<PAGE> 1
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) June 28, 1996
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 (I.R.S. 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)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 28, 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 for trade names and trademarks) of
Children's Choice Learning Center, a preschool owned and operated by Children's
Choice, Inc. in Phoenix, Arizona.
The consideration paid by Sunrise in connection with the acquisition was
$410,000, which was paid at the closing of the acquisition on June 28, 1996.
The consideration was paid from Sunrise's cash and cash equivalents, and was
determined through arm's length negotiations between representatives of Sunrise
and Children's Choice. 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 Children's Choice or any
shareholder of Children's Choice prior to the acquisition.
The purchased assets consisted primarily of 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
Audited financial statements of Children's Choice Learning Center, Inc.
are not readily available. The required unaudited financial statements
for Children's Choice Learning Center follow:
Children's Choice Learning Center, Inc.
Unaudited Income Statement
For the Year Ended December 31, 1995
<TABLE>
<S> <C>
Operating Revenues $597,732
Operating Expenses
Payroll 227,217
Facilities and maintenance 173,076
General and administrative 101,559
--------
Total operating expenses 501,852
--------
Income from Operations 95,880
Interest Expense 4,420
--------
Net Income $ 91,460
========
</TABLE>
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information
Sunrise Preschools, Inc. and Subsidiary
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of April 30, 1996
(In thousands)
<TABLE>
<CAPTION>
Historical
--------------------
Children's Pro Forma Pro Forma
Sunrise Choice Adjustments Combined
------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 3,500 $(16) $ 16 $ 3,055
(445)
Accounts receivable, net 467 -- -- 467
Prepaids and other 208 -- -- 208
Deferred tax asset, current 109 -- -- 109
------- ---- ----- -------
Total current assets 4,284 (16) (429) 3,839
Property and equipment, net 1,594 34 (34) 1,651
57
Deferred tax asset, net 586 -- -- 586
Note receivable from PSI 256 -- -- 256
Goodwill 351 -- 317 668
Deposits and other 410 364 (364) 481
71
------- ---- ----- -------
Total assets $ 7,481 $382 $(382) $ 7,481
======= ==== ===== =======
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 163 $ -- $ -- $ 163
Accrued Expenses 476 31 (31) 476
Notes payable and capital
leases, current 139 6 (6) 139
Deferred rent, current 132 -- -- 132
Deferred gain, current 45 -- -- 45
------- ---- ----- -------
Total current liabilities 955 37 (37) 955
Notes Payable and Capital
Leases, net 456 30 (30) 456
Deferred Rent, net 328 -- -- 328
Deferred Gain, net 99 -- -- 99
Shareholders' Equity
Preferred stock 857 -- -- 857
Common stock 30 5 (5) 30
Paid-in capital 7,625 -- -- 7,625
Retained earnings (deficit) (2,869) 310 (310) (2,869)
------- ---- ----- -------
Total shareholders' equity 5,643 315 (315) 5,643
------- ---- ----- -------
Total liabilities and
shareholders' equity $ 7,481 $382 $(382) $ 7,481
======= ==== ===== =======
</TABLE>
See accompanying Note to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information
Sunrise Preschools, Inc. and Subsidiary
Unaudited Pro Forma Condensed Consolidated Income Statement
For the Fiscal Year Ended July 31, 1995
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical
--------------------
Children's Pro Forma Pro Forma
Sunrise Choice Adjustments Combined
------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Operating Revenues $ 9,715 $566 $ -- $10,281
Operating Expenses
Payroll 4,731 201 (21) 4,911
Facilities and maintenance 2,976 162 27 3,165
General and administrative 1,396 103 -- 1,499
------- ---- ----- -------
Total operating expenses 9,103 466 6 9,575
------- ---- ----- -------
Income from Operations 612 100 (6) 706
Non-operating Income (Expense)
Interest income (expense), net (39) (5) -- (44)
Other income 14 -- -- 14
------- ---- ----- -------
Total non-operating income
(expense) (25) (5) -- (30)
------- ---- ----- -------
Income before Income Taxes 587 95 (6) 676
Income Tax Benefit 220 -- -- 220
------- ---- ---- -------
Net Income $ 807 $ 95 $ (6) $ 896
======= ==== ==== =======
Net Income Available for
Common Stock $ 757 $ 846
======= =======
Net Income (Loss) per Common
Share and Common Share
Equivalent
Primary $ 0.29 $ 0.32
======= =======
Fully Diluted $ 0.25 $ 0.28
======= =======
Average Shares Outstanding
Primary 2,621 2,621
======= =======
Fully Diluted 3,208 3,208
======= =======
</TABLE>
See accompanying Note to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information
Sunrise Preschools, Inc. and Subsidiary
Unaudited Pro Forma Condensed Consolidated Income Statement
For the Nine Months Ended April 30, 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
HISTORICAL
------------------------
CHILDREN'S PRO FORMA PRO FORMA
SUNRISE CHOICE ADJUSTMENTS COMBINED
---------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Operating Revenues $7,421 $460 $ - $7,881
Operating Expenses
Payroll 3,612 184 (29) 3,767
Facilities and maintenance 2,729 118 24 2,871
General and administrative 1,044 70 - 1,114
------- ----- ------ -------
Total operating expenses 7,385 372 (5) 7,752
------- ----- ------ -------
Income from Operations 36 88 5 129
Non-operating Income (Expense)
Interest income (expense) net 47 (2) - 45
Other income (expense), net 3 - - 3
------- ----- ----- ------
Total non-operating income
(expense) 50 (2) - 48
------- ----- ----- ------
Net Income $ 86 $ 86 $ 5 $ 177
======= ==== ===== ======
Net Income (Loss) Available for
Common Stock $ (120) $ (29)
======= ======
Net Income (Loss) per Common
Share and Common Share
Equivalent $(0.04) $(0.01)
======= =======
Average Shares Outstanding 2,966 2,966
======= =======
</TABLE>
See accompanying Note to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information
Sunrise Preschools, Inc. and Subsidiary
Note to Unaudited Pro Forma Condensed Consolidated Financial Statements
(1) Pro forma adjustments to the unaudited pro forma condensed
consolidated balance sheet consisted of eliminating all Childrens'
Choice balances, reducing cash and cash equivalents by $445,000
(the purchase price of $410,000 plus other acquisition costs),
increasing property and equipment by $57,000 (the estimated fair
market value of the assets acquired) increasing goodwill by $317,000
and increasing other intangible assets by $71,000.
Pro forma adjustments to the unaudited pro forma condensed
consolidated income statements consisted of reducing payroll costs
by the amount of salaries paid to the seller and increasing
facilities and maintenance costs for depreciation and amortization
of the acquired assets.
(c) Exhibits
--------
(1) Asset Purchase Agreement between Children's Choice Learning Center,
Inc. and Sunrise Preschools, Inc. dated June 26, 1996, with one
amendment dated June 28, 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.
Date: September 9, 1996 By:/s/ James R. Evans
----------------------------------
James R. Evans
Chairman of the Board of Directors
and President (Principal Executive
Officer)
<PAGE> 1
ASSET PURCHASE AGREEMENT
between
SUNRISE PRESCHOOLS, INC.,
a Delaware corporation
and
CHILDREN'S CHOICE LEARNING CENTER, INC.,
an Arizona corporation
dated as of June 26, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
ARTICLE I DEFINITIONS.......................................................1
1.1 Business...................................................1
1.2 Closing....................................................1
1.3 Closing Date...............................................1
1.4 Due Diligence Period.......................................1
1.5 Equipment..................................................1
1.6 Leased Location............................................2
1.7 Lease to be Assigned.......................................2
1.8 Purchase Price.............................................2
1.9 Purchased Assets...........................................2
1.10 Termination Date...........................................2
1.11 Trade Accounts Payable.....................................2
1.12 Trade Accounts Receivable..................................2
1.13 Trade Names and Trademarks.................................2
ARTICLE II PURCHASE AND SALE................................................2
2.1 Purchase and Sale..........................................2
ARTICLE III PURCHASE PRICE..................................................3
3.1 Purchase Price.............................................3
ARTICLE IV ASSUMPTION OF LIABILITIES .......................................3
4.1 Lease......................................................3
4.2 Nonassumption of Other Liabilities.........................3
4.3 Consents to Assignment.....................................3
ARTICLE V COLLECTION OF TRADE ACCOUNTS RECEIVABLE...........................3
5.1 Collection of Trade Accounts Receivable....................3
ARTICLE VI DUE DILIGENCE....................................................4
6.1 Due Diligence..............................................4
6.2 Access.....................................................4
6.3 Termination of Agreement...................................4
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF SELLER........................5
7.1 Corporate Status...........................................5
7.2 Corporate Authority........................................5
7.3 Title to Purchased Assets..................................5
</TABLE>
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<TABLE>
<CAPTION>
Page
<S> <C>
7.4 Tax Matters................................................5
7.5 Litigation.................................................5
7.6 Environmental Matters......................................5
7.7 Banking and Financial Records..............................5
ARTICLE VIII REPRESENTATIONS AND WARRANTIES OF BUYER........................6
8.1 Corporate Status...........................................6
8.2 Corporate Authority........................................6
ARTICLE IX EMPLOYEES........................................................6
9.1 Definition.................................................6
9.2 Termination................................................6
9.3 Labor Contracts............................................7
9.4 Pension Plans..............................................7
9.5 Workmen's Compensation.....................................7
9.6 Nonassumption of Obligations Owed Employees................7
ARTICLE X REALTY............................................................7
10.1 Warranty of Title..........................................7
10.2 Conveyance.................................................7
ARTICLE XI INDEMNITIES......................................................7
11.1 Seller.....................................................7
11.2 Buyer......................................................7
ARTICLE XII TAXES AND UTILITIES.............................................8
12.1 Transfer Taxes.............................................8
ARTICLE XIII CONDUCT OF OPERATIONS PRIOR TO CLOSING.........................8
13.1 Conduct of Operations......................................8
13.2 Requisite Government Approvals.............................8
ARTICLE XIV CLOSING.........................................................8
14.1 Closing....................................................8
ARTICLE XV CONDITIONS PRECEDENT TO BUYER'S DUTY TO CLOSE....................8
15.1 Continued Truth of Warranties..............................9
15.2 Performance of Obligations.................................9
15.3 Delivery of Closing Documents..............................9
15.4 Litigation.................................................9
15.5 No Material Adverse Change.................................9
15.6 Government Approvals.......................................9
</TABLE>
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<TABLE>
<CAPTION>
Page
<S> <C>
15.7 Board of Directors' Approval...............................9
15.8 Assignment of Lease........................................9
ARTICLE XVI CONDITIONS PRECEDENT TO SELLER'S DUTY TO CLOSE..................9
16.1 Continued Truth of Warranties..............................9
16.2 Performance of Obligations................................10
16.3 Delivery of Closing Documents.............................10
16.4 Litigation................................................10
ARTICLE XVII ITEMS TO BE DELIVERED AT CLOSING BY SELLER....................10
17.1 Bill of Sale..............................................10
17.2 Lease Assignment, Assumption and Consent Agreement and
Estoppel Certificate......................................10
17.3 Certified Resolution......................................10
17.4 Certificates of Good Standing.............................10
17.5 Representations and Warranties............................10
17.6 Consents..................................................10
17.7 UCC Termination Statements................................11
17.8 Customer List.............................................11
17.9 Certified Articles and Bylaws.............................11
17.10 Covenant Not to Compete...................................11
ARTICLE XVIII ITEMS TO BE DELIVERED AT CLOSING BY BUYER....................11
18.1 Certified Resolution......................................11
18.2 Representations and Warranties............................11
18.3 Lease Assignment, Assumption and Consent Agreements.......11
18.4 Purchase Price............................................11
18.5 Certificates of Good Standing.............................11
ARTICLE XIX MISCELLANEOUS..................................................11
19.1 Further Assurances........................................11
19.2 No Other Agreements.......................................12
19.3 Waiver....................................................12
19.4 Public Announcements......................................12
19.5 Notices...................................................12
19.6 Brokers...................................................12
19.7 Risk of Loss..............................................12
19.8 Third-Party Beneficiary...................................13
19.9 Confidential Information..................................13
19.10 Assignment................................................13
19.11 Paragraph Headings........................................13
19.12 Time Is of the Essence....................................14
</TABLE>
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<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE XIX.13 ATTORNEY FEES.................................................14
EXHIBIT A Equipment
EXHIBIT B Bill of Sale
EXHIBIT C Lease Assignment, Assumption and Consent Agreements
EXHIBIT D Seller's Cerificate
EXHIBIT E Covenant Not to Compete
EXHIBIT F Buyer's Certificate
</TABLE>
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<PAGE> 6
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT dated as of June 26, 1996, is by and
between CHILDREN'S CHOICE LEARNING CENTER, INC., an Arizona corporation
("Seller"), and SUNRISE PRESCHOOLS, INC., a Delaware corporation ("Buyer").
RECITALS
Seller desires to sell and Buyer desires to purchase the assets and
assume certain liabilities of the children's preschool business conducted by
Seller in the greater Phoenix metropolitan area.
Seller 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 Seller's operations
conducted under the trade name Children's Choice Learning Center at the Leased
Location.
1.2 Closing. The term "Closing" shall mean the exchange of Closing
documents together with the simultaneous conveyance by Seller to Buyer of the
Purchased Assets and the payment by Buyer to Seller 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 Due Diligence Period. The term "Due Diligence Period" shall mean
the period of time commencing on execution of this Agreement and expiring on
June 28, 1996, and any written extension thereof.
1.5 Equipment. The term "Equipment" shall mean all furniture, fixtures
and equipment and other pieces of tangible personal property owned by Seller and
used at the Leased Location including those items described in Exhibit "A" to be
attached to this Agreement during the Due Diligence Period.
<PAGE> 7
1.6 Leased Location. The term "Leased Location" shall mean the location
at 814 East Union Hills Drive, Phoenix, Arizona, together with deposits of any
nature whatsoever in connection with the operation of the Business.
1.7 Lease to be Assigned. The term "Lease to be Assigned" shall mean
the lease of the real property between Resurgence Properties, Inc. and
Children's Choice Learning Center, Inc. with the right to any deposits in
connection therewith.
1.8 Purchase Price. The term "Purchase Price" shall mean the price
being paid for the Purchased Assets as defined elsewhere in this Agreement.
1.9 Purchased Assets. The term "Purchased Assets" shall mean the
Equipment, Lease to be Assigned, Covenant Not to Compete, Trade Names,
Trademarks, licenses, any and all deposits referred to herein and all other
matters of any nature whatsoever, whether tangible or intangible in connection
with the Business.
1.10 Termination Date. The term "Termination Date" shall mean the last
business day immediately preceding the Closing Date.
1.11 Trade Accounts Payable. The term "Trade Accounts Payable" shall
mean the obligation of Seller to make payment to third parties owed, including
those owed but not yet due, as of Closing for goods or services sold to Seller
in the ordinary course of the Business prior to Closing.
1.12 Trade Accounts Receivable. The term "Trade Accounts Receivable"
shall mean the obligation to make payment to Seller owed, including those owed
but not yet due, as of Closing by all third-party purchasers of goods and
services from Seller in the ordinary course of the Business prior to Closing.
1.13 Trade Names and Trademarks. The terms "Trade Names" and
"Trademarks" shall mean the term "Children's Choice Learning Center" and/or any
other used in connection with the operation of the Business.
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale. At Closing, Seller agrees to sell and convey the
Purchased Assets to Buyer, and Buyer agrees to pay the Purchase Price to Seller
and assume certain specified obligations hereunder on the covenants, terms and
conditions contained herein.
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<PAGE> 8
ARTICLE III
PURCHASE PRICE
3.1 Purchase Price. The Purchase Price for the Purchased Assets shall
be FOUR HUNDRED TEN THOUSAND AND NO/100 DOLLARS ($410,000.00), payable in
immediately available funds at closing.
ARTICLE IV
ASSUMPTION OF LIABILITIES
4.1 Lease. At Closing, Buyer shall assume the Lease.
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 SELLER
OF ANY FORM OR NATURE WHETHER INCURRED IN CONNECTION WITH THE BUSINESS OR
OTHERWISE.
4.3 Consents to Assignment. Seller shall obtain prior to the date of
Closing, with respect to the Lease to be Assigned, the consent of any person or
entity necessary to the assignment of Seller's rights under the Lease to be
Assigned to Buyer without modification of the terms of the Lease to be Assigned
unless agreed to by Buyer in writing. The Closing is subject to and conditioned
upon Buyer receiving a fully executed lease assignment and lessor estoppel
certificate for the Lease to be Assigned in form, substance and content
acceptable to Buyer in its sole and absolute discretion.
ARTICLE V
COLLECTION OF TRADE ACCOUNTS RECEIVABLE
5.1 Collection of Trade Accounts Receivable. Within thirty (30) days
after date of Closing, Buyer shall use reasonable efforts to collect the Trade
Accounts Receivable which relate to services performed prior to the Closing and
shall be paid to Seller upon receipt. If any of the Trade Accounts Receivable
have not been collected by Buyer during such thirty (30) day period, Buyer shall
have no further responsibilities to Seller in connection therewith.
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<PAGE> 9
ARTICLE VI
DUE DILIGENCE
6.1 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 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 Seller's files and documents as well as conduct
on-site studies and investigations, including interviews with Seller's
employees. Minimally, the due diligence shall include all leases, environmental
reports or issues, books, files, bank accounts, accounting, employee or any
other type of record as may be reasonably needed in connection herewith.
6.2 Access. During the Due Diligence Period, and in order to assist
Buyer with Buyer's inspections and investigations of the Purchased Assets,
Seller 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 the Purchased
Assets, financial, customer and employee records; and bank statements, verified
deposits, and any other bank record relating to the Business and Purchased
Assets. Seller shall fully cooperate with Buyer and shall promptly provide Buyer
with all information currently available to Seller and requested by Buyer during
the Due Diligence Period.
6.3 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 to
Seller 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 Seller 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 Seller remedy each problem or defect
within ten (10) days of receipt of such notice. Seller may correct such problems
within the ten (10) day cure period or cancel the Agreement by providing written
notice to Buyer of cancellation within such ten (10) day period. If Seller is
unable to cure such problem and/or elects to cancel the Agreement, Buyer shall
have ten (10) 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.
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<PAGE> 10
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants 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 Corporate Status. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Arizona.
7.2 Corporate Authority. Seller 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 taken. Upon execution hereof, this shall be
a valid, legally binding obligation of Seller, enforceable in accordance with
its terms.
7.3 Title to Purchased Assets. Seller has good and marketable title to
the Purchased Assets free and clear of all liens, claims and encumbrances and
has full power and authority to transfer such title to Buyer.
7.4 Tax Matters. All required federal, state and local tax returns have
been filed by Seller, including those with respect to income, sales, property,
withholding, social security and employment taxes. Seller has authorized all
applicable taxing authorities to release any tax information to Buyer or Buyer's
counsel, at either's request. Seller will satisfy all tax obligations incurred
prior to Closing on, before, or immediately following Closing and provide to
Buyer within thirty (30) days after Closing tax clearance certificates from all
applicable taxing authorities verifying that all sales, use, ad valorem,
withholding, Social Security, and employment tax obligations have been fully
satisfied by Seller.
7.5 Litigation. There is no threatened or pending litigation,
arbitration, or administrative hearing concerning or affecting the operation of
the Business or the Purchased Assets 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 or threatened notices
of violation of environmental laws, rules, or regulations with respect to the
Purchased Assets.
7.7 Banking and Financial Records. The banking and financial records
have been prepared by Seller 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.
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<PAGE> 11
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller 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 all states
which will require such qualification and license for the continued conduct of
Business as operated by Seller.
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 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.
ARTICLE IX
EMPLOYEES
9.1 Definition. During the Due Diligence Period, Seller shall provide
to Buyer a complete list of all persons regularly employed on either a part-time
or full-time basis by Seller in connection with the Business at the Leased
Location. 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 Seller between the date of the list and the date immediately
preceding the Closing Date ("Termination Date"). During the due diligence period
Buyer and Seller 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 Termination Date, Seller shall terminate all
Employees employed at the Leased Location as of such date. With respect to
terminated Employees, Seller 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 Seller termination shall occur
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<PAGE> 12
notwithstanding the fact that Buyer may employ some or all of such employees in
the future.
9.3 Labor Contracts. Seller represents and warrants to Buyer that it is
not a party to any organized labor contracts.
9.4 Pension Plans. Seller has no liability or obligation with respect
to pension plans.
9.5 Workmen's Compensation. Seller agrees 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 Seller to its
Employees, nor in any way adopts existing employee benefit programs currently
offered by Seller.
ARTICLE X
REALTY
10.1 Warranty of Title. Seller hereby warrants that it has good and
marketable leasehold interest in the Leased Location, except for covenants,
easements and restrictions of record and the lien for current taxes and
assessments.
10.2 Conveyance. At Closing, Seller shall assign the Lease to Buyer and
deliver to Buyer the lessor's consent to the assignment of the Lease as well as
a lessor's estoppel certificate in form, substance and content acceptable to
Buyer in its sole and absolute discretion.
ARTICLE XI
INDEMNITIES
11.1 Seller. Seller 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 Seller of any of its covenants, representations or warranties
hereunder or (ii) any liability of Seller, 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 Seller
(by counsel reasonably satisfactory to Seller) from and against any and all
loss, claim, damage, liability or
-7-
<PAGE> 13
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
liability of Buyer. 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 Seller.
ARTICLE XIII
CONDUCT OF OPERATIONS PRIOR TO CLOSING
13.1 Conduct of Operations. From the date hereof until Closing, Seller
shall conduct its operation of the Business in the ordinary course and
consistent with its prior practices. Seller agrees not to sell any asset of the
Business or any of the Purchased Assets during the period from execution of this
Agreement until Closing.
13.2 Requisite Government Approvals. The parties shall make all
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. Seller 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.
ARTICLE XIV
CLOSING
14.1 Closing. Closing shall occur at the offices of Streich Lang, P.A.
on June 21, 1996, or at such other time or place as the parties may agree upon
subject to the satisfaction of the Condition Precedent set forth in Article XVI
and XVII hereof.
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<PAGE> 14
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 Seller contained herein shall continue to be true and correct at
Closing in all material respects.
15.2 Performance of Obligations. Seller 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. Seller shall have tendered delivery
to Buyer of all the documents required to be delivered to Buyer by Seller at
Closing.
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.
15.6 Government Approvals. The parties 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 Location in form and substance acceptable to Buyer in
Buyer's sole discretion.
15.7 Board of Directors' Approval. Buyer shall have obtained approval
for this transaction by its Board of Directors.
15.8 Assignment of Lease. Seller shall have obtained (i) consent from
the lessor of the assignment of the Leased Location to Buyer with no changes in
the terms of the Lease and/or changes required by Buyer, and (ii) confirmation
from the lessor that the Lease is in full force and effect without any default
of Seller under the terms of the Lease in the form of a signed lessor's estoppel
certificate in form and substance acceptable to Buyer.
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<PAGE> 15
ARTICLE XVI
CONDITIONS PRECEDENT TO SELLER'S DUTY TO CLOSE
Seller 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 Seller of all the documents required to be delivered to Seller by Buyer at
Closing pursuant to this Agreement.
16.4 Litigation. No lawsuit, administrative proceedings or other legal
action shall be pending or threatened against Seller which seeks to restrain or
enjoin Seller's sale or Buyer's acquisition of the Purchased Assets or any
material part thereof.
ARTICLE XVII
ITEMS TO BE DELIVERED AT CLOSING BY SELLER
At Closing, Seller 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, and Trade Names and Trademarks to Buyer, in the form
attached as Exhibit "B" hereto.
17.2 Lease Assignment, Assumption and Consent Agreement and Estoppel
Certificate. Agreement duly executed by Seller under which Seller assigns and
Buyer assumes the Lease to be Assigned consented to by lessor, in the form
attached as Exhibit "C" hereto, and a lessor's estoppel certificate.
17.3 Certified Resolution. A copy of the resolution of the Board of
Directors of Seller authorizing the execution and performance of this Agreement
certified by the secretary of Seller.
17.4 Certificates of Good Standing. Certificates of good standing or
due qualification from the Secretary of State of Arizona dated within a
reasonable period before Closing.
-10-
<PAGE> 16
17.5 Representations and Warranties. A certificate signed by an officer
of Seller to the effect that all of the representations and warranties of Seller
contained herein are true and correct in all material respects as of Closing in
the form attached as Exhibit "D".
17.6 Consents. All consents, opinions of counsel and other third-party
agreements Seller is required to obtain with respect to the Lease to be Assigned
are completed and available to Buyer.
17.7 UCC Termination Statements. All Uniform Commercial Code
termination or release statements necessary to transfer the Purchased Assets
free and clear of all security interests, liens or encumbrances.
17.8 Customer List. A list of all of Seller's past and present
customers.
17.9 Certified Articles and Bylaws. A copy of the Articles of
Incorporation and Bylaws of Seller certified by the secretary or an assistant
secretary of Seller.
17.10 Covenant Not to Compete. A Covenant Not to Compete in the form
attached as Exhibit "E" hereto signed by Seller and Mr. Chris Hopkins.
ARTICLE XVIII
ITEMS TO BE DELIVERED AT CLOSING BY BUYER
At Closing, Buyer shall, unless waived by Seller, deliver the following
items to Seller:
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 "F".
18.3 Lease Assignment, Assumption and Consent Agreements. Copies of
each assignment, assumption and consent agreement required duly executed by
Buyer.
18.4 Purchase Price. The Purchase Price in immediately available funds
in the amount of the Purchase Price.
-11-
<PAGE> 17
18.5 Certificates of Good Standing. Certificates of good standing or
due qualification from the Secretary of State of Delaware dated within a
reasonable period before Closing.
ARTICLE XIX
MISCELLANEOUS
19.1 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.
19.2 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.
19.3 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.
19.4 Public Announcements. No public announcements of this Agreement
shall be made unless Buyer has agreed on the timing, distribution, and contents
of such announcements, except as may be required by law.
19.5 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 Seller: Children's Choice Learning Center, Inc.
814 East Union Hills Drive
Phoenix, Arizona 85024
To Buyer: Sunrise Preschools, Inc.
9128 East San Salvador, Suite 200
Scottsdale, Arizona 85258
-12-
<PAGE> 18
Copy To: R. Neil Irwin, Esq.
c/o Streich Lang, P.A.
Two North Central Avenue
Phoenix, Arizona 85004
19.6 Brokers. Each party represents and warrants to the other party
that it has not employed any finder, broker or agent in the negotiation of this
transaction and that no person is entitled to any finder's fee, broker's
commission or other similar form of remuneration by reason of or in connection
with the execution or performance of this Agreement.
19.7 Risk of Loss. The risk of loss, damage, condemnation or
destruction of the Purchased Assets shall be borne by Seller 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, Seller
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 Seller, either
terminate this Agreement without further liability or obligation to Seller 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 Seller, 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 Seller by reason of any
loss, damage or taking shall be for the account of Buyer and shall be included
in the Purchased Assets.
19.8 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.
19.9 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.
19.10 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.
19.11 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.
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<PAGE> 19
19.12 Time Is of the Essence. Time is of the essence in the performance
and observance of all obligations and duties under this Agreement.
19.13 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 this Agreement, the prevailing party
shall be entitled to reasonable attorneys' fees and costs of suit from the
non-prevailing party.
IN WITNESS WHEREOF, the parties hereto have set their hands effective
the date set forth above.
"SELLER"
CHILDREN'S CHOICE LEARNING CENTER,
INC.
By /s/ Christian Hopkins
------------------------------
Name Christian Hopkins
----------------------------
Title President
---------------------------
"BUYER"
SUNRISE PRESCHOOLS, INC.
By /s/ Buffy Owens
------------------------------
Name Buffy Owens
----------------------------
Title Exec. Vice President
---------------------------
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<PAGE> 20
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
This FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT, dated as of
June 28, 1996 (the "Amendment"), is by and between SUNRISE PRESCHOOLS, INC., a
Delaware corporation ("Sunrise"), and CHILDREN'S CHOICE LEARNING CENTER, INC.,
an Arizona corporation ("Children's Choice").
I. RECITALS:
1. The parties entered into that certain Asset Purchase
Agreement dated as of June 26, 1996 ("APA"), which provides for the purchase of
certain assets by Sunrise from Children's Choice and which transaction was
planned to close on June 21, 1996, or at such other time as the parties may
agree to (the "Closing"). The parties have agreed that the Closing shall occur
on June 28, 1996 under the terms and conditions of the APA.
2. The parties now wish to amend the APA on the terms and
conditions set forth herein.
Capitalized terms used in this Amendment, unless otherwise
defined herein, shall have the meaning set forth in the APA.
II. AGREEMENTS AND AMENDMENTS:
NOW THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Trade Names and Trademarks shall not be included in the
Purchased Assets.
2. The Purchase Price shall be reduced by the amount of rent
due for the month of June 1996, which shall be paid by Sunrise to the landlord
of the Leased Location simultaneously with the delivery by Children's Choice of
assignment and estoppel agreements executed by the landlord and Children's
Choice. Sunrise shall have no duty to pay any such rent until the fully executed
assignment and estoppel agreements are delivered to Sunrise.
3. The Purchase Price shall be reduced by the total amount of
all liens encumbering the two motor vehicles being acquired by Sunrise as a part
of the Purchased Assets. Children's Choice represents and warrants to Sunrise,
as part of and in no way limiting the representations and warranties of the APA,
that the liens disclosed by Children's Choice are the only liens or encumbrances
encumbering the motor vehicles.
1
<PAGE> 21
4. Sunrise agrees that it shall remove from public view on the
Leased Location all signs associated with Children's Choice within ten (10) days
from the Closing.
5. Sunrise agrees that it shall repaint the motor vehicles
acquired as a part of the purchased assets within thirty (30) days from the
Closing.
III. RATIFICATION:
Except as specifically set forth herein, the APA is unmodified
and is hereby ratified and confirmed and shall remain in full force and effect.
IV. COUNTERPARTS:
This Amendment 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. Telefax signatures shall be fully
binding upon the parties hereto and shall be deemed as if originals.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date and year hereinabove written.
CHILDREN'S CHOICE LEARNING CENTER,
INC., an Arizona corporation
By: /s/ Christian Hopkins
---------------------------------
Printed Name: Christian Hopkins
-----------------------
Its: President
--------------------------------
SUNRISE PRESCHOOLS, INC., a Delaware
corporation
By: /s/ Buffy Owens
---------------------------------
Printed Name: Buffy Owens
-----------------------
Its: Exec. Vice President
--------------------------------
2
<PAGE> 22
EXHIBIT A
CHILDREN'S CHOICE LEARNING CENTER INVENTORY LIST
OFFICE:
3 desks and chairs
5 filing cabinets
2 bookshelves
1 computer
2 monitors
1 printer
1 keyboard
1 storage cabinet
1 radio
1 fax machine
1 Video Cassette Player
1 Television
1989 Ford Van (VIN No. 1FBJS31H1KHC38873)
1990 Ford Van (VIN No. 1BJS31H5LHB60339)
HALLWAY CLOSET:
3 utility shelves
2 upright vacuum cleaners
KITCHEN:
Large steel serving (rolling) unit
INFANTS:
11 cribs
4 high chairs
1 rocking chair
1 refrigerator
1 radio
ONES:
1 table and chairs
3 cribs
play mats
3 carriers
<PAGE> 23
1 bouncer
1 radio
Multi child stroller
Boxes with toys in front office
FIVES:
3 cubby shelves
8 tables and chairs
3 bookshelves
housekeeping center
1 water table
SCHOOL AGE:
7 tables and chairs
2 cubby shelves
2 fussballs
10 video games
2 computers
1 printer
1 keyboard
2 bookshelves
1 radio
1 storage cubby
PLAYGROUND:
4 picnic tables (2 small and 2 large)
4 castles
2 swingsets
Riding toys
TWOS:
2 cubby shelves
2 bookshelves
5 tables and chairs
1 slide
1 castle
1 house
1 radio
<PAGE> 24
THREES:
3 cubby shelves
6 tables and chairs
1 house
2 bookshelves
housekeeping center
1 radio
FOURS:
2 cubby shelves
4 tables and chairs
2 bookshelves
housekeeping center
4 storage shelves
<PAGE> 25
EXHIBIT "B"(1)
BILL OF SALE
------------
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, CHILDREN'S CHOICE LEARNING CENTER, INC., an Arizona
corporation ("Seller"), does hereby transfer sell, set over and assign unto
SUNRISE PRESCHOOLS, INC., a Delaware corporation ("Buyer"), its successors and
assigns, all of the furniture, furnishings, equipment fixtures, inventory,
supplies and other items of personal property used in connection with the
preschool business conducted by the Seller at the location in the greater
Phoenix, Arizona area located at 814 East Union Hills Drive, Phoenix, Arizona
85024. The furniture, furnishings, equipment, fixtures, inventory, supplies and
other items of personal property include without limitation, those items of
personal property identified on Exhibit "A" to the Asset Purchase Agreement and
attached hereto as Exhibit "A" and incorporated herein by this reference.
Seller hereby represents and warrants to Buyer that Seller has title to and
holds the entire interest in the Personal Property and that the Personal
Property is hereby transferred free and clear of all liens and encumbrances.
Seller makes no other representation or warranty as to the condition of the
Purchased Assets and Buyer takes the Purchased Assets "as-is."
DATED as of the 27th day of June, 1996
SELLER
CHILDREN'S CHOICE LEARNING CENTER,
INC., an Arizona Corporation
By: /s/ Christian S. Hopkins
--------------------------------
Printed Name: Christian S. Hopkins
----------------------
Its: President
-------------------------------
<PAGE> 26
EXHIBIT C
ASSIGNMENT OF LEASE AGREEMENT
This Assignment of Lease Agreement (this "Agreement") is made and
entered into this 1st day of July, 1996, by and between Children's Choice
Learning Center, Inc., as "Assignors", and Sunrise Preschool, Inc., as
"Assignees".
R E C I T A L S :
WHEREAS, on the 3rd day of April, 1996, Assignors executed that certain
Lease (the "Lease") with Resurgence Properties Inc., as "Landlord", for
Suites C12, C14 and C16 at ABCO Plaza, 814 East Union Hills Drive, Phoenix,
Arizona (the "Premises").
WHEREAS, the Commencement Date of the Lease is July 1, 1996.
WHEREAS, the Lease term is for ten (10) years beginning on July 1,
1996, and expiring on June 30, 2006.
WHEREAS, Assignors now desire to assign the Lease to Assignees and
Assignees desire to accept the assignment thereof, all in accordance with the
terms and provisions hereinafter set forth.
NOW, THEREFORE, in consideration of the payment of the sum hereinafter
set forth and other good and valuable considerations, the receipt and adequacy
of which are hereby acknowledged by the parties, Assignors and Assignees hereby
agree as follows:
1. Assignors hereby warrant and represent to Assignees that: (a) the
Lease is in full force and effect; (b) the Lease has not been modified, changed,
altered, amended and/or assigned; (c) Assignors are not in default under the
Lease; (d) Assignors have full and lawful right and authority to assign the
Lease; and (e) Assignors have no knowledge of any defaults or breaches by the
Landlord or of any defense or offsets in favor of the Landlord to the
enforcement of the Lease.
2. By execution hereof, Assignees hereby assume the Lease and all
existing obligations thereunder as of the date hereinabove first set forth, and
agree to perform and observe all of the terms and provisions therein contained
on Assignors' part to be performed and observed including the prompt payment of
all rental payments for the full term of the Lease. Assignees further agree to
be fully and directly liable to Landlord for the faithful performance of all of
the terms and provisions under the Lease.
3. As an inducement to Landlord for entering into that certain
Consent by Landlord to Assignment executed contemporaneously with this
Agreement, Assignors hereby release Landlord from
<PAGE> 27
any and all liability, causes of action, claims, damages or loss arising from
or connected with the Lease, this Agreement, the Premises and the ABCO Plaza
Shopping Center.
4. Assignors acknowledge and agree that Landlord is not holding any
funds on behalf of Assignors except a security deposit in the amount of Four
Thousand Fifty and No/100 Dollars ($4,050.00) which Landlord shall continue to
hold in accordance with the terms of the Lease. Assignees hereby agree to pay
said sum to Assignors upon execution of this Agreement. Thereafter, Assignors
will no longer have any right, title or interest in and to said security
deposit and hereby assign its rights therein to Assignees.
5. Assignors warrant and represent that this Agreement does not in any
manner relieve Assignors of any liability under the Lease and Assignors hereby
agree to continue to be bound by the terms and provisions of the Lease.
6. It is expressly agreed by the parties hereto that the Landlord may
enforce any of the terms and provisions of the Lease against Assignors or
Assignees, jointly or severally, or against either of said parties without any
nature of notice to, demand upon, preceding against or judgment against the
other party, except for any notice required by the Lease.
7. Assignors and Assignees agree that Landlord is a third-party
beneficiary to this Agreement.
8. It is hereby agreed that nothing in this Agreement shall be deemed
to waive or modify any of the terms and provisions of the Lease.
9. This Agreement shall be binding on and inure to the benefit of the
parties hereto, their successors and assigns; provided, however, the parties
understand and agree that no assignment of the Lease is effective unless and
until the prior written consent of the Landlord is obtained.
10. This Agreement contains all of the agreements of the parties hereto
with respect to the matters contained herein, and no prior agreement,
arrangement or understanding pertaining to any such matter shall be effective
for any purpose.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the day and year first hereinabove set forth.
2
<PAGE> 28
ASSIGNORS:
CHILDREN'S CHOICE LEARNING CENTER,
INC.
By: /s/ Christian Hopkins
---------------------------------
Printed Name: Christian Hopkins
-----------------------
Its: President
--------------------------------
ASSIGNEES
SUNRISE PRESCHOOL, INC.
By: /s/ Buffy Owens
---------------------------------
Printed Name: Buffy Owens
-----------------------
Its: Exec. Vice President
--------------------------------
<PAGE> 29
CONSENT BY LANDLORD TO ASSIGNMENT
Resurgence Properties Inc. is the Landlord of those certain "Premises", as
defined in that certain Lease executed April 3, 1996, to be effective July 1,
1996 (the "Lease"), made and entered into by and between Landlord and
Children's Choice Learning Center Inc. The Lease contains a restriction against
assignment or subletting by the Tenant, as Tenant without Landlord's prior
written consent thereto. Landlord does hereby consent (this "Consent"), subject
to the following conditions, to the proposed assignment of Assignor's right,
title and interest in the Lease of the Premises by Assignors to Sunrise
Preschools, Inc. ("Assignees"), pursuant to the Assignment of Lease Agreement
dated the 1st day of July, 1996 ("Assignment").
1. Landlord's consent herein expressly conditioned upon the payment of Minimum
Rent and Additional Charges (as defined in the Lease), and the performance
and observance of the terms, covenants, conditions and agreements in the
Lease, and this Consent shall in no way affect or release Assignors from
their liabilities under the terms of the Lease. Assignors hereby acknowledge
that, notwithstanding the terms of the Assignment, it shall remain liable
and responsible for and shall perform and comply with all obligations and
liabilities of the "Tenant" under the Lease.
2. This Consent is given without prejudice to Landlord's right under the Lease,
this Consent being expressly limited to the Assignment to Assignees, and
shall not be deemed to be the consent to or authorization for any further or
other assignment or subletting or sharing of possession of all or any part
of the Premises.
3. Landlord joins in this Consent solely to grant its consent and, by doing so,
Landlord does not thereby make any representations or warranties, or
acknowledge or approve of any of the terms of the Assignment as between
Assignors and Assignees. Further, nothing contained in the Assignment or
this Consent shall be construed as modifying, waiving or affecting any of
the provisions, covenants and conditions or any of Landlord's rights or
remedies under the Lease other than specifically set forth herein.
4. In consideration of Landlord's consent to the Assignments, Assignees hereby
acknowledge and agree that it assumes and agrees to observe, comply with and
perform all terms, condition and covenants in the Lease and to perform all
obligations of any kind whatsoever as and when the same are due to be
performed by Tenant therein pursuant to the terms and provisions of the
Lease and to be subject to all of the Landlord's rights thereunder, as
though Assignees were the name tenant thereunder, during the entire Term of
the Lease, and all extensions, renewals, modification or amendments thereof.
Assignees hereby further expressly acknowledge and agree to be subject to
the prohibition against subletting, assigning, mortgaging or encumbering or
permitting the occupation or use of all or part of the Premises by others
without the prior written consent of Landlord, upon the terms and condition
as are set forth in the Lease.
<PAGE> 30
5. Assignors and Assignees represent and warrant that they have not
dealt with a broker, agent or other person in connection with the Assignment
other than Southwest Retail Group ("BROKERS"), and they agree to indemnify and
hold Landlord harmless from and against any claims or causes of action for a
commission or other form of compensation arising from the assignment of the
Lease, whether advanced by Broker(s) or any other person or entity. The
provisions of this Paragraph shall survive the termination of the Lease and any
renewal thereof.
IN WITNESS WHEREOF, the undersigned have executed this agreement on this 28th
day of June, 1996.
LANDLORD: Resurgence Properties Inc.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
ASSIGNORS: Children's Choice Learning Center, Inc.
By: /s/ Chris Hopkins
---------------------------------
Printed Name: Chris Hopkins
-----------------------
Its: President
--------------------------------
ASSIGNEES: Sunrise Preschools, Inc.
By: /s/ Buffy Owens
---------------------------------
Printed Name: Buffy Owens
-----------------------
Its: Exec. Vice President
--------------------------------
<PAGE> 31
EXHIBIT "D"
CERTIFICATE
This Certificate is given pursuant to that certain Asset Purchase
Agreement dated June 26, 1996 by and between CHILDREN'S CHOICE LEARNING CENTER,
INC., an Arizona corporation ("Seller"), and SUNRISE PRESCHOOLS, INC., a
Delaware corporation ("Buyer").
The representations and warranties made by Seller 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 28th day of June, 1996.
SELLER
CHILDREN'S CHOICE LEARNING CENTER,
INC., an Arizona corporation
By: /s/ Christian Hopkins
---------------------------------
Printed Name: Christian Hopkins
-----------------------
Its: President
--------------------------------
<PAGE> 32
EXHIBIT "E"
AGREEMENT NOT TO COMPETE
This Agreement ("Agreement"), effective as of June 28, 1966,
is entered into between SUNRISE PRESCHOOLS, INC., a Delaware corporation
("Buyer"), CHILDREN'S CHOICE LEARNING CENTER, INC., an Arizona corporation, and
CHRISTIAN HOPKINS (collectively "Selling Parties").
Whereas, Buyer has or will purchase the assets of the Business
conducted by the Selling Parties located at 814 East Union Hills Drive,
Phoenix, Arizona 85024 (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
June 26, 1966, by and among Buyer and Children's Choice Learning Center, Inc.
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
Maricopa County, Arizona.
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
"Children's Choice Learning Center, Inc." to any person engaged in any
business, trade, or occupation similar to the Business in the Buyer's Protected
Territory.
b. 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, solicit, implore or request any Employee
of Buyer to leave employment with Buyer to accept
<PAGE> 33
employment with Selling Parties and Selling Parties agree not employ any
Employee if the Employee seeks employment with Selling Parties of his or her
own volition.
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, directly or indirectly, solicit, implore or request any client of
Selling Parties' at the Location 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 Buyer
from any breach of this Agreement 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 Buyer 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 Buyer 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 and duration and geographic
scope of Buyer's Protected Territory contained in this Agreement are
reasonable. Further, the restrictions and duration and scope of Buyer's
Protected Territory 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 costs and
attorneys fees incurred in prosecuting such action in such amount adjudged
reasonable by the court.
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.
2
<PAGE> 34
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/ Buffy Owens
---------------------------------
Its: Exec. Vice President
--------------------------------
SELLING PARTIES
CHILDREN'S CHOICE LEARNING CENTER, INC.,
an Arizona corporation,
By: /s/ Christian Hopkins
---------------------------------
Printed Name: Christian Hopkins
-----------------------
Its: President
--------------------------------
CHRISTIAN HOPKINS
3
<PAGE> 35
EXHIBIT "F"
CERTIFICATE
-----------
This Certificate is given pursuant to that certain Asset Purchase
Agreement dated June 26, 1996 by and between CHILDREN'S CHOICE LEARNING CENTER,
INC., an Arizona corporation ("Seller"), 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 28th day of June, 1996.
BUYER
SUNRISE PRESCHOOLS, INC., a Delaware
corporation
By: /s/ Buffy Owens
---------------------------------
Printed Name: Buffy Owens
-----------------------
Its: Exec. Vice President
--------------------------------
