traffic Light 1
Doll Houses 2
Highway Carpet
Hopscotch Carpet
Assorted Plastic Baskets 50
Wooden Blocks 1
3 YEAR OLD ROOM
- ---------------
Little Tikes Tables 2
Little Tikes Chairs 6
Clothing Rack with Shelf 1
Assorted Plastic Baskets 50
Little Tikes Kitchen 1
Doll Bed 1
Washer/Dryer 1
Little Tikes Workbench 1
Musical Instruments 4
Wooden Puzzles 9
Wooden Blocks
</TABLE>
-7-
<PAGE> 34
INVENTORY LIST
(Continued)
<TABLE>
<S> <C>
PLAYGROUND
- ----------
Wooden Swing/Climbing Structures 2
Little Tikes Slides 4
Large Little Tikes Climb/Slide Structure 1
Tether Ball 1
Tricycles Metals 4
Plastic Tricycles 1
Assorted Tonda Trucks
Little Tikes Airplane 1
Large Garbage Cans 2
Outside Water Fountain 1
Inside Water Fountain 1
Metal Drivers 2
1 YEAR OLD ROOM
- ---------------
Wooden Stove 1
Little Tikes Climber 1
Little Tikes Rocker 1
Plastic Baskets 8
2 YEAR OLD ROOM
- ---------------
Little Tikes Table with Chairs 2
Coat Rack with Shelf 2
Little Tikes Kitchen Set 2
Little Tikes Rocker 1
Little Tikes Airplane 1
Baskets 49
Little Tikes Climber 1
Musical Instruments 3
</TABLE>
-8-
<PAGE> 35
INVENTORY LIST
(Continued)
<TABLE>
<S> <C>
OFFICE
- ------
Desk 1
Office Chair 1
Samsung Monitor 2
Keyboard 1
Computer 1
EPSN Printer 1
3 Hole Punch 1
Various Staplers & Removers
Horizontal File Cabinets 2
Calculators 2
Wall Filers - Plastic 6
</TABLE>
-9-
<PAGE> 36
RURAL/RAY ROAD LOCATION (Owned by County Air, Inc.)
- -----------------------
No Inventory
-10-
<PAGE> 37
TOTS UNLIMITED VANS
-------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1FBHS31G0FHA95832 1985 FORD 132,133.30 mi.
2GAGG355M4G4130882 1986 CHEVY 181,797.90 mi.
1G5EG25L2F7513905 1985 GMC 120,498.00 mi.
2G8EG25L4G4164178 1986 CHEVY 99,283.00 mi.
284FK4532KR169375 1989 DODGE 111,218.50 mi.
</TABLE>
-11-
<PAGE> 38
EXHIBIT "C"
LEASED LOCATIONS
1. Price Road and Southern Avenue (Lessee: Calman Corporation) Address:
3320 South Price Road, Suites 111-113, Tempe, Arizona 85282
2. Guadalupe and McClintock (Lessee: Calman Corporation) Address: 1835 East
Guadalupe Road, Suites C101-C103, Tempe, Arizona 85282
3. Rural Road and Ray Road (Lessee: Country Air, Inc.) Address: 1439 West
Ray Road, No. 121, Chandler, Arizona 85284
4. Alma School Road and 8th Avenue (Lessee: Calman Corporation) Address:
848 South Alma School Road, Suites C1-C4, Mesa, Arizona 85210
<PAGE> 39
EXHIBIT "D"
LEASES TO BE ASSIGNED
1. Price & Southern Location: Lease dated June 25, 1996, between Orsett
Properties Limited Partnership, a Massachusetts limited partnership, as
landlord, and Calman Corporation, an Arizona corporation, as tenant.
2. McClintock & Guadalupe Location: Lease dated April 16, 1993, between
Lomas Mortgages U.S.A., predecessor in interest to Weingarten Nostat,
Inc., a Connecticut corporation, as landlord, and Calman Corporation, an
Arizona corporation, as tenant.
3. Rural & Ray Location: Lease dated February 7, 1995 between Rural & Ray,
L.L.C., an Arizona limited liability company, as landlord, and Country
Air, Inc., an Arizona corporation as tenant.
4. Alma School & 8th Avenue Location: Lease dated August 25, 1995, between
Citibank (Arizona), an Arizona corporation, as landlord, and Calman
Corporation, an Arizona corporation, as tenant.
<PAGE> 40
EXHIBIT "E"(1)
TRADE ACCOUNTS RECEIVABLE
- ---------------
(1) This Exhibit to be completed during the Due Diligence Period and updated
as of Closing
<PAGE> 41
EXHIBIT "F"
LIENS
None.
<PAGE> 42
EXHIBIT "G"
BILL OF SALE
The Bill of Sale comprises Exhibit "G" of the Asset Purchase Agreement
between CALMAN CORPORATION, an Arizona corporation, LKG, INC., an Arizona
corporation, and COUNTRY AIR, INC., an Arizona corporation (herein jointly and
severally "Selling Parties") each as one of the three entities comprising
"Selling Parties" therein, and SUNRISE PRESCHOOLS, INC., a Delaware corporation
("Buyer") and is subject to all of the terms of said Agreement.
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Selling Parties, as their interests appear, do
hereby transfer, sell, set over and assign unto Buyer all of the personal
property listed on the attached inventory (jointly and severally "Personal
Property"), which property is located at the preschool centers operated by
Selling Parties and located at the site indicated.
Selling Parties hereby represent and warrant to Buyer that it has title
to and holds the entire interest in the Personal Property appearing on the
attached inventory lists and that the Personal Property is hereby transferred
free and clear of all liens and encumbrances.
NO WARRANTIES. Buyer acknowledges that it has had full opportunity to
examine each item comprising Personal Property and that the Personal Property
shall be purchased in a "used" and "as is" and "as-shown" condition. Buyer
further acknowledges and agrees that, except as expressly set forth in the
paragraph immediately above, it is purchasing the Personal Property solely upon
the basis of its investigation and not on the basis of any promise or
representation, express or implied, written or oral, made by Selling Party or
its agents, principals or employees.
DATED as of the 22nd day of August, 1996.
SELLING PARTIES:
CALMAN CORPORATION, an Arizona
corporation
By: /s/ Kay Goodman
---------------------------------------
Printed Name: Kay Goodman
-----------------------------
Its: President
--------------------------------------
<PAGE> 43
LKG, INC., an Arizona corporation
By: /s/ Kay Goodman
---------------------------------------
Printed Name: Kay Goodman
-----------------------------
Its: President
--------------------------------------
COUNTRY AIR, INC., an Arizona corporation
By: /s/ Kay Goodman
---------------------------------------
Printed Name: Kay Goodman
-----------------------------
Its: President
--------------------------------------
ACKNOWLEDGEMENT
SUNRISE PRESCHOOLS, INC., a Delaware
corporation
By: /s/ James R. Evans
--------------------------------------
Printed Name: James R. Evans
----------------------------
Title: President
-----------------------------------
-2-
<PAGE> 44
EXHIBIT "H"
ASSIGNMENT AND ASSUMPTION OF LEASE
THIS ASSIGNMENT AND ASSUMPTION OF LEASE (the "Assignment") is made this
_____ day of August, 1996, by and between CALMAN CORPORATION, an Arizona
corporation, d/b/a TOTS UNLIMITED ("Assignor"), and SUNRISE PRESCHOOLS, INC., an
Arizona corporation ("Assignee").
I. RECITALS
1. Unless otherwise expressly provided herein, all capitalized
terms used in this Assignment shall have the meanings set forth in the Asset
Purchase Agreement entered into between Calman Corporation, as one of three
entities comprising the Selling Parties, and Sunrise Preschools, Inc., as Buyer
(the "Agreement").
2. Assignor is presently the owner and holder of all of the
lessee's interest in that lease dated June 25, 1996 and all modifications,
amendments and/or supplements thereto (the "Lease") between Assignor, as lessee,
and Orsett Properties Limited Partnership, a Massachusetts limited partnership,
as lessor ("Landlord"), which leases to Assignor the real property and
improvements located at 3320 South Price Road, Suites 111 - 113, Tempe, Arizona
85282 (the "Leased Location"). A true, correct and complete copy of the Lease is
attached hereto as Exhibit "A" and incorporated herein by this reference.
3. Pursuant and subject to the terms of the "Asset Purchase
Agreement" dated August , 1996, by and between Assignor as one of the "Selling
Parties" and Assignee as "Buyer" (the "Agreement" of which this Assignment
constitutes Exhibit "H"), with respect to the purchase of the Purchased Assets
located at the Leased Location, Assignor is assigning to Assignee and Assignee
is acquiring from Assignor all of Assignor's interest as lessee in and to the
Lease.
II. AGREEMENT
For Ten Dollars and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Assignment. Assignor hereby assigns, conveys, transfers, and
sets over unto Assignee all of Assignor's right, title, and interest as lessee
in and to the Lease, together with all rentals, tenant security deposits,
advance rental deposits, and any other sums paid by Assignor relating to any
obligation that is to be undertaken by Assignor following the close of escrow of
the Agreement (the "Close of Escrow").
2. Assumption. Assignee hereby agrees to assume, perform,
fulfill, and comply with all covenants and obligations of the lease assigned
hereunder and any amendments and/or
<PAGE> 45
modifications thereto that are to be performed and complied with by the lessee
pursuant to the Lease on and after Close of Escrow as if Assignee were the
original tenant thereunder.
3. Indemnifications by Assignor. Assignor hereby agrees to
indemnify, pay, defend (with counsel reasonably acceptable to Assignee), and
hold Assignee harmless from and against any liabilities, obligations, actions,
suits, proceedings, or claims, and all costs and expenses (including without
limitation reasonable attorneys' fees) incurred in connection with the Lease,
based upon or arising out of any action or breach or alleged breach of the Lease
by Assignor occurring or alleged to have occurred prior to Close of Escrow.
4. Indemnifications by Assignee. Assignee hereby agrees to
indemnify, pay, defend (with counsel reasonably acceptable to Assignor), and
hold Assignor harmless from and against any liabilities, obligations, actions,
suits, proceedings, or claims, and all costs and expenses (including without
limitation reasonable attorneys' fees) incurred in connection with the Lease,
based upon or arising out of any action or breach or alleged breach of the Lease
by Assignee occurring or alleged to have occurred after the Close of Escrow.
5. Warranties. Assignor makes the following representations,
warranties, and covenants to and with Assignee which shall survive the Close of
Escrow and the execution of this Assignment:
a. The Lease is binding and in full force and effect, and
has not been breached, terminated, modified, or supplemented in any way
except as set forth on Exhibit "A" which is a true, complete and
accurate copy of the Lease;
b. The Lease constitutes the entire agreement with the
Landlord under the Lease, there are no understandings, representations,
warranties, allowances, concessions, or promises not fully set forth in
the Lease, and there are no other oral or written leases, occupancy
agreements, or subleases for the Leased Location or any portion of the
Leased Location;
c. Assignor has performed and fulfilled all terms,
conditions, and obligations required of Assignor pursuant to the Lease,
and Landlord has not asserted, and to the best of Assignor's knowledge
is not entitled to assert, any claim against Assignor pursuant to the
Lease;
d. As of Close of Escrow, there will be no assignments of
or other liens or encumbrances on the Lease;
e. To the best of Assignor's knowledge, Landlord has not:
(i) commenced any voluntary case, or had entered against Landlord an
order for relief, under any chapter of the Federal Bankruptcy Code
(Title 11 of the United States Code) or under any other similar federal
or state law; (ii) caused, suffered, or
-2-
<PAGE> 46
consented to the appointment of a receiver, trustee, administrator,
conservator, sequestrator, liquidator, or similar official in any
federal, state, or foreign judicial or nonjudicial proceeding, to hold,
administer, and/or liquidate all, or substantially all, of the
Landlord's assets; (iii) made a general assignment for the benefit of
creditors; or (vii) made an offer of settlement, extension, or
composition to Landlord's creditors generally; and
f. All improvements or other work to be performed for
Assignor under the Lease have been fully completed and paid for, and
Assignor is not obligated to provide for any new or additional
improvements, fixtures, or furnishings in relation to the Leased
Location. The representations, warranties, covenants, and agreements
contained in this Assignment are made and given in addition to and not
in lieu of any other representations, warranties, covenants, and
agreements contained in the Agreement.
6. Counterparts. This Assignment may be executed in two or more
Counterparts, each of which shall be deemed an original and all of which,
together, shall constitute one and the same instrument.
7. Binding Effect. This Assignment shall inure to the benefit of
and shall be binding upon the parties hereto and their respective successors and
assigns.
IN WITNESS WHEREOF, the parties have executed this Assignment as of the
date set forth above.
ASSIGNEE
SUNRISE PRESCHOOLS, INC., a Delaware
corporation
By: /s/ James R. Evans
--------------------------------------
Printed Name: James R. Evans
----------------------------
Title: President
-----------------------------------
-3-
<PAGE> 47
ASSIGNOR
CALMAN CORPORATION, an Arizona
corporation
By: /s/ Kay Goodman
---------------------------------------
Printed Name: Kay Goodman
-----------------------------
Its: President
--------------------------------------
-4-
<PAGE> 48
ACKNOWLEDGEMENT AND CONSENT
Landlord hereby acknowledges and consents to this Assignment
dated as of the date set forth above and all of the terms and conditions
contained herein.
ORSETT PROPERTIES LIMITED
PARTNERSHIP, a Massachusetts limited
partnership
By:__________________________________________
Printed Name:________________________________
Its:_________________________________________
-5-
<PAGE> 49
EXHIBIT "I"
CERTIFICATE
This Certificate is given pursuant to that certain Asset Purchase
Agreement dated August 22, 1996 by and between CALMAN CORPORATION, an Arizona
corporation, LKG, INC., an Arizona corporation, and COUNTRY AIR, INC., an
Arizona corporation (jointly and severally "Selling Parties"), and SUNRISE
PRESCHOOLS, INC., a Delaware corporation ("Buyer").
The representations and warranties made by Selling Parties in the Asset
Purchase Agreement are true and accurate in all material respects as of the date
hereof with the same effect as though such representations and warranties had
been made or given on and as of such date.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
this 22nd day of August, 1996.
SELLING PARTIES:
CALMAN CORPORATION, an Arizona
corporation
By: /s/ Kay Goodman
---------------------------------------
Printed Name: Kay Goodman
-----------------------------
Its: President
--------------------------------------
LKG, INC., an Arizona corporation
By: /s/ Kay Goodman
---------------------------------------
Printed Name: Kay Goodman
-----------------------------
Its: President
--------------------------------------
<PAGE> 50
COUNTRY AIR, INC., an Arizona corporation
By: /s/ Kay Goodman
---------------------------------------
Printed Name: Kay Goodman
-----------------------------
Its: President
--------------------------------------
-2-
<PAGE> 51
EXHIBIT "J"
AGREEMENT NOT TO COMPETE
This Agreement ("Agreement"), effective as of August 22, 1996,
is entered into between SUNRISE PRESCHOOLS, INC., a Delaware corporation
("Buyer"), CALMAN CORPORATION, an Arizona corporation, LKG, INC., an Arizona
corporation, and COUNTRY AIR, INC., an Arizona corporation, and KAY GOODMAN
(jointly and severally "Selling Parties").
Whereas, Buyer has or will purchase the assets of the Business
conducted by the Selling Parties located at four locations in the Phoenix,
Arizona metropolitan area, identified on Exhibit "C" (the "Location");
Whereas, this Agreement is a valuable asset and is an essential
part of the purchase of the assets of the Business;
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS.
Capitalized terms not otherwise defined in this Agreement shall
have the same meaning as those terms in the Asset Purchase Agreement dated as of
August 22, 1996, by and among Buyer and Selling Parties.
The following terms used herein shall have the following
meanings:
1.1 The term "directly or indirectly" shall mean as owner,
employee, partner, agent, director, officer, lender, financier, stockholder or
otherwise.
1.2 The term "Buyer's Protected Territory" shall mean a
two mile radius surrounding each of the four Leased Locations.
2. SELLING PARTIES' AGREEMENT NOT TO COMPETE.
a. Selling Parties, including any affiliates, successors,
and assigns, agree that for a period of five (5) years from the date hereof they
will not, directly or indirectly, operate a preschool operation in Buyer's
Protected Territory and will not participate in, engage in, reopen, or
reestablish in any way, directly or indirectly, any business, trade, or
occupation similar to the Business in the Buyer's Protected Territory, nor will
they in any manner become interested, directly or indirectly, in any such
business, trade, or occupation in the Buyer's Protected Territory. Selling
Parties further agree not to sell, convey, license, or lease the trade name
"Tots Unlimited" to any person engaged in any business, trade, or occupation
similar to the Business in the Buyer's Protected Territory.
<PAGE> 52
b. Selling Parties including any affiliates, successors,
and assigns, agree that for a period of two (2) years from the date hereof they
will not solicit, implore or request any Employee of Buyer working for Buyer at
and after the Close of Escrow to leave employment with Buyer to accept
employment with Selling Parties and Selling Parties agree not to employ any
Employee of Buyer if the Employee seeks employment with Selling Parties of his
or her own volition unless Buyer terminated the Employee's employment or first
having received Buyer's written consent for such hiring. Likewise, Buyer agrees
that for a period of two (2) years from the date hereof it shall not solicit,
implore or request any employee of Selling Parties working at any preschool
location, besides the four Leased Locations, run by Selling Parties in the
greater Phoenix area to accept employment with Buyer unless Selling Parties have
terminated that employee or Selling Parties have given written consent for such
firing.
c. Selling Parties including any affiliates, successors,
and assigns, agree that for a period of five (5) years from the date hereof they
will not solicit, implore or request, excluding mass media advertising, any
client of Selling Parties', at any of the four Leased Locations, to terminate
services with Buyer and seek services with Selling Parties.
3. REMEDY FOR BREACH.
It is agreed that it would be difficult to measure damages to the
parties from any breach of this Agreement by the other party and that injury
from any such breach would be great and incalculable, and that damages therefor
would be an inadequate remedy. Accordingly, Selling Parties and Buyer agree that
any party claiming a breach of this Agreement by the other party would be
entitled to seek injunctive relief in any court having jurisdiction for a breach
of this Agreement; provided, however, this clause shall not be construed to
prohibit the parties from pursuing any other remedies permitted by law to
redress such breach or any anticipated or threatened breach.
4. REASONABLENESS.
The parties agree that the restrictions, duration and geographic
scope of Buyer's Protected Territory contained in this Agreement are reasonable.
Further, the restrictions, duration and scope of Buyer's Protected Territory in
this Agreement are necessary to protect Buyer's bargained for interest in the
Purchased Assets.
5. ATTORNEYS FEES.
Should Buyer bring any action to enforce this Agreement, the
parties agree that the prevailing party shall be entitled to recover reasonable
costs and attorneys fees incurred in prosecuting such action in such amount
adjudged reasonable by the court.
-2-
<PAGE> 53
6. BINDING AGREEMENT.
This Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective heirs, personal representatives,
successors, and assigns.
7. COUNTERPARTS.
This Agreement may be executed in several counterparts, each of
which shall be deemed an original but all of which counterparts collectively
shall constitute one instrument representing the agreement among the parties.
8. APPLICABLE LAW.
This Agreement shall be interpreted and construed in accordance
with the laws of the State of Arizona.
9. ENTIRE AGREEMENT.
This Agreement represents the entire Agreement with respect to
competition between the parties. All prior or contemporaneous negotiations,
agreements or understandings, whether oral or written, are merged into this
document. This Agreement may only be modified in writing executed by all parties
hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date set forth above.
BUYER:
SUNRISE PRESCHOOLS, INC., a Delaware
corporation
By: /s/ James R. Evans
--------------------------------------
Printed Name: James R. Evans
----------------------------
Title: President
-----------------------------------
-3-
<PAGE> 54
SELLING PARTIES:
CALMAN CORPORATION, an Arizona
corporation
By: /s/ Kay Goodman
---------------------------------------
Printed Name: Kay Goodman
-----------------------------
Its: President
--------------------------------------
LKG, INC., an Arizona corporation
By: /s/ Kay Goodman
---------------------------------------
Printed Name: Kay Goodman
-----------------------------
Its: President
--------------------------------------
COUNTRY AIR, INC., an Arizona corporation
By: /s/ Kay Goodman
---------------------------------------
Printed Name: Kay Goodman
-----------------------------
Its: President
--------------------------------------
/s/ Kay Goodman
------------------------------------------
KAY GOODMAN
-4-
<PAGE> 55
EXHIBIT "K"
CERTIFICATE
This Certificate is given pursuant to that certain Asset Purchase
Agreement dated August 22, 1996 by and between CALMAN CORPORATION, an Arizona
corporation, LKG, INC., an Arizona corporation, and COUNTRY AIR, INC., an
Arizona corporation ("Selling Parties"), and SUNRISE PRESCHOOLS, INC., a
Delaware corporation ("Buyer").
The representations and warranties made by Buyer in the Asset Purchase
Agreement are true and accurate in all material respects as of the date hereof
with the same effect as though such representations and warranties had been made
or given on and as of such date.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
this 22nd day of August, 1996.
BUYER
SUNRISE PRESCHOOLS, INC., a Delaware
corporation
By: /s/ James R. Evans
--------------------------------------
Printed Name: James R. Evans
----------------------------
Title: President
-----------------------------------
<PAGE> 56
EXHIBIT "L"
PROMISSORY NOTE
$425,000.00 Phoenix, Arizona
August 22, 1996
FOR VALUE RECEIVED, the undersigned SUNRISE PRESCHOOLS, INC., a Delaware
corporation ("Maker"), promises to pay to CALMAN CORPORATION, an Arizona
corporation, LKG, INC., an Arizona corporation, and COUNTRY AIR, INC., a
Arizona corporation (jointly and severally "Selling Parties"), at 3157 East
Irwin, Mesa, Arizona 85204, or at such other place as the holder hereof may from
time to time designate in writing, the principal sum of FOUR HUNDRED TWENTY-FIVE
THOUSAND AND NO/100 DOLLARS ($425,000.00), with interest thereon at the rate of
eight percent (8%) per annum, from the date hereof on the principal balance from
time to time outstanding as hereinafter provided. This Note is being executed in
connection with that Asset Purchase Agreement between Maker and Selling Parties,
dated August 22, 1996 (the "Agreement"), for the purchase of Selling Parties'
preschool Business located at four locations in the Phoenix, Arizona
metropolitan area and identified on Exhibit "C" to the Agreement. Principal,
interest and all other sums payable hereunder are to be paid in lawful money of
the United States of America, as follows:
Interest shall accrue at the rate of 8% per annum. Interest and
principal shall be paid monthly in equal installments of $10,375.49
each, due and payable on the first day of each month, beginning
September 1, 1996, for a period of four years from the date hereof for a
total of forty-eight (48) payments. On August 1, 2000, all unpaid
principal and accrued interest shall be paid in full.
The Maker shall have the option to prepay this Note, in whole or in
part, at any time without penalty; provided, however, that prepayment shall be
applied first to interest accrued to the first day of the month in which such
prepayment is made, and then to principal. All prepayments shall be applied in
the inverse order of maturity, or, at the option of the holder, in the regular
order of maturity.
It is hereby expressly agreed that if a payment is made later than five
(5) business days after such payment is due, Maker shall pay a late penalty to
Selling Parties equal to four percent (4%) of the outstanding payment.
It is hereby expressly agreed that should any default be made in the
payment of any installment of principal or interest when due on this Note, and
should such default continue for a period of fifteen (15) days, then and in any
such event the whole sum of principal and accrued interest may, at the option of
the holder hereof, be declared due and payable. Upon the occurrence of any such
uncured default, the interest rate for this Note shall be increased to sixteen
percent (16%)
<PAGE> 57
for as long as such uncured default remains. Maker agrees to pay all collection
expenses, including reasonable attorneys' fees and court costs, incurred in the
collection or enforcement of all or any part of this Note. Such court costs and
attorneys' fees shall be set by the court and not by the jury, and shall be
included in any judgment obtained by the holder hereof. Time is of the essence
of this Note.
Failure of the holder hereof to exercise any option hereunder shall not
constitute a waiver of the right to exercise the same in the event of any
subsequent default or in the event of continuance of any existing default after
demand for strict performance thereof.
Maker, sureties, guarantors and endorsers hereof agree to be jointly and
severally bound, severally waive any homestead or exemption right against said
debt, and severally waive demand, diligence, presentment for payment, protest
and demand, notice of extension, dishonor, protest, demand and nonpayment of
this Note, and consent that the holder hereof may extend the time of payment or
otherwise modify the terms of payment of any part or the whole of the debt
evidenced by this Note, at the request of any other person or entity primarily
liable hereon, and such consent shall not alter nor diminish the liability of
any person or entity, it being further agreed by them that they will pay any
collection expenses, court costs and reasonable attorneys' fees which may be
incurred in the collection or enforcement of this Note or of any part hereof.
This Note shall be construed according to the laws of the State of
Arizona.
IN WITNESS WHEREOF, this Promissory Note has been executed as of the
date first written above.
SUNRISE PRESCHOOLS, INC., a Delaware
corporation
By: /s/ James R. Evans
--------------------------------------
Printed Name: James R. Evans
----------------------------
Title: President
-----------------------------------
MAKER
-2-
<PAGE> 58
EXHIBIT "M"
SECURITY AGREEMENT
In consideration of one or more loans or credit accommodations granted
to undersigned ("Debtor") by CALMAN CORPORATION, an Arizona corporation LKG,
INC., an Arizona corporation, and COUNTRY AIR, INC., an Arizona corporation
("Secured Parties"), Debtor hereby pledges and assigns to Secured Parties, and
grants to Secured Parties a security interest in, the following:
1. Purchased Assets: those Purchased Assets as defined and
described in the Asset Purchase Agreement dated August 22, 1996 by and between
Debtor and Secured Parties (the "Agreement"), and
2. Leases to be Assigned: those Leases to be Assigned as defined
and described in the Agreement, and all proceeds thereof (collectively referred
to as "Collateral") to secure the performance of the covenants and agreements
herein set forth and payment of Debtor's note dated August 22, 1996, in the sum
of FOUR HUNDRED TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($425,000.00) (the
"Note") and interest as specified therein and any and all extensions or renewals
thereof in whole or in part.
Selling Parties designate LKG, Inc., an Arizona corporation, as the
agent of the Selling Parties to receive all payments under the Promissory Note
and any and all notices due under the Agreement, this Security Agreement, and
any related documents.
So long as Secured Parties maintain a security interest in any part or
portion of the Purchased Assets, including any potential liability under any of
the subject Leases, and/or are owed money by Debtor, Debtor agrees:
1. Upon request, to execute and/or deliver all such instruments,
documents and other papers as may be requested by Secured Parties in order to
cause any and all payments and notices provided under the terms of the
Collateral to be made and given directly to Secured Parties.
2. To execute and deliver UCC-1 financing statements as may be necessary
to perfect such security interest under the laws of the State of Arizona.
3. To pay Secured Parties demand on all costs and expenses, including
reasonable attorneys' fees, incurred by Secured Parties in the preservation,
realization, enforcement and exercise of the rights, powers and remedies of
Secured Parties and the obligations of Debtor hereunder.
4. (a) Not to assign, transfer or sublease, in any form or manner, any
of the Leased Locations, or amend or modify the Leases to increase the rental
amounts or term, without prior written consent of the Assignor, which consent
may not be unreasonably withheld. This paragraph
<PAGE> 59
4(a) shall apply only to an isolated assignment, sale, transfer or sublease of
any of the Leases to be Assigned and/or Purchased Assets to which this Security
Agreement pertains and shall not affect or apply to any corporate merger,
acquisition, or consolidation of any form to which Debtor is a party.
(b) Landlord under the Leases to be Assigned will be advised in
writing that it is to notify Secured Parties in the event of any default by the
terms of the subject Lease.
5. (a) Debtor shall:
(i) maintain and operate each of the day care centers and
all government licenses necessary to operate each such center, and the leased
premises, in a good and prudent manner;
(ii) forthwith notify Secured Parties of any default in a
lease of any of the subject premises and concurrently provide Selling Parties
with a true and accurate copy of any and all notices of default received by
Buyer; and
(iii) timely comply with all provisions of the Agreement;
(b) Debtor shall not:
(i) permit any lien, claim or encumbrance upon any of
these assets superior to the interest of Secured Parties;
(ii) sell, assign or transfer title to any of the
Purchased Assets except in the ordinary course of business; and
(iii) be in default under any provisions of the Agreement;
6. Any of the following shall constitute an event of default:
(a) Violation of any of the covenants, promises and/or agreements
herein.
(b) Failure of Debtor to pay, when due, any indebtedness secured
hereby.
(c) The commencement of any bankruptcy, arrangement,
reorganization, insolvency, receivership or similar proceedings by or against
Debtor or against any guarantor or surety for Debtor.
(d) Dissolution or termination of corporate existence of Debtor.
(e) Violation of any of Buyer's obligations and/or warranties
contained in the Agreement and/or any Exhibit thereto.
-2-
<PAGE> 60
7. Upon the happening of any uncured event of default, Secured Parties
may, at its option, and without notice to any party, Secured Parties shall have
the rights, options, duties and remedies afforded a secured party at equity,
under the laws of the State of Arizona or under the Agreement or this Security
Agreement, including, but not limited to, the right to cure any default of Buyer
with a third party under the Agreement, Security Agreement, or related document
by making any payment(s) owed by Buyer to said third party and/or, in the case
of a landlord's reasonable demand that certain repairs or other physical
modifications be made at a center as required under the Leases, the right to
enter upon the premises and make such changes in the event that Buyer has failed
to do so within a reasonable period of time, thereby jeopardizing the
continuation of the lease through its full term. In the event that Selling
Parties have expended sums of monies to cure any of the above defaults, then
such monies shall become immediately due and owing from Buyer to Selling Parties
and, until paid, any such unpaid sums of money shall be added to the balance of
principal owed by Buyer to Selling Parties, accruing interest at the same rate
of interest and same shall also be deemed to increase by a like sum the
principal amount due pursuant to the Promissory Note issued to Selling Parties
by Buyer.
8. It is understood and agreed that Secured Parties does not assume and
will not be subject to any obligation or liability of Debtor under any
Collateral in which Secured Parties is granted a security interest.
9. This Security Agreement is not taken in payment of the obligation
except to the extent that Secured Parties actually recovers payment hereunder.
10. Upon satisfaction of all payments due under the Note and Asset
Purchase Agreement, Secured Parties agree to execute such documents as are
necessary to terminate this Agreement, all UCC-1 filings, and any other security
document related hereto.
11. This agreement shall be governed by the laws of the State of
Arizona. Any provisions found to be invalid shall not invalidate the remainder
hereof. Waiver of any default shall not constitute waiver of any subsequent
default. Any true and correct carbon, photographic, or other reproductive copy
of this Agreement may be filed or recorded as a financing statement. If this
instrument is signed by more than one Debtor the singular word "Debtor" shall
include the plural, and the obligations of all such Debtors shall be joint and
several. All words used herein shall be construed to be of such gender and
number as the circumstances require, and all reference herein to Debtor shall
include all other persons primarily or secondarily liable hereunder. This
instrument shall be binding upon the heirs, personal representatives, successors
and assigns of Debtor, and inure to the benefit of Secured Parties, its
successor and assigns. THIS AGREEMENT AND THE DOCUMENTS REFERENCED HEREIN
CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT
MATTER CONTAINED HEREIN, AND MAY NOT BE ALTERED OR AMENDED EXCEPT BY A WRITING
SIGNED BY ALL PARTIES.
Executed this 22nd day of August, 1996.
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<PAGE> 61
DEBTOR
SUNRISE PRESCHOOLS, INC., a Delaware
corporation
By: /s/ James R. Evans
--------------------------------------
Printed Name: James R. Evans
----------------------------
Title: President
-----------------------------------
SECURED PARTIES:
CALMAN CORPORATION, an Arizona
corporation
By: /s/ Kay Goodman
---------------------------------------
Printed Name: Kay Goodman
-----------------------------
Its: President
--------------------------------------
LKG, INC., an Arizona corporation
By: /s/ Kay Goodman
---------------------------------------
Printed Name: Kay Goodman
-----------------------------
Its: President
--------------------------------------
COUNTRY AIR, INC., an Arizona corporation
By: /s/ Kay Goodman
---------------------------------------
Printed Name: Kay Goodman
-----------------------------
Its: President
--------------------------------------
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<PAGE> 62
EXHIBIT "N"
CONDITIONAL ASSIGNMENT OF LEASE
KNOW ALL MEN BY THESE PRESENTS:
BY THIS CONDITIONAL ASSIGNMENT OF LEASE (hereinafter called the
"Assignment"), the undersigned SUNRISE PRESCHOOLS, INC., a Delaware corporation
(hereinafter called "Assignor"), whose address is 9128 East San Salvador, Suite
200, Scottsdale, Arizona 85258, for valuable consideration, the receipt of which
is hereby acknowledged, does hereby assign, transfer, convey and set over to
___________________________________, an Arizona corporation (hereinafter called
"Assignee"), whose address is
________________________________________________________________________________
________________________________________, and does hereby grant to Assignee a
security interest in, all of Assignor's right, title and interest in and to that
Lease dated by and between Assignor as successor to tenant's interest and
___________________________________ ("Landlord"), together with all obligations
of Landlord due or to be performed thereunder or with respect thereto (all
hereinafter called the "Lease").
TO HAVE AND TO HOLD the same from this day forward so long as any part
of the obligations of Assignor hereinafter described remains unpaid and
unperformed.
This Assignment is made as and shall constitute collateral security for
any and all indebtedness and liabilities of any kind and nature of Assignor to
Assignee, direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, under that loan by Assignee to Assignor pursuant
to that Asset Purchase Agreement between Assignor and Assignee of even date
herewith (hereinafter called the "Agreement"), evidenced by that Promissory Note
made by Assignor to the order of Assignee as one of three Selling Parties in the
principal amount of FOUR HUNDRED TWENTY-FIVE THOUSAND AND NO/100 DOLLARS
($425,000.00) (hereinafter called the "Promissory Note") and secured by other
lien and security instruments, all of even date herewith (all of the foregoing
hereinafter called the "Obligation").
1. Assignor represents, warrants and covenants that:
(a) Assignor has full power, right and authority to execute and
deliver this Assignment.
(b) Assignor has not conveyed, transferred, or assigned the Lease
or any right or interest therein and has not executed any other document
or instrument that might prevent or limit Assignee from operating under
the terms, conditions and provisions of this Assignment.
<PAGE> 63
(c) Assignor shall make no other assignment of the Agreement or
of any right or interest therein.
(d) Assignor shall perform and observe, in timely fashion, all of
the covenants, conditions, obligations and agreements of Assignor under
the Lease in accordance with the terms, conditions and provisions
thereof.
2. Assignor hereby authorizes Assignee, upon the occurrence of any
uncurred event of default under the Agreement or any document or instrument
securing the Obligation, and at any time while such event of default is
continuing, or upon any default by Assignor under the Lease that remains uncured
after the expiration of any grace period provided therein, and upon the election
by Assignee to exercise its rights under this Assignment, to enforce Assignor's
rights under the Lease and to receive any performance of Landlord thereunder.
Assignor hereby authorizes Landlord to accept this Assignment and authorizes and
directs Landlord, upon such default by Assignor and election by Assignee, to
make and render all acts and performances required of Landlord under the terms
of the Lease directly to Assignee or its nominee as Assignee may direct.
Assignor hereby relieves Landlord from any liabilities to Assignor that Assignor
might otherwise have or assert by reason of the making or rendering of any
performance by Landlord under the Agreement to Assignee or its nominee pursuant
to this Section 2.
3. No change, amendment or modification shall be made to the
instructions of Assignor contained herein without the prior written approval of
Assignee.
4. Assignor shall promptly notify Assignee of any default or breach of
or under the Lease or of any failure of performance or other condition that,
after notice or lapse of time, or both, could become a default or breach by
Landlord of or under the Lease.
5. Assignor, immediately upon receipt, shall deliver to Assignee at the
address set forth above a true and complete copy of any notice of default or
breach and all other communications respecting a default or breach, alleged
default or breach, failure of performance, or other condition that with lapse of
time or after additional notice, or both, could become a default or breach by
Assignor of or under the Agreement, or otherwise relating to Assignor's good
standing with respect to the Lease.
6. Assignee shall have the right at any time to appear in and defend and
be represented by counsel of its own choice in any action or proceeding
purporting to affect Assignor's rights under the Lease.
7. All amounts paid, suffered or incurred by Assignee in exercising any
authority granted herein due to or caused by a default of Assignor, including
reasonable attorneys' fees, and all other amounts due Assignee from Assignor in
connection with this Assignment shall be added to the Obligation, shall be
secured by all lien and security documents securing the Obligation, shall bear
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<PAGE> 64
interest at the highest rate payable on any of the Obligation until paid, and
shall be due and payable by Assignor to Assignee immediately without demand.
8. Neither the execution and delivery of this Assignment nor any failure
on the part of Landlord to comply with, honor and perform in accordance with the
Lease shall affect the liability of any party to pay and perform the Obligation.
9. The taking of this Assignment by Assignee shall not effect the
release of any other collateral now or hereafter held by Assignee as security
for the Obligation, nor shall the taking of additional security for the
Obligation hereafter effect a release or termination of this Assignment or any
terms, conditions or provisions hereof.
10. Assignor, upon request of Assignee, shall execute and deliver such
additional documents, including but not limited to financing statements, and do
such other acts as may be reasonably necessary to fully implement the intent of
this Assignment and to perfect and preserve the rights and interests of Assignee
hereunder and the priority thereof.
11. Time is of the essence. This Assignment shall be binding upon
Assignor and its successors and assigns and shall inure to the benefit of
Assignee and its successors and assigns; this Assignment, however, is not
intended to confer any right or remedies upon any person other than the parties
hereto and their successors and assigns.
12. No failure or delay on the part of Assignee in exercising any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power, or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The rights, powers and remedies hereunder are cumulative and may be
exercised by Assignee either independently of or concurrently with any other
right, power or remedy contained herein or in any document or instrument
executed in connection with the Obligation.
13. By executing this Assignment, Assignor acknowledges receipt of a
copy hereof. A carbon, photographic or other reproduced copy of this Assignment
and/or any financing statement
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<PAGE> 65
relating hereto shall be sufficient for filing and/or recording as a financing
statement. This Assignment shall be governed by and construed according to the
laws of the State of Arizona.
IN WITNESS WHEREOF, these presents are executed as of the _____ day of
August, 1996.
SUNRISE PRESCHOOLS, INC., a Delaware
corporation
By:__________________________________________
Printed Name:________________________________
Its:_________________________________________
ASSIGNOR
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<PAGE> 66
ACKNOWLEDGMENT AND CONSENT
The undersigned is referred to in the foregoing Conditional Assignment
of Lease (the "Assignment") as Landlord. The undersigned acknowledges and
consents to the Assignment and agrees that upon a default of Assignor as stated
thereunder and the election of Assignee to exercise its rights under the
Assignment, it will render all acts and performances required of it under the
terms of the Lease directly to Assignee or its nominee as Assignee may direct.
This Acknowledgment and Consent and the agreement of the undersigned
contained herein is conditioned upon the following: (i) neither the Assignment
nor this Acknowledgment and Consent shall give Assignee any greater rights under
the Lease than those of Assignor, and (ii) upon a default by Assignor and the
election of Assignee to exercise its rights under the Assignment, Assignee will
perform all of the covenants, conditions, obligations and agreements of Assignor
under the Lease.
The undersigned hereby certifies to Assignee and agrees that:
1. The Lease is in full force and effect and no breach or default
exists under the Lease and no event has occurred and no condition exists
that, after notice or lapse of time, or both, would constitute a breach
or default under the Lease.
2. All conditions precedent to the obligation of the undersigned
to perform pursuant to the Lease have been fully satisfied.
3. The undersigned will notify Assignee in writing in the event
of any breach or default by Assignor under the Agreement. In the event
that Assignee exercises its rights under the Assignment and gives due
notice to Landlord of such election, Assignee will be entitled to a cure
period for any Assignor default in addition to that of Assignor.
LANDLORD
By:__________________________________________
Printed Name:________________________________
Its:_________________________________________
