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):
July 3, 1996
CHILDROBICS, INC.
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(Exact Name of Registrant as Specified in its Charter)
New York 0-25110 11-3163443
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) No.)
200 Smith Street
Farmingdale, New York 11735
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(Address of principal executive offices)
Registrant's Telephone Number, including
area code: (516) 694-0999
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(Former Address, if changed since last report)
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Item 5. Other Events.
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Employment Termination and Option Termination Agreement.
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On July 3, 1996, Childrobics, Inc. (the "Company") entered
into an Employment Termination and Option Termination Agreement (the
"Termination Agreement") with Salvatore Casaccio, the Company's Chairman, Chief
Executive Officer and a Director of the Company; A. Joseph Melnick, the
Company's President, Chief Operating Officer, Chief Financial Officer and a
Director of the Company; and Richard Bartlett, the Company's Executive Vice
President and a Director of the Company (collectively, the "Officers"). Pursuant
to the terms of the Termination Agreement, the Officers have agreed to terminate
their employment agreements with the Company, to resign as officers and
Directors of the Company and to relinquish certain options previously granted to
them by the Company, in exchange for which each of the Officers will receive
$200,000 (plus reimbursement for certain expenses not to exceed $17,000 in the
aggregate, and in the case of Mr. Bartlett, the repayment of loans previously
made by Mr. Bartlett to the Company in the amount of $77,620) and each of the
Officers will be granted options to purchase 300,000 shares of the Company's
Common Stock at an exercise price of $.01 per share. Of the payments to be made
to the Officers pursuant to the Termination Agreement, $50,000 shall be payable
to each of the Officers at the closing of the Termination Agreement (plus the
expense reimbursement and loan repayment referenced above) and the remainder of
such obligations with respect to the payments to be made to the Officers will be
evidenced by notes to be issued by the Company in favor of each of the Officers,
which will be due one year from the closing of the Termination Agreement
(subject to certain mandatory prepayments) and will be secured by the assets of
Group Coin Associates, Inc., a subsidiary of the Company. The Company has also
agreed to use its best efforts to register the sale of the shares issuable upon
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exercise of such options, subject to certain restrictions on the sale of such
shares by the Officers. In addition, pursuant to the terms of the Termination
Agreement, at the closing, the Company will transfer to Mr. Casaccio, all of the
outstanding shares of stock of Bayridge Playrobics, Inc., Third Avenue
Playrobics, Inc., and East Side Playrobics, Inc., the Company's subsidiaries
which operate the Company's playcenters in Bayside, Brooklyn and Manhattan, New
York, respectively, and will also transfer to Mr. Casaccio all of the assets of
the Company which are used in the operation of the Company's playcenter located
at Avenue U in Brooklyn, New York. At the closing, the Company will also
transfer to Messrs. Casaccio and Bartlett, the Company's stock in Fun Station
USA of Staten Island, Inc., the Company's subsidiary which operates the
Company's playcenter in Staten Island, New York.
The closing of the Termination Agreement is subject to the fulfillment
of certain conditions, and there can be no assurance that the conditions will be
satisfied and that the closing of the Termination Agreement will occur.
The foregoing summary of the Termination Agreement is incomplete and is
qualified in its entirety by reference to the copy of the agreement filed as
Exhibit 1 annexed hereto.
Appointment of Two New Directors
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At a special meeting of the Board of Directors (the "Board")
held on July 3, 1996, the Company increased the number of members of the Board
from three to five members and appointed Conrad J. Gunther, Jr. and Douglas B.
Fox to serve as members of the Board.
Prior to the closing of the Termination Agreement, the Officers have
agreed to refrain from taking certain actions without the unanimous written
consent of the Board, including Messrs. Gunther and Fox.
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In addition, as compensation for agreeing to serve as members of the
Board, the Company has agreed to elect each of Messrs. Gunther and Fox on the
following terms:
(a) Each of Messrs. Gunther and Fox will receive an annual retainer of
$18,000 per year, payable semiannually in equal installments, with the first
such payment being due within 30 days from their appointment to the Board and
the next payment six months thereafter (Thereafter payable on January 1 and July
1 each year);
(b) Each of Messrs. Gunther and Fox will receive $1,000 for each formal
meeting of the Board and $500 for each meeting of the Compensation Committee,
all payable on the day of such meeting;
(c) Each of Messrs. Gunther and Fox were retained as consultants to the
Company for a 60-day period commencing on the date of their appointment to the
Board for a fee of $20,000 each, in order to assist the Company in certain
proposed transactions, including the evaluation and negotiation of the proposed
acquisition of Just Kiddie Rides, Inc.;
(d) Each of Messrs. Gunther and Fox were granted options, subject to
shareholder approval, to purchase 100,000 shares of common stock of the Company,
exercisable at $.10 per share, such options to vest in three installments,
50,000 of which shall vest on the date of election to the Board and the next two
installments of 25,000 options to vest on the next two anniversaries thereof,
provided, however all such options shall immediately vest under certain
circumstances (The shares issuable upon exercise of such options are also
subject to restriction on sale without the consent of the Company for a period
of two years); and
(h) The Company agreed to grant to each of Messrs. Gunther and Fox, at
a later date, subject to shareholder approval, options to purchase an additional
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100,000 shares of common stock of the Company, exercisable at $.10 per share,
such options to vest in three installments, 50,000 of which shall vest on the
date of grant of such options and the next two installments of 25,000 options to
vest on the next two anniversaries thereof, provided, however all such options
shall immediately vest under certain circumstances (The shares issuable upon
exercise of such options are also subject to restriction on sale without the
consent of the Company for a period of two years).
Mr. Gunther has been a business development manager and financial
advisor with the Allied Group, a privately-owned insurance brokerage firm, since
1995. He also served as Chief Operating Officer and Executive Vice President of
North Fork Bancorporation, a publicly-traded company, from 1989 to 1995.
Since 1994, Mr. Fox has been employed with Landmark Communications,
Inc. ("Landmark"), a multi-divisional media company and served as Chief
Operating Officer-President of Publishing and Video Games of Landmark from June
1994 to November 1995. Mr. Fox joined Times Mirror, Inc., a newspaper group, in
1987 and served as Corporate Vice President-Marketing from October 1987 to May
1994 and as President and Chief Operating Officer of New York Newsday from
September 1990 to October 1992.
Acquisition of Just Kiddie, Inc.
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On July 3, 1996, the Company entered into a revised letter of
intent with Just Kiddie Rides, Inc. ("Just Kiddie"), pursuant to which the
Company will acquire all or substantially all (either by merger, asset
acquisition or stock purchase) of Just Kiddie (the "Acquisition").
The letter of intent contemplates that the purchase price will consist
of $1,000,000 and 3,273,750 shares of the Company's Common Stock, of which
250,000 shares of Common Stock will entitle the holders thereof to certain
registration rights in connection with registration statements filed by the
Company. In
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addition, the letter of intent contemplates that Gerard A. Reda, the President
of Just Kiddie will enter into an employment agreement with the Company,
pursuant to which Mr. Reda will become President and Chief Executive Officer of
the Company, will receive initial annual compensation of $250,000 per year, will
become a member of the Company's Board of Directors and will be granted options
to purchase 200,000 shares of the Company's Common Stock, subject to the
Company's achieving certain net income levels for the two fiscal years following
Mr. Reda's employment with the Company. The obligations with respect to the
payments to be made to Just Kiddie pursuant to the Acquisition will be evidenced
by notes to be issued by the Company in favor of Just Kiddie, which will be due
one year from the closing of the Acquisition (subject to certain proposed
mandatory prepayments) and will be secured by a pledge of stock of the
subsidiary of the Company holding the assets of Just Kiddie following the
Acquisition.
Just Kiddie has agreed, for a period of 60 days commencing on
the date of the letter of intent relating to the Acquisition, to deal
exclusively with the Company in connection with the sale of capital stock or
assets of Just Kiddie, any financing transaction for Just Kiddie, subject to
certain exceptions, or the merger or joint venture of Just Kiddie with any other
entity (all such transactions being referred to herein as an "Acquisition
Transaction"), and that Just Kiddie shall not solicit, initiate or encourage any
offer, proposal or inquiry from, or engage in negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
with respect to any Acquisition Transaction nor shall Just Kiddie accept any
proposal with respect to an Acquisition Transaction.
The letter of intent is not (except for certain provisions,
including the exclusive negotiation provision described above) a binding
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agreement and is subject to a number of conditions to closing, including due
diligence by both of the parties which is ongoing, and there can be no assurance
that the Company will consummate the Acquisition on the terms set forth in the
letter of intent or at all.
The foregoing summary of the letter of intent with respect to
the Acquisition is incomplete and is qualified in its entirety by reference to
the copy of the letter of intent filed as Exhibit 2 annexed hereto.
Item 7. Financial Statements and Exhibits.
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(c) Exhibits
1. Employment Termination and Option
Termination Agreement, dated July 3, 1996, among Salvatore Casaccio, A. Joseph
Melnick, Richard Bartlett and Childrobics, Inc.
2. Letter of Intent, dated July 3, 1996,
among Just Kiddie Rides, Inc. and Childrobics, Inc.
3. Press Release issued by the Company on
July 10, 1996.
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
July 10, 1996
CHILDROBICS, INC.
By: /s/ Salvatore Casaccio
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Salvatore Casaccio
Chairman and Chief Executive Officer
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EMPLOYMENT TERMINATION AND OPTION TERMINATION AGREEMENT
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AGREEMENT made this 3rd day of July, 1996, among Salvatore Casaccio
("Casaccio"), an individual with an address at 64 Burton Avenue, Staten Island,
New York, 10309, A. Joseph Melnick ("Melnick"), an individual with an address at
85 Collyer Avenue, Staten Island, New York, 10312, Richard Bartlett
("Bartlett"), an individual with an address at 2 Sunnyfield Road, Hicksville,
New York, 11801, (Casaccio, Melnick and Bartlett being collectively referred to
as the "Officers"), and Childrobics, Inc., a New York corporation with its
principal office at 200 Smith Street, Farmingdale, New York 11735 (the
"Corporation").
W I T N E S S E T H :
WHEREAS, Casaccio is the Chairman, Chief Executive Officer and a
Director of the Corporation, Melnick is the President, Chief Operating Officer,
Chief Financial Officer and a Director of the Corporation, and Bartlett is the
Executive Vice President and a Director of the Corporation; and
WHEREAS, each of the Officers desires to resign from all offices and
directorships of the Corporation and its subsidiaries, and the Corporation
desires to terminate the employment agreements (the "Employment Agreements")
between each of the Officers and the Corporation on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the respective
promises, representations, warranties and covenants herein contained, the
parties hereto do hereby agree as follows:
1. Employment Agreement and Option Termination. Subject to the terms
and conditions of this Agreement, on the Closing Date (as hereinafter defined),
(a) the respective employment agreements between each of the Officers and the
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Corporation (including, without limitation, the Employment Agreements between
each of Casaccio and Melnick and the Corporation, each dated as of March 31,
1994, as amended on July 11, 1995, and the Employment Agreement between Bartlett
and the Corporation dated July 11, 1995, all of which Employment Agreements were
to expire on July 2000) and any other agreements written or oral, concerning
their employment or compensation or rights or duties as to the Corporation or
any subsidiaries of the Corporation (except as provided in this Agreement) shall
be terminated without further action by any of the parties hereto and without
any further rights or obligations on the part of any of the parties hereto and
shall be void and of no further force or effect, (b) each of the Officers shall
resign as officers and directors of the Corporation and each of its subsidiaries
and shall execute resignations in the forms attached as Exhibit A hereto, (c)
the options (i) granted to each of Casaccio and Melnick on July 11, 1995 to
purchase 375,000 shares of the Corporation's common stock at an exercise price
of $.01 per share, and (ii) the options granted to each of the Officers on July
11, 1995 to purchase 50,000 shares of the Corporation's Common Stock at an
exercise price of $.6875 per share (collectively, (i) and (ii) being referred to
as the "Options") shall terminate and each of such Officer's rights and claims
in such Options and pursuant to the option agreements executed in connection
therewith shall terminate in all respects without any further action on the part
of any of the parties hereto and shall be void and of no further force and
effect, and (d) all rights to any accrued and unpaid compensation from the
Corporation to each of the Officers through the Closing Date (as hereinafter
defined) shall be waived (provided the Corporation has paid their respective
current salaries through the end of the Corporation's last regular payroll
period prior to the Closing Date).
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2. Termination Payments and Transfer of Certain Subsidiaries.
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(a) Each of the Officers will receive from the Corporation,
(i) $200,000, plus an amount equal to all documented expenses, the aggregate of
such expenses not to exceed $17,000, which are due to the Officers from the
Corporation resulting from their performance of their duties as officers of the
Corporation through the Closing Date and an amount equal to all documented and
verified loans made to the Corporation or its subsidiaries by the Officers which
remain unpaid as of the Closing Date, the aggregate amount of such loans
totalling $77,620 payable to Bartlett, all of which remains unpaid, $50,000,
plus the amount of documented expenses and in the case of Bartlett, the amount
of documented and verified loans payable to Bartlett, of which shall be payable
upon the closing of the Private Placement (as hereinafter defined), which, at
the option of the Officers, may be utilized to purchase securities offered in
the Private Placement, on the same terms as the other purchasers in such Private
Placement, and the remainder of which shall be payable in the form of notes
attached as Exhibit B hereto (the "Notes"), to be executed by the Corporation in
favor of each of the Officers at the Closing, which Notes shall be due one year
after the Closing (as hereinafter defined), provided that the Corporation shall
be required to prepay the Notes under certain circumstances, and shall be
secured by a security interest in the assets of Group Coin Associates, Inc., a
subsidiary of the Corporation, pursuant to a Security Agreement and a Guaranty
of Promissory Note to be executed by Group Coin Associates, Inc. in favor of
each of the Officers, each in the form of Exhibit C hereto, and (ii) ten-year
options (the "New Options") in the form of Exhibit D hereto to purchase 300,000
shares of common stock of the Corporation at an exercise price of $.01 per
share, which New Options shall be immediately exercisable. The Corporation
hereby agrees that each of the Officers shall have registration rights with
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respect to the shares of Common Stock issuable upon exercise of the New Options
(regardless of whether the New Options shall have been exercised) identical to
the registration rights the Corporation shall provide to investors in the
Private Placement, in exchange for which the Officers hereby agree not to sell
greater than one-third of such 300,000 shares issuable upon exercise of the
options until six months following the effectiveness of the registration
statement to be filed in connection with the Private Placement (the "Effective
Date"), an additional one-third of such 300,000 shares until nine months
following the Effective Date, and the remaining one-third of such 300,000 shares
until one year following the Effective Date, without the consent of the
Corporation. Notwithstanding the foregoing, in the event that the Corporation,
shall permit (whether by absence of a similar restriction or by giving its
consent to lift, either partially or entirely a similar restriction) other
directors of the Corporation, Farmstead Development LLC or its affiliates or
Just Kiddie Rides, Inc., or its affiliates to sell shares of Common Stock owned
by them, then the Corporation shall give its consent to the sale of a pro rata
amount of shares by the Officers.
(b) At the Closing, the Corporation will transfer to Casaccio
all of the outstanding stock of Baybridge Playrobics, Inc. (Bayside, Queens),
Third Avenue Playrobics, Inc. (Third Avenue, Brooklyn) and East Side Playrobics,
Inc. (First Avenue, Manhattan), subsidiaries of the Corporation which operate
the Corporation's playcenters located in Bayside, Brooklyn and Manhattan, New
York, by execution and delivery of a stock power transferring such stock
together with the stock certificates representing such stock, as well as all
minute books, stock record books, seals, accounts, records, formulas, documents
and papers of, belonging to, or maintained on behalf of such subsidiaries but
not including the stock of any other subsidiary of the Corporation (the
"Non-Transferred
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Subsidiaries"), and the Corporation and each of the Non-Transferred Subsidiaries
shall forgive any liabilities of such subsidiaries to the Corporation or any of
Non-Transferred Subsidiary. In addition, at the Closing, the Corporation will
transfer to Casaccio, or a corporation of which Casaccio is the sole
shareholder, all of the assets of the Corporation which are used solely in
connection with the operations of the Corporation attributable to the
Corporation's playcenter located at Avenue U in Brooklyn, New York (the "Avenue
U Playcenter"), in exchange for which Casaccio or such corporation, shall agree
to assume all of the liabilities attributable to the operations at such location
(which shall be evidenced by an assumption agreement to be executed by Casaccio,
or such corporation, at the Closing). The Corporation covenants and agrees that
it will use its best efforts (which shall not be deemed to require the
Corporation to make any additional payments) to obtain each consent or approval
to be given by any third party in connection with the transfer of assets of such
location including the consent to the assignment of the lease in connection with
such location. If any such consent is not obtained, or if an attempted
assignment thereof would be ineffective, the Corporation and Casaccio will
cooperate in a mutually agreeable arrangement under which Casaccio would obtain
the benefits of such agreement and assume the obligations thereunder in
accordance with this Section. The obligations of Casaccio, or such corporation,
to assume the liabilities in connection with the operations of such location
shall be secured by the personal guaranty (the "Guaranty") of Casaccio (to be
executed by Casaccio at the Closing) pursuant to which Casaccio shall agree to
personally guaranty the obligations under the lease with respect to the Avenue U
Playcenter (the "Lease") for the longer of (i) 90 days following the date upon
which a notice of termination pursuant to Section 71 of the Lease is delivered
to the landlord under the Lease by either the Corporation, Casaccio, or the
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corporation holding such assets or (ii) until Casaccio and the corporation
holding such assets surrenders possession of the Avenue U Playcenter pursuant to
Section 71 of the Lease. The Corporation agrees, if requested by Casaccio or the
corporation holding such assets, to deliver a notice of termination to the
landlord under the Lease pursuant to Section 71 of the Lease. Casaccio agrees
and shall cause the corporation holding such assets to agree to deliver (or in
the event that the Corporation remains liable under the Lease following the
Closing and Casaccio or the corporation holding such assets shall default in its
obligations under the Lease or the Guaranty, to allow the Corporation to
deliver) a notice of termination to the Landlord pursuant to Section 71 of the
Lease and to surrender possession of the Avenue U Playcenter within 90 days
following delivery of such notice. Casaccio shall deliver monthly evidence to
the Corporation of payments made pursuant to the Lease following the Closing.
(c) At the Closing, the Corporation will transfer to each of
Casaccio and Bartlett, with each of Casaccio and Bartlett receiving 50% of such
stock, all of the outstanding stock of Fun Station USA of Staten Island, Inc., a
subsidiary of the Corporation which operates the playcenter located in Staten
Island, New York by execution and delivery of stock powers transferring such
stock but not including the stock of the Non-Transferred Subsidiaries and the
Corporation and each of the Non-Transferred Subsidiaries shall forgive any
liabilities of such subsidiary to the Corporation or any Non-Transferred
Subsidiary.
(d) At the Closing, the Corporation shall pay Casaccio $10,000
as reimbursement for 50% of the buy-out provision of his car lease (plus an
amount equal to any accrued but unpaid payments under such lease) in exchange
for which Casaccio shall indemnify the Corporation against any liability arising
out of such car lease. The Corporation shall also have a right of set-off under
the
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Note payable to Casaccio against any liabilities arising out of such car lease
following the Closing, and in the event that the Corporation remains the lessee
under such car lease, the Corporation shall, in lieu of any payments on the
Notes due to Casaccio, retain, in escrow, the amount of any remaining buy-out
payments under the car lease until the expiration of the car lease or the
removal of the Corporation as the lessee.
3. Closing; Closing Date. The consummation of the transactions provided
for herein (the "Closing") shall take place on the date simultaneous with the
closing of the proposed private placement of securities of the Corporation
resulting in gross proceeds of at least $1,000,000 to the Corporation (the
"Private Placement"), or on such other date as the parties may mutually agree
(the "Closing Date"), at the offices of Squadron, Ellenoff, Plesent & Sheinfeld,
LLP, 551 Fifth Avenue, New York, New York 10176.
4. Representations and Warranties of the Officers. Each of the
Officers, severally and not jointly, represents and warrants to the Corporation
solely with respect to himself as follows:
4.1 Options. Each of the Officers, as the case may be, is the
record and beneficial owner of the Options, none of which have been exercised.
Other than the New Options, the Options represent the only options, warrants or
other rights of each of the Officers to purchase or otherwise acquire any shares
of stock of the Corporation or any of its subsidiaries and there are no existing
agreements, subscriptions, options, warrants, calls, commitments, trusts (voting
or otherwise), or rights of any kind whatsoever granting to any of the Officers
any interest in or the right to purchase or otherwise acquire any shares of
stock of the Corporation or any of its subsidiaries at any time, or upon the
happening of any stated event other than (i) voting proxies held by Casaccio
with respect to 65,000 shares of Common Stock issued to FZL, Inc. and voting
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proxies held by Melnick and Casaccio with respect to 1,000,000 shares issued to
investors in connection with the Corporation's March 1996 private placement, and
(ii) additional shares of Common Stock that may be issued, directly or
indirectly, to Bartlett as a stockholder or former stockholder of Medford
Amusement Corp., FZL, Inc. and Tunnels & Tubes For Fun, Inc. pursuant to
contractual arrangements made by the Company to such entities when it acquired
the assets of such Companies.
4.2 Employment and/or Compensation Agreements. Other than the
Employment Agreements, no other employment, compensation or other similar
agreements exist between the Corporation and each of the Officers.
4.3 Power and Capacity. Each of the Officers has all requisite
legal capacity to enter into, deliver and perform this Agreement and the
transactions contemplated hereby. Each of this Agreement and the other
instruments and agreements to be executed and delivered by such Officers
hereunder is a valid and binding obligation of each of the Officers, enforceable
against each of the Officers in accordance with its terms.
4.4 Freedom to Contract. The execution and delivery of this
Agreement by each of the Officers does not, and the performance by each of the
Officers of their respective obligations hereunder will not, (a) violate any of
the terms, conditions or provisions of any order, writ, injunction, judgment or
decree of any court, governmental authority, or regulatory agency, or (b) result
in a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, indenture, debenture, security agreement, trust agreement,
lien, mortgage, lease agreement, license, franchise, permit, guaranty, joint
venture agreement, or other agreement, instrument or obligation, oral or
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written, to which such Officer is a party (whether as an original party or as an
assignee or successor) or by which each such Officer or any of their respective
properties or assets are bound. No governmental authorization, approval, order,
license, permit, franchise or consent, and no registration, declaration or
filing with any court, governmental department, commission, authority, board,
bureau, agency or other instrumentality, is required to be obtained by such
Officer in connection with the execution, delivery and performance of this
Agreement by each of the Officers and the consummation of the transactions
contemplated hereby.
4.5 Litigation.
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(a) None of the Officers is a party to any suit,
action, arbitration or legal, administrative, governmental or other proceeding
or investigation pending or, to the best knowledge of each of the Officers,
threatened, which might adversely affect or restrict their respective right,
title or interest to any of the Options, the right to relinquish any of the
Options, or the ability of each of the Officers to consummate the transactions
contemplated by this Agreement or to perform their respective obligations
hereunder.
(b) There is no judgment, order, injunction or decree
of any court, governmental authority or regulatory agency to which any of the
Officers is subject which might adversely affect their respective right, title
or interest to any of the Options, the right to transfer any of the Options, or
restrict the ability of each of the Officers to consummate the transactions
contemplated by this Agreement or to perform their respective obligations
hereunder.
4.6 Title to Property. Except as set forth in this Agreement,
none of the Officers has any rights in or to any property or equipment located
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at the premises of the Corporation and used by the Corporation in the operation
of its business or any rights to the name "Childrobics" or any other corporate,
trade or business name used by the Corporation or any of the Non-Transferred
Subsidiaries or any right to any agreements or licenses of the Corporation or
any of the Non-Transferred Subsidiaries, but Casaccio and Bartlett shall have
the right to use the corporate and D/B/A names of the stores and/or subsidiaries
transferred to them pursuant to Sections 2(b) and (c).
4.7 Possession of Documents. None of the Officers has in his
possession or control any property or document or any copy or facsimile thereof,
belonging to or maintained on behalf of the Corporation or any Non-Transferred
Subsidiary other than such property or document or any copy or facsimile thereof
which each Officer shall deliver pursuant to Section 6.5.
4.8 Certain Representations of the Corporation. None of the
Officers has actual knowledge of any facts which would cause him to believe that
the representations and warranties made by the Corporation in Section 5 are not
correct in all respects.
5. Representations and Warranties of the Corporation.
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The Corporation represents and warrants to each of the
Officers as follows:
5.1 Power and Capacity. The Corporation has all requisite
corporate power and authority to enter into, deliver, perform and execute this
Agreement and the transactions contemplated hereby. Each of this Agreement and
the other instruments and agreements to be executed and delivered by the
Corporation hereunder is a valid and binding obligation of the Corporation,
enforceable against the Corporation in accordance with its terms.
5.2 Freedom to Contract. The execution and delivery of this
Agreement by the Corporation does not, and the performance by the Corporation
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of the Corporation's obligations hereunder will not, (a) conflict with or result
in a breach of the Certificate of Incorporation or By-Laws of the Corporation,
(b) violate any of the terms, conditions or provisions of any order, writ,
injunction, judgment or decree of any court, governmental authority, or
regulatory agency, or (c) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, indenture, debenture, security
agreement, trust agreement, lien, mortgage, lease agreement, license, franchise,
permit, guaranty, joint venture agreement, or other agreement, instrument or
obligation, oral or written, to which the Corporation is a party (whether as an
original party or as an assignee or successor) or by which the Corporation or
any of the Corporation's properties or assets are bound. No governmental
authorization, approval, order, license, permit, franchise or consent, and no
registration, declaration or filing with any court, governmental department,
commission, authority, board, bureau, agency or other instrumentality, is
required in connection with the execution, delivery and performance of this
Agreement by the Corporation and the consummation of the transactions
contemplated hereby.
5.3 Litigation.
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(a) The Corporation is not a party to any suit,
action, arbitration or legal, administrative, governmental or other proceeding
or investigation pending or, to the best knowledge of the Corporation,
threatened, which might adversely affect or restrict the ability of the
Corporation to consummate the transactions contemplated by this Agreement or to
perform the Corporation's obligations hereunder.
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(b) There is no judgment, order, injunction or decree
of any court, governmental authority or regulatory agency to which the
Corporation is subject which might adversely affect or restrict the ability of
the Corporation to consummate the transactions contemplated by this Agreement or
to perform the Corporation's obligations hereunder.
6. Certain Covenants and Agreements of the Parties.
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6.1 Existing Third-Party Agreements. Following the execution
of this Agreement, none of the Officers shall do any act the effect of which may
reasonably be expected to result in the cancellation, non-renewal or
modification (the effect of which cancellation, non-renewal or modification
would be adverse as determined by the Board of Directors of the Corporation,
excluding the Officers, to the business, assets or prospects of the Corporation)
of any agreement or arrangement between the Corporation and any other person or
entity, except to the extent that they, as officers of the Corporation, may
determine that the Corporation does not have the financial resources to meet its
payment obligations under such agreements or arrangements which may result in
cancellation, non-renewal or modification. In addition, following the execution
of this Agreement and prior to the Closing, the Officers will not take any
action, including, without limitation, any of the following actions, without the
unanimous consent of the Board of Directors of the Corporation (given either at
a meeting or by written consent), including the two independent directors: (a)
make any capital expenditure in excess of $1,000 individually and $15,000 in the
aggregate, monthly, (b) hire any additional employees or consultants, (c) make
or amend any compensation, salary, bonus, stock or option grants or employee
benefits, including without limitation, under the Employment Agreements, or (d)
enter into, terminate, or otherwise amend any contract, lease, license or
agreement to which the Corporation or any subsidiary is a party.
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<PAGE>
6.2 Trade Secrets. Each of the Officers shall keep
confidential all confidential information relating to or concerned with the
operations, business and affairs of the Corporation ("Protected Information"),
and shall not, at any time after the date hereof use or disclose to any person
any such information; provided that Protected Information shall not include (a)
information that is generally available to or known by the public or other
companies or businesses in the Corporation's industry without violation of this
Section 6.2, or (b) information that is or becomes available to or known by an
Officer on a non-confidential basis from a source other than the Corporation,
provided such source is not bound with respect to such information by an
obligation of secrecy to the Corporation; and provided, further, that an Officer
shall not be in violation of this Section 6.2 if Protected Information is
disclosed by an Officer or if such Officer is required to provide Protected
Information in any legal proceeding or by order of any court.
Notwithstanding anything contained herein to the
contrary, the restrictions contained in Section 6.2 shall not apply and shall be
unenforceable in the event that the Corporation, all of its commonly-controlled
affiliates and its successors and assigns cease active conduct of the business
of the Corporation, and further, Messrs. Casaccio and Bartlett may use Protected
Information with respect to the subsidiaries referred to in Sections 2(b) and
(c) solely in connection with their operations of such subsidiaries referred to
in Sections 2(b) and (c).
6.3 Intellectual Property. Any license, trademark,
servicemark, discovery, invention, formula, process, design, system or
development conceived, developed, created or made by any of the Officers, alone
or with others, during the period of his employment by the Corporation and
applicable to the business of the Corporation, whether or not patentable or
registrable, shall become the
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sole and exclusive property of the Corporation. Each of the Officers shall
disclose the same promptly and completely to the Corporation and shall, during
the period of his employment hereunder and at any time and from time to time
hereafter, (a) execute all documents requested by the Corporation for vesting in
the Corporation the entire right, title and interest in and to the same, (b)
execute all documents requested by the Corporation for filing and procuring such
applications for patents, trademarks, service marks or copyrights as the
Corporation, in its sole discretion, may desire to prosecute, and (c) give the
Corporation all assistance it may reasonably require, including the giving of
testimony in any suit, action, investigation or other proceeding, in order to
obtain, maintain and protect the Corporation's right therein and thereto.
6.4 Non-Competition. For a period of three years following the
Closing Date, (a) Melnick shall not directly or indirectly own, control, manage,
operate, participate or invest in, or otherwise be engaged in (as a director,
officer, employee or consultant), in any manner, including without limitation
consulting for or allowing the use of his name or any variation thereof in, any
business activity, venture or enterprise that engages in any business competing
with the business in which the Corporation is currently engaged in the actual
geographic areas in which the Corporation currently conducts its business, (b)
none of the Officers shall for himself or on behalf on any other person, contact
any present employee of the Corporation for the purpose of inducing such
employee to leave the employ of the Corporation (except that Casaccio and
Bartlett may do so solely with respect to employees working at the store
locations they are acquiring hereunder), and (c) Bartlett shall not, for himself
or on behalf of any other person, contact any present customer of Group Coin
Associates, Inc., Turnpike Amusements, Inc. or Tunnels and Tubes, Inc., for the
purpose of inducing such customer to terminate its relationship with such
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<PAGE>
subsidiaries or otherwise soliciting or diverting any such customer from such
subsidiary. The foregoing provisions notwithstanding, Melnick may invest his
funds in securities of an issuer if the securities of such issuer are listed for
trading on a registered stock exchange or actively traded in the
over-the-counter market and their respective holding therein represents less
than 5% of the total number of shares or principal amount of the securities of
such issuer then outstanding. Each of the Officers acknowledges that the
provisions of this Section, and the period of time, geographic area and scope
and type of restrictions on his activities set forth herein, are reasonable and
necessary for the protection of the Corporation. Each of the Officers
acknowledges that the Corporation will not have any adequate remedy at law if
any of the Officers fails to abide by his agreement in Sections 6.1, 6.2, 6.3
and 6.4 above, and therefore the Corporation shall have, in addition to any and
all other rights it may have, the right to injunctive relief.
6.5 Delivery of Property. At the Closing, each of the Officers
shall deliver all property of the Corporation and the Non-Transferred
Subsidiaries in the possession of any of the Officers, including, without
limitation, all minute books, stock record books, seals, accounts, records,
formulas, documents and papers of, belonging to or maintained on behalf of the
Corporation.
6.6 Certain Action Regarding the Corporation's Securities.
From the date hereof to and including the Closing Date, each of the Officers
shall refrain from exercising any portion of any of the Options and shall not
sell, transfer, assign or otherwise dispose of any of the Options or any shares
of the Corporation's Common Stock.
6.7 Group Coin Associates, Inc. Following the Closing, Messrs.
Casaccio and Bartlett will cause the subsidiary to be acquired by them pursuant
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<PAGE>
to Section 2(c) to honor its contract with Group Coin Associates, Inc., pursuant
to which the Corporation will continue to operate all video and vending machines
and redemption equipment and the Corporation shall receive 35% of all redemption
and machine revenues derived at the Staten Island, New York location for a
period of a minimum of five years from the Closing Date and such subsidiary
shall pay for all redemption prizes at such location.
6.8 Sales Taxes. Following the Closing, the Corporation shall
be required, prior to utilizing any of the proceeds of the Private Placement for
any other purposes, to use a portion of the proceeds of the Private Placement to
pay, in full, the obligation of the Corporation with respect to unpaid sales
taxes (approximately $80,000) that were due on June 20, 1996.
6.9 Deferral of Salaries. The Officers agree that, for the
period commencing on July 5, 1996 and ending on the Closing Date, the Officers
shall defer the payment of their salaries due to them from the Corporation for
such period until the Closing, and at the Closing, the Officers shall receive a
payment equal to all deferred salary due to them from the Corporation for such
period.
7. Conditions Precedent to the Corporation's Obligations. All
obligations of the Corporation under this Agreement are subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent (any of which may be waived in writing in whole
or in part by the Corporation):
7.1 Representations and Warranties True as of Closing Date.
Each of the Officer's representations and warranties contained in this
Agreement, shall be true on and as of the date hereof and shall be true on and
as of the Closing Date with the same effect as though such representations and
warranties were made on and as of the Closing Date.
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<PAGE>
7.2 Compliance with this Agreement. Each of the Officers shall
have performed and complied with all agreements and conditions contained in this
Agreement that are required to be performed or complied with by it prior to or
at the Closing.
7.3 Certificate. Each of the Officers shall have executed
certificates certifying as to Sections 7.1 and 7.2.
7.4 Release. The Corporation shall have received releases
dated the Closing Date and signed by each of the Officers in the forms attached
as Exhibit E.
7.5 No Restraint. No suit, action, proceeding, or
investigation shall have been instituted or threatened by any governmental
agency, and no injunction shall have been issued and then outstanding, to
restrain, prohibit or otherwise challenge the legality or validity of the
transactions contemplated by this Agreement.
7.6 Resignations. Each of the Officers shall have delivered to
the Corporation his written resignation, effective as of the Closing Date, as an
employee, officer and director of the Corporation and its subsidiaries.
7.7 Private Placement. The closing of the Private Placement
shall have occurred by July 31, 1996.
7.8 Schedules. The Corporation and Messrs. Casaccio and
Bartlett shall agree on schedules of the assets, liabilities (including
liabilities to the Corporation and other subsidiaries of the Corporation, which
shall be forgiven as provided in Sections 2(b) and (c)) and contracts associated
with the Corporation's subsidiaries to be transferred to Messrs. Casaccio and
Bartlett.
7.9 Assumption Agreement. The Corporation shall have received
an Assumption Agreement from Casaccio pursuant to Section 2(b) hereof.
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<PAGE>
7.10 Personal Guaranty. The Corporation shall have received
the Guaranty pursuant to Section 2(b) hereof.
8. Conditions Precedent to each of the Officers Obligations. All
obligations of each of the Officers under this Agreement are subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent (any of which may be waived in writing in whole
or in part by each of the Officers):
8.1 Representations and Warranties True as of Closing Date.
The representations and warranties of the Corporation contained in this
Agreement shall be true at and as of the date hereof and shall be true at and as
of the Closing Date with the same effect as though such representations and
warranties were made on and as of the Closing Date.
8.2 Compliance with this Agreement. The Corporation shall have
performed and complied with all agreements and conditions contained in this
Agreement that are required to be performed or complied with by it prior to or
at the Closing.
8.3 Certificate. The Corporation shall have executed a
certificate certifying as to Sections 8.1 and 8.2.
8.4 Release. Each of the Officers shall have received a
release dated the Closing Date in the form attached as Exhibit F.
8.5 No Restraint. No suit, action, proceeding or investigation
shall have been instituted or threatened by any governmental agency, and no
injunction shall have been issued and then be outstanding to restrain, prohibit
or otherwise challenge the legality or validity of any of the transactions
contemplated by this Agreement.
8.6 Private Placement. The closing of the Private Placement
shall have occurred by July 31, 1996.
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<PAGE>
8.7 Schedules. The Corporation and Messrs. Casaccio and
Bartlett shall agree on schedules of the assets, liabilities (including
liabilities to the Corporation and other subsidiaries of the Corporation, which
shall be forgiven as provided in Sections 2(b) and (c)) and contracts associated
with the Corporation's subsidiaries and the Avenue U Playcenter to be
transferred to Messrs. Casaccio and Bartlett and the Corporation shall deliver
an instrument pursuant to which the Corporation shall acknowledge the
forgiveness of such indebtedness.
8.8 Stock Option Agreement. The Corporation shall have
delivered Option Agreements evidencing the New Options.
9. Cooperation.
------------
(a) From and after the Closing, each of the Officers and the
Corporation agree to execute and deliver such further documents and instruments
and to do such other acts and things as the Corporation or such Officers, as the
case may be, may reasonably request in order to effectuate the transactions
contemplated by this Agreement. Following the Closing, the parties will
cooperate with each other in connection with tax audits and in the defense of
any legal proceedings, consistent with the other provisions for defense of
claims provided in this Agreement.
(b) Following the Closing, the Corporation will use its best
efforts to remove the Officers from any personal guarantees of such Officers
given in connection with any equipment leases entered into by the Corporation
provided that such best efforts shall not require or include any payments by the
Corporation earlier than payments required by the terms of such leases.
10. Indemnification.
----------------
10.1 Indemnification by the Officers. Each of the Officers
shall, severally and not jointly, indemnify and hold the Corporation and all of
its
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officers (other than the Officers) and directors harmless at all times from and
after the Closing Date against any and all actions, suits, proceedings, claims,
demands, damages, losses, liabilities, taxes and deficiencies, penalties and
interest thereon and costs and expenses, including reasonable attorneys' fees,
whether or not arising out of any third party claims ("Losses") related to,
caused by or arising from any breach of a representation or warranty or
nonfulfillment of any covenant or agreement on the part of such Officer under
this Agreement.
10.2 Indemnification by the Corporation.
-----------------------------------
(a) The Corporation shall indemnify each of the Officers and
hold him harmless at all times from and after the Closing Date against any and
all Losses related to, caused by or arising from:
(i) any breach of a representation or warranty or
nonfulfillment of any covenant or agreement on the part of the Corporation;
and/or
(ii) any liability related to any personal guarantees
executed by each of the Officers on behalf of the Corporation or its
subsidiaries with respect to equipment leases relating to Non-Transferred
Subsidiaries; and/or
(iii) any liability arising from the sale of the
securities in the Private Placement.
(b) The Corporation shall further indemnify each of the
Officers and hold him harmless at all times from and after the date hereof to
the fullest extent to which a corporation incorporated in New York is permitted
to indemnify an officer, director or employee of such corporation or a
subsidiary of such corporation under the New York Business Corporation Law in
effect on the date hereof.
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<PAGE>
10.3 Notice to the Indemnitor. Within a reasonable period, but
in no event later than thirty (30) days after the assertion of any claim by a
third party to a claim for indemnification from an indemnitor (the "Indemnitor")
under this Section 10, an indemnified party (the "Indemnified Party") shall
notify the Indemnitor in writing of such claim.
10.4 Rights of Parties to Settle or Defend. The Indemnitor
shall have the responsibility, acting in good faith and without unnecessary
delay, to contest and defend against such claim. The Indemnified Party shall
have the right to be represented, at its own expense by its own counsel and
accountants, their participation to be subject to the reasonable direction of
the Indemnitor. The Indemnified Party shall make available to the Indemnitor and
its attorneys and accountants, at reasonable times during normal business hours,
all books, records, and other documents in its possession relating to such
claim. If the Indemnitor fails to undertake the defense of, or settle or pay any
such third party claim within ten (10) days after the Indemnified Party has
given written notice to the Indemnitor of such claim, or if the Indemnitor fails
forthwith to defend, settle or pay such claim, then the Indemnified Party may
take any and all necessary action to dispose of such claim including, without
limitation, the settlement or full payment thereof upon such terms as it shall
deem appropriate, in its sole discretion, subject to the following with respect
to any proposed settlement thereof.
10.5 Settlement Proposals. In the event the Indemnified Party
desires to settle any such third party claim, the Indemnified Party shall advise
the Indemnitor of the amount it proposes to pay in settlement thereof (the
"Proposed Settlement"). If such Proposed Settlement is unsatisfactory to the
Indemnitor, it shall have the right, at its expense, to contest such claim by
giving written notice of such election to the Indemnified Party within ten (10)
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<PAGE>
days after the Indemnitor has been advised of the Proposed Settlement. If the
Indemnitor does not deliver such written notice within ten (10) days after the
Indemnitor has been advised of the Proposed Settlement, the Indemnified Party
may offer the Proposed Settlement to the third party making such claim. If the
Proposed Settlement is not accepted by the party making such claim, any new
Proposed Settlement figure which the Indemnified Party may wish to present to
the party making such claim shall first be presented to the Indemnitor who shall
have the right, subject to the conditions hereinabove set forth in this Section
10, to contest such claim. In all such events, the Indemnitor shall indemnify
the Indemnified Party and hold it harmless against and from any and all costs of
defense, payment or settlement, including reasonable attorneys' fees incurred in
connection therewith.
10.6 Reimbursement. At the time that the Indemnified Party
shall suffer a loss because of a breach of any warranty, representation or
covenant by the Indemnitor or at the time the amount of any liability on the
part of the Indemnitor under this Section 10 is determined (which in the case of
payments to third persons shall be the earlier of (a) the date of such payments,
or (b) the date that a court of competent jurisdiction shall enter a final
judgment, order or decree (after exhaustion of appeal rights establishing such
liability), the Indemnitor shall forthwith, upon notice from the Indemnified
Party, pay to the Indemnified Party, the amount of the indemnity claim. If such
amount is not paid forthwith, then the Indemnified Party may, at its option,
take legal action against the Indemnitor for reimbursement in the amount of its
indemnity claim. For purposes hereof the indemnity claim shall include the
amounts so paid (or determined to be owing) by the Indemnified Party together
with costs and reasonable attorneys' fees and interest on the foregoing items at
the rate of seven (7%) percent per annum from the date the obligation is due
from the
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<PAGE>
Indemnified Party to the Indemnitor, as hereinabove provided, until the
indemnity claim shall be paid.
11. Survival of Representations and Warranties. All representations,
warranties, covenants and agreements made by each party in this Agreement, or in
any list, certificate, document or written statement furnished or delivered by
any such party pursuant hereto shall survive the Closing.
12. Expenses. The parties shall each pay their respective expenses
(including fees and expenses of legal counsel) in connection with the
transactions contemplated herein, provided that the Corporation shall pay at the
Closing the expenses of counsel to the Officers of up to $10,000 in the
aggregate which are in excess of the present balance of the retainer previously
paid to such counsel by the Corporation in March 1996 (which was approximately
$5,300 as of May 31, 1996), which shall be applied against time and
disbursements on behalf of such Officers by such counsel.
13. Contents of Agreement; Parties In Interest; etc. This Agreement and
the agreements referred to herein set forth the entire understanding of the
parties hereto with respect to the transactions contemplated hereby. It shall
not be amended except by a written instrument duly executed by each of the
parties hereto. Any and all previous agreements and understandings between or
among the parties regarding the subject matter hereof, whether written or oral,
are superseded by this Agreement.
14. Assignment and Binding Effect. This Agreement may not be assigned
by either party hereto without the prior written consent of the other party. All
of the terms and provisions of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto.
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15. Waiver. Any term or provision of this Agreement may be waived at
any time by the party entitled to the benefit thereof by a written instrument
duly executed by such party.
16. Termination. This Agreement may be terminated by mutual agreement
of the parties. Nothing in this Agreement shall be deemed to require any party
to terminate this Agreement in the event that a condition precedent to its
obligations hereunder is not met, rather than to waive such conditions precedent
and proceed to Closing.
17. Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed to have been given (a) when
received, if delivered to the party personally, telegraphed, telexed, sent by
facsimile transmission, confirmed in writing within three (3) business days
thereafter, or sent by prepaid documented air courier, or (b) three (3) business
days following the mailing thereof, if mailed by registered or certified mail
(return receipt requested), with postage and registration or certification fees
thereon prepaid, addressed to the party as follows:
If to the Corporation:
----------------------
at its address set forth above
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attn:
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<PAGE>
If to the Officers:
-------------------
at his address set forth above
with a copy to:
Peter Ziemba
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016-1903
or to such other address or person as any party may have specified in a notice
duly given to the other party as provided herein.
18. Governing Law. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the State of New York as applied to
contracts made and fully performed in such state without regard to conflict of
law principles thereof.
19. No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and their respective heirs, administrators, legal
representatives, successors and assigns and they shall not be construed as
conferring, and are not intended to confer, any rights on any other persons.
20. Section Headings. All section headings are for convenience only and
shall in no way modify or restrict any of the terms or provisions hereof.
21. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, and each of the Officers and the
Corporation may become a party hereto by executing a counterpart hereof. This
Agreement and any counterpart so executed shall be deemed to be one and the same
instrument. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts.
22. Public Disclosure. None of the parties hereto shall make any public
disclosure concerning the subject matter hereof or the transactions contemplated
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herein without the prior written consent of the other party, except as required
by law.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Agreement on the date first above written.
Childrobics, Inc.
By: /s/ Salvatore Casaccio
----------------------------------
Name: Salvatore Casaccio
Title: CEO
/s/ Salvatore Casaccio
-----------------------------------
Salvatore Casaccio
/s/ A. Joseph Melnick
----------------------------------
A. Joseph Melnick
/s/ Richard Bartlett
----------------------------------
Richard Bartlett
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<PAGE>
EXHIBIT A
SALVATORE CASACCIO
July , 1996
To the Board of Directors
of Childrobics, Inc.:
Gentlemen:
I hereby resign as a Director of Childrobics, Inc. (the "Corporation"),
and from all offices I now hold or ever held with the Corporation, and as a
director, officer and employee of any subsidiary or affiliate of the
Corporation, effective immediately.
-----------------------
Salvatore Casaccio
<PAGE>
A. JOSEPH MELNICK
July , 1996
To the Board of Directors
of Childrobics, Inc.:
Gentlemen:
I hereby resign as a Director of Childrobics, Inc. (the "Corporation"),
and from all offices I now hold or ever held with the Corporation, and as a
director, officer and employee of any subsidiary or affiliate of the
Corporation, effective immediately.
-----------------------
A. Joseph Melnick
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<PAGE>
RICHARD BARTLETT
July , 1996
To the Board of Directors
of Childrobics, Inc.:
Gentlemen:
I hereby resign as a Director of Childrobics, Inc. (the "Corporation"),
and from all offices I now hold or ever held with the Corporation, and as a
director, officer and employee of any subsidiary or affiliate of the
Corporation, effective immediately.
------------------------
Richard Bartlett
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<PAGE>
EXHIBIT B
---------
PROMISSORY NOTE
$ New York, New York
Date: July __, 1996
FOR VALUE RECEIVED, Childrobics, Inc., a New York corporation
with its principal office at 200 Smith Street, Farmingdale, New York 11735 (the
"Borrower"), promises to pay to the order of ____________ (the "Payee"), with an
address at _________________________________________, or at such other address
as to which the Payee shall give written notice to the Borrower, on or before
____________________, ____ [One year], in lawful money of the United States of
America, _______ ($ ).
The Borrower further promises to pay interest at such address,
in like money, from the date hereof on the outstanding principal amount owing
hereunder at a rate per annum equal to percent ( %) (the rate then published by
the Internal Revenue Service for debt of such maturity) until the principal
amount of this Note is paid in full to the satisfaction of the Payee. Such
interest shall be computed daily on the basis of a 360-day year and for the
actual number of days elapsed. Interest shall be due and payable at such time as
principal is due and payable under this Note, except as otherwise provided in
this Note.
The Borrower shall be required to make mandatory prepayments
of principal and interest accrued on this Note to the maximum extent possible
from the net proceeds received by the Borrower from the sale of any of
Borrower's securities, other than pursuant to the proposed Private Placement,
within five (5) business days from the date of the receipt of such proceeds;
provided, however, that such prepayments required to be made by the Borrower
hereunder shall be made equal (as to dollar amounts) and on a pari passu basis
with the Borrower's mandatory prepayment obligations under (i) Promissory Notes
of even date herewith payable to the _______________ and _______________ [the
other two Officers], (ii) a Promissory Note of the Borrower that may be
delivered to Farmstead Development LLC in connection with the Borrower's
possible investment in Farmstead Development LLC, and (iii) a Promissory Note of
the Borrower that may be delivered to Just Kiddie Rides, Inc. in connection with
the Borrower's possible acquisition of Just Kiddie Rides, Inc.
If any payment of this Note becomes due and payable on a
Saturday, Sunday or a legal bank holiday under the laws of the State of New
York, the maturity thereof shall be extended to the next succeeding business day
and interest thereon shall be payable at the rate set forth above during such
extension.
All payments of principal and interest shall be made without
setoff, deduction or counterclaim except in the event the Borrower is entitled
to indemnification for a breach of a representation under Section 4 or a breach
of a covenant under the second sentence of Section 6.1, or Sections 6.6, 6.7 or
6.9 from the Payee pursuant to the Employment Termination and Option Termination
Agreement between parties hereto and, in the case of Salvatore Casaccio,
pursuant to Section 2(d) of such Agreement.
The Borrower may upon giving Payee prior notice, prepay this
Note in whole or in part at any time without premium or penalty, but with
interest accrued on the unpaid principal amount through the date of such
prepayment.
<PAGE>
The payment of all monies due Payee under this Note shall be
secured by a security agreement and a guaranty dated of even date herewith
between the Payee and Amusement Associates Distributing, Inc.
In the event that Borrower shall fail to pay any amount when
due and payable hereunder or an Event of Default shall occur and be continuing
under the aforementioned security agreement, Payee, ten (10) days after giving
Borrower written notice of such default, may, if such default has not been cured
within such ten (10) day period, by written notice to Borrower, at Payee's
option, declare the entire unpaid principal amount of this Note, together with
accrued interest thereon, to be due and payable, whereupon the same shall
forthwith mature and become due and payable, and Payee shall have such other
remedies as Payee may have at law, equity or otherwise.
No failure on the part of Payee to exercise, and no delay in
exercising, and no course of dealing with respect to, any right hereunder shall
operate as a waiver hereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise hereof or the exercise of
any other right.
All notices hereunder shall be given to any party hereunder in
writing and shall be deemed to have been given (a) when received, if delivered
to the party personally, telegraphed, telexed, sent by facsimile transmission,
confirmed in writing within three (3) business days thereafter, or sent by
prepaid documented air courier or (b) three (3) business days following the
mailing thereof, if mailed by registered or certified mail (return receipt
requested), with postage and registration or certification fees thereon prepaid,
addressed to the party as follows:
If to the Borrower:
-------------------
at its address set forth above
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attn: Kenneth R. Koch, Esq.
If to the Payee:
----------------
at his address set forth above
with a copy to:
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016-1903
Attn: Peter Ziemba, Esq.
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<PAGE>
or to such other address or person as any party may have specified in a notice
duly given to the other party as provided herein.
Borrower and all other parties liable herefor, whether
principal, endorser, or otherwise, hereby jointly and severally (i) waive
presentment, demand for payment, notice of dishonor, notice of protest and
protest and all other notices or demands in connection with the delivery,
acceptance, performance, default, endorsement or guaranty of this Note, (ii)
waive recourse to suretyship defenses generally, including extensions of time,
releases of security and other indulgences which may be granted from time to
time by the holder of this Note to Borrower or any party liable herefor, (iii)
waive trial by jury, and (iv) agree to pay all costs and expense, including
reasonable attorneys' fees, in connection with the enforcement or collection of
this Note.
This Note may be modified or cancelled, only by the written
agreement of the Borrower and the Payee. Failure of the Payee hereof to assert
any right herein shall not be deemed to be a waiver thereof.
This Note and the rights and obligations of the Borrower and
the Payee hereof shall be governed by and construed in accordance with the
internal laws of the State of New York.
CHILDROBICS, INC.
By:
----------------------------------
Name:
Title:
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<PAGE>
GUARANTY OF PROMISSORY NOTE
---------------------------
To induce ____________________ ("Payee") to accept a certain
promissory note dated July __, 1996 made by Childrobics, Inc. ("Maker") to the
order of Payee, in the principal amount of $______ ("Promissory Note"), the
undersigned, Group Coin Associates, Inc. ("Guarantor"), for valuable
consideration, hereby, unconditionally and irrevocably guarantees to Payee, its
administrators, legal representatives and its successors and assigns, and to
every subsequent holder of the Promissory Note, irrespective of the genuineness,
validity, regularity or enforceability thereof, of the obligation evidenced
thereby, or any claims or defenses available to or asserted by Maker, and
irrespective of any other circumstance, that all sums stated therein to be
payable on the Promissory Note shall promptly be paid in full, in accordance
with the provisions of the Promissory Note, at maturity, and, in the case of any
extension of time of payment or renewal in whole or in part, all sums shall be
promptly paid when due according to such extension or extensions, renewal or
renewals, at maturity, by acceleration or otherwise.
In order to induce Payee to accept the Promissory Note of
Maker and intending Payee to rely thereon, Guarantor hereby represents and
warrants as follows, such representations and warranties to survive the delivery
hereof:
(a) This Guaranty is in no way conditional or
contingent and constitutes a valid, present, continuing and absolute obligation
of such Guarantor which shall not be impaired or affected by (i) any
modification, waiver, forbearance,
<PAGE>
extension or renewal granted with respect to the Promissory Note, or (ii) any
failure to exercise or delay in exercising of any rights granted to the Payee,
its successors and assigns, or any subsequent holder of the Promissory Note
pursuant to the terms of the Promissory Note or by any statute or rule of law.
(b) The execution, delivery and performance by such
Guarantor of this Guaranty does not contravene any law or contractual
restriction binding on or affecting such Guarantor.
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by such Guarantor of
this Guaranty.
(d) This Guaranty is the legal, valid and binding
obligation of Guarantor enforceable against Guarantor in accordance with its
terms.
The signature of Guarantor hereto shall constitute endorsement
of the Promissory Note by Guarantor.
Guarantor hereby waives notice of acceptance of this Guaranty,
presentment, demand for payment, notice of dishonor, notice of protest and
protest, and all other notices or demands in connection with the delivery,
acceptance, performance, default, endorsement, or guaranty of the Promissory
Note or this Guaranty, to which the Maker, such Guarantor or any other Guarantor
may be entitled including, but not limited to, recourse to suretyship defenses,
releases of security of Guarantor or any other indulgences granted by Payee.
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<PAGE>
This is a continuing guaranty, primary and unconditional, and
shall remain in full force and effect and may not be revoked as to any unpaid
amounts which may be due or become due nor may it be changed or modified orally.
This Guaranty is binding upon each and every Guarantor, its heirs, executors,
administrators, successors and assigns and shall inure to the benefit of Payee,
its successors and assigns.
Guarantor shall be liable hereunder for the principal amount
and all interest due on the Promissory Note and for all costs and expenses,
including reasonable attorneys' fees, in connection with the collection of the
Promissory Note and the enforcement of this Guaranty. Guarantor hereby waives
trial by jury.
This Guaranty has been executed and delivered in the State of
New York and the construction, validity and performance hereof shall be governed
by the internal laws of the State of New York, without regard to principles of
conflict of laws.
If any provision of this Guaranty shall be unenforceable in
whole or in part for any reason whatsoever, then such provision, to the extent
it is unenforceable, shall be ineffective and the balance of this Guaranty shall
be deemed valid and enforceable and construed as if the offending provisions had
been deleted therefrom.
This Guaranty may be assigned by Payee to any holder of the
Promissory Note and such assignee shall have all the rights of Payee as if named
here.
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<PAGE>
IN WITNESS WHEREOF the Guarantor has signed this Guaranty as
of the ____ day of July, 1996.
GROUP COIN ASSOCIATES, INC.
By:
-------------------------------
Name:
Title:
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<PAGE>
Exhibit C
SECURITY AGREEMENT
------------------
SECURITY AGREEMENT, dated as of ______, 1996, between Group
Coin Associates, Inc., a New York corporation, with an address at 200 Smith
Street, Farmingdale, New York 11735 (the "Debtor"), and, _____ with an address
at _________(the "Secured Party").
WHEREAS, the sole shareholder of the Debtor has executed a
note (the "Note") in favor of Secured Party in the original principal amount of
$ _____, which was executed by such shareholder in favor of Secured Party
pursuant to an Employment Termination and Option Termination Agreement; and
WHEREAS, the Debtor has executed a guaranty (the "Guaranty")
in favor of the Secured Party with respect to the Note pursuant to the
Employment Termination and Option Termination Agreement; and
WHEREAS, as an inducement to Secured Party to accept the Note
and Guaranty, the Debtor wishes to grant a security interest in certain
collateral to the Secured Party;
NOW, THEREFORE, the parties hereby agree as follows:
1. Grant of a Security Interest. Debtor hereby grants to
Secured Party a first priority interest in the Collateral of Subsidiary (as
defined in Section 2). All capitalized terms used herein and not otherwise
defined shall have the meanings as defined in the Uniform Commercial Code as in
effect in the State of New York (the "UCC").
2. Collateral. (a) The collateral covered by this Agreement
consists of all property of the following types, wherever located and whether
now owned or hereafter owned or acquired by the Subsidiary, whether or not
affixed to realty, in all Proceeds and Products thereof in any form, in all
parts, accessories, attachments, special tools, additions, replacements,
substitutions and accessions thereto or therefor, and in all increases or
profits received therefrom: Equipment; Fixtures; Inventory; Accounts; Chattel
Paper; Documents; Instruments; and General Intangibles, including, without
limitation, Intellectual Property (all of the foregoing, including such
proceeds, being collectively referred to as the "Collateral"); provided,
however, the Collateral shall not include, and Debtor shall not grant to the
Secured Party, any interest in any Collateral of Debtor in which Debtor has
previously granted a security interest to any third party prior to the date
hereof.
(b) Any and all Collateral described or referred to
in this Agreement which is hereafter acquired by the Subsidiary shall, and
without any further conveyance, assignment or act on the part of the Debtor or
the Secured Party, become and be subject to the security interests created
hereby as fully and completely as though specifically described herein, but
nothing in this
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<PAGE>
Section 2(b) shall be deemed to modify or change the obligations of the Debtor
under Sections 5(b) and 5(c) hereof.
3. Debtor's Obligations Secured Hereby. Debtor's obligations
(the "Obligations") to Secured Party secured hereby are the payment of the
aggregate principal sum and interest evidenced by the Note, and performance and
discharge of each and every obligation of Debtor under this Agreement, the
Guaranty and the Notes.
4. Debtor's Representations and Warranties. Debtor represents
and warrants and, so long as this Security Agreement is in effect, shall be
deemed continuously to represent and warrant, that:
(a) The Subsidiary owns the Collateral free and clear
of any liens and encumbrances.
(b) Debtor has all necessary corporate power and
authority and has taken all corporate action necessary to execute, deliver and
perform this Agreement and the Note and to encumber and grant a security
interest in the Collateral of the Subsidiary.
(c) There is no effective financing statement or
other instrument similar in effect covering all or any part of the Collateral on
file in any recording office except as may have been filed in favor of the
Secured Party.
(d) This Agreement creates a valid security interest
of Secured Party in the Collateral of the Subsidiary securing payment of the
Obligations. Upon the filing of the financing statements, the Secured Party will
have a valid and perfected first priority lien on and security interest in the
Collateral of the Subsidiary, except as to purchase money security interests
created after the date of this Agreement.
(e) No consent, authorization, approval or other
action by, and no notice to or filing with, any governmental authority,
regulatory body, lessor, franchisor or other person or entity is required for
the grant by Debtor of the security interest granted hereby or for the
execution, delivery or performance of this Agreement by Debtor or for the
perfection or exercise by Secured Party of its rights and remedies hereunder,
except filings of financing documents .
(f) Debtor does not transact any part of its business
under any tradenames, division names, assumed names or other name, except for
its name set forth in the preamble hereto; Debtor's business address and chief
executive office is as set forth in the preamble hereto; and Debtor's records
concerning the Collateral are kept at such address.
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<PAGE>
5. Debtor's Covenants. Debtor agrees and covenants that:
------------------
(a) The Collateral will be used solely for business
purposes of Debtor and will remain in the possession or under the control of the
Debtor (sale or replacement in the ordinary course excepted) and will not be
used for any unlawful purpose. The Collateral will not be misused, abused,
wasted or allowed to deteriorate (ordinary wear and tear excepted). Debtor will
keep the Collateral, as appropriate and applicable, in good condition and repair
(ordinary wear and tear excepted), and will clean, shelter, and otherwise deal
with the Collateral in all such ways as are considered good practice by owners
of like property.
(b) Debtor has executed and will promptly file with
the appropriate governmental authorities, or deliver to Secured Party for
filing, UCC-1 Financing Statements with respect to the Collateral. Debtor shall,
at no cost to Secured Party, execute, acknowledge and deliver all such other
documents and instruments as Secured Party reasonably deems necessary to create,
perfect and continue the security interest in the Collateral contemplated
hereby. Debtor will pay all costs of title searches and filing of financing
statements, assignments or other documents in all public offices reasonably
requested by Secured Party, and will not, without the prior written consent of
Secured Party, file or authorize or permit to be filed in any public office any
financing statement, assignment or other document naming Debtor as debtor and
not naming Secured Party, as secured party.
(c) Debtor will defend the Collateral against the
claims and demands of all other parties, including, without limitation,
defenses, setoffs, claims and counterclaims asserted by any Account Debtor
against Debtor or Secured Party, except, as to Inventory, purchasers and lessees
in the ordinary course of Debtor's business; will keep the Collateral free from
all security interests or other encumbrances; and will not sell, transfer,
lease, assign, deliver or otherwise dispose of any Collateral or any interest
therein without the prior written consent of Secured Party, except that the
Debtor may sell or lease Inventory in the ordinary course of Debtor's business.
(d) Debtor will, at Secured Party's request, mark any
and all books and records to indicate the security interest created hereby.
(e) Debtor will deliver to Secured Party, upon
demand, all Documents and all Chattel Paper (duly indorsed to Secured Party)
constituting, representing or relating to the Collateral or any part thereof,
and any schedules, invoices, shipping documents, delivery receipts, purchase
orders, contracts or other documents representing or relating to the Collateral
or any part thereof.
(f) Debtor will notify Secured Party promptly in
writing of any change in Debtor's business address or chief executive office,
any change in the address at which records concerning the Collateral are kept
and any change in the Debtor's name, identity or corporate or other structure.
(g) Debtor will prevent the Collateral or any part
thereof from being or becoming an accession to other goods not covered by this
Security Agreement.
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<PAGE>
(h) Debtor shall pay all expenses, including
reasonable attorneys' fees and costs, incurred by Secured Party in the
preservation, realization, enforcement or exercise of any of Secured Party's
rights under this Agreement.
6. Certain Provisions Concerning Collateral. (a) Upon the
occurrence of an Event of Default, Secured Party may notify any or all Account
Debtors of the security interest created hereby and may also direct such Account
Debtors to make all payments on Collateral to Secured Party. All payments on and
from Collateral received by Secured Party directly or from Debtor shall be
applied to the Obligations in accordance with Section 8. Secured Party may
demand of Debtor in writing, before or after notification to Account Debtors and
without waiving in any manner the security interest created hereby, that any
payments on and from the Collateral received by Debtor: (i) shall be held by
Debtor in trust for Secured Party in the same medium in which received; (ii)
shall not be commingled with any assets of Debtor; and (iii) shall be delivered
to Secured Party in the form received, properly indorsed to permit collection,
not later than the next business day following the day of their receipt; and
Debtor shall comply with such demand. Debtor shall also promptly notify Secured
Party of the return to or repossession by Debtor of Goods underlying any
Collateral, and Debtor shall hold the same in trust for Secured Party and shall
dispose of the same as Secured Party directs.
(b) Until the occurrence of an Event of Default,
Debtor reserves the right to receive all income from or interest on the
Collateral consisting of Instruments. Upon the occurrence of an Event of
Default, Debtor will not demand or receive any income from or interest on such
Collateral and, if Debtor receives any such income or interest without any
demand by it, the same shall be held by Debtor in trust for Secured Party in the
same medium in which received, shall not be commingled with any assets of Debtor
and shall be delivered to Secured Party in the form received, properly indorsed
to permit collection, not later than the next business day following the day of
its receipt. Secured Party may apply the net cash receipts from such income or
interest to payment of the Obligations, provided that Secured Party shall
account for and pay over to Debtor any such income or interest remaining after
payment in full of the Obligations.
7. Events of Default. The occurrence of any default under the
Note shall constitute an "Event of Default" under this Security Agreement. A
breach of a representation or warranty given by Debtor under this Security
Agreement or the failure by Debtor to perform its agreements and covenants
hereunder shall constitute an "Event of Default" under this Security Agreement.
8. Remedies on Default. (a) Upon the occurrence of an Event of
Default, the Secured Party, shall have all rights, privileges, powers and
remedies provided a secured party under the UCC and any other applicable law.
Upon the existence or occurrence of an Event of Default, Secured Party may
require Debtor to assemble the Collateral and make it available to Secured Party
at a place or places designated by Secured Party, and Secured Party may use and
operate the Collateral.
(b) Without in any way requiring notice to be given
in the following time and manner, Debtor agrees that any notice by Secured Party
of
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<PAGE>
sale, disposition or other intended action hereunder or in connection herewith,
whether required by the UCC or otherwise, shall constitute reasonable notice to
Debtor if such notice is mailed by regular or certified mail postage prepaid, at
least five days prior to such action, to Debtor's address specified above or to
any other address which Debtor has specified in writing to Secured Party as the
address to which notices hereunder shall be given to Debtor.
(c) After an Event of Default, Secured Party may
demand, collect and sue on any of the Accounts, Chattel Paper, Instruments and
General Intangibles (in either Debtor's or Secured Party's name at the latter's
option); may enforce, compromise, settle or discharge such Collateral without
discharging the Obligations or any part thereof; and may indorse Debtor's name
on any and all checks, commercial paper, and any other Instruments pertaining to
or constituting Collateral.
9. Payments After an Event of Default. All payments received
and amounts realized by the Secured Party pursuant to Section 8, including all
such payments and amounts received after the entire unpaid principal and
interest amount of the Note has been declared due and payable, as well as all
payments or amounts then held or thereafter received by the Secured Party as
part of the Collateral while an Event of Default shall be continuing, shall be
promptly applied and distributed by the Secured Party in the following order of
priority:
(a) first, to the payment of all costs and expenses,
including legal expenses and attorneys' fees, incurred or made hereunder by the
Secured Party, including any such costs and expenses of foreclosure or suit, if
any, and of any sale or the exercise of any other remedy under Section 8, and of
all taxes, assessments or liens superior to the lien granted under this Security
Agreement, except any taxes, assessments or other superior lien subject to which
any said sale under Section 8 hereof may have been made; and
(b) second, to the payment to Secured Party of the
amount then owing or unpaid on such Secured Party's Note; and
(c) third, to the payment of the balance or surplus,
if any, to the Debtor, its successors and assigns, or to whomsoever may be
lawfully entitled to receive the same.
10. Secured Party's Right to Cure; Reimbursement. In the event
Debtor should fail to do any act as herein provided, Secured Party may, but
without obligation to do so, without notice to Debtor, and without releasing
Debtor from any obligation hereof, make or do the same in such manner and to
such extent as Secured Party may deem necessary to protect the Collateral,
including, without limitation, the defense of any action purporting to affect
the Collateral or the rights or powers of Secured Party hereunder, at Debtor's
expense. Debtor shall reimburse Secured Party for expenses reasonably incurred
under this Section 10.
11. Miscellaneous. (a) This Agreement, together with the
covenants and warranties contained in it, shall inure to the benefit of Secured
Party, its successors, assigns, heirs and personal representatives, and shall be
binding upon Debtor, its successors and assigns.
- 5 -
<PAGE>
(b) Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or by Federal Express, Express Mail or
similar overnight delivery or courier service or delivered against receipt to
the party to whom it is to be given at the address of such party set forth in
the preamble to this Agreement (or to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section 11(b)).
Any notice given to the Debtor shall be to the attention of its President. Any
notice or other communication given by certified mail shall be deemed given at
the time of certification thereof, except for a notice changing a party's
address which shall be deemed given at the time of receipt thereof. Any notice
given by other means permitted by this Section 11(b) shall be deemed given at
the time of receipt thereof.
(c) This Agreement shall terminate on the
satisfaction in full of all of the Obligations and, on such termination, Secured
Party shall release to Debtor the security interest granted in the Collateral
hereunder; provided, that if, after receipt of any payment of all or any part of
the Obligations, Secured Party is for any reason compelled to surrender such
payment to any person or entity, because such payment is determined to be void
or voidable as a preference, an impermissible setoff, or a diversion of trust
funds, or for any other reason, this Agreement shall continue in full force
notwithstanding any contrary action which may have been taken by Secured Party
in reliance upon such payment, and any such contrary action so taken shall be
without prejudice to Secured Party's rights under this Agreement and shall be
deemed to have been conditioned upon such payment having become final and
irrevocable.
(d) If any provision of this Agreement is invalid,
illegal, or unenforceable, the balance of this Agreement shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
(e) The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
(f) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) This Agreement has been negotiated and
consummated in the State of New York and shall be governed by and construed in
accordance with the laws of the State of New York.
(h) No course of dealing and no delay or omission on
the part of the Secured Party in exercising any right or remedy shall operate as
a waiver thereof or otherwise prejudice the Secured Party's rights, powers or
remedies. No right, power or remedy conferred by this Agreement upon the Secured
Party shall be exclusive of any other right, power or remedy referred to herein
or now or hereafter available at law, in equity, by statute or otherwise, and
all such remedies may be exercised singly or concurrently.
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<PAGE>
(i) This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements among them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
IN WITNESS WHEREOF, the parties have executed this Security Agreement
on the date set forth above.
GROUP COIN ASSOCIATES, INC.
By:____________________________________
Name:
Title:
By:____________________________________
Secured Party
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<PAGE>
EXHIBIT D
---------
STOCK OPTION AGREEMENT
AGREEMENT, made as of July ___, 1996, between CHILDROBICS, INC., a New
York corporation (the "Company") and _________________________ ("Optionee").
WHEREAS, pursuant to the Employment Termination and Option Termination
Agreement dated July 3, 1996 between the Company and Optionee, the Company
agreed to issue to Optionee an option to purchase as aggregate of 300,000 of the
authorized but unissued shares of the Common Stock of the Company, $.01 par
value (the "Common Stock"), on the terms and conditions set forth in this
Agreement; and
WHEREAS, Optionee desires to acquire said option on the terms and
conditions set forth in this Agreement;
IT IS AGREED:
1. The Company hereby grants to Optionee the right and option (the
"Option") to purchase all or any part of an aggregate of 300,000 shares of the
Common Stock at a purchase price of $.01 per share on the terms and conditions
set forth herein (the "Option Shares"). The Option is a non-qualified stock
option not intended to qualify under any section of the Internal Revenue Code of
1986, as amended.
2. The Option shall be immediately exercisable and shall remain
exercisable until the close of business on July ___, 2006 (the "Exercise
Period").
3. The Option shall not be assignable or transferable except, in the
event of the death of Optionee, by will or by the laws of descent and
distribution. No transfer of the Option by Optionee by will or by the laws of
descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with written notice thereof and a copy of the
will and such other evidence as the Company may deem necessary to establish the
validity of the transfer and the acceptance by the transferee or transferees of
the terms and conditions of the Option.
4. Optionee shall not have any of the rights of a stockholder with
respect to the Option Shares until such shares have been issued after the due
exercise of the Option.
5. Adjustments.
------------
5.1 Adjustments to Exercise Price and Number of Securities.
The purchase price and the number of shares of Common Stock underlying this
Option shall be subject to adjustment from time to time as hereinafter set
forth:
5.1.1 Stock Dividends - Recapitalization, Reclassification,
Split-Ups. If, after the date hereof, and subject to the provisions of Section
5.2 below, the number of outstanding shares of Common Stock is increased by a
stock dividend on the Common Stock payable in shares of Common Stock or by a
split-up, recapitalization or reclassification of shares of Common Stock or
other similar event, then, on the effective date thereof, the number of shares
of Common Stock issuable on exercise of this Option shall be increased in
proportion to such increase in outstanding shares.
<PAGE>
5.1.2 Aggregation of Shares. If after the date hereof, and
subject to the provisions of Section 5.3, the number of outstanding shares of
Common Stock is decreased by a consolidation, combination or reclassification of
shares of Common Stock or other similar event, then, upon the effective date
thereof, the number of shares of Common Stock issuable on exercise of this
Option shall be decreased in proportion to such decrease in outstanding shares.
5.1.3 Adjustments in Exercise Price. Whenever the number of
shares of Common Stock purchasable upon the exercise of this Option is adjusted,
as provided in this Section 5.1, the purchase price shall be adjusted (to the
nearest cent, but not less than one cent in any event) by multiplying such
applicable purchase price immediately prior to such adjustment by a fraction (X)
the numerator of which shall be the number of shares of Common Stock purchasable
upon the exercise of this Option immediately prior to such adjustment, and (y)
the denominator of which shall be the number of shares of Common Stock so
purchasable immediately thereafter.
5.1.4 Replacement of Securities upon Reorganization, etc. In
case of any reclassification or reorganization of the outstanding shares of
Common Stock other than a change covered by Section 5.1.1 hereof or which solely
affects the par value of such shares of Common Stock, or in the case of any
merger or consolidation of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or reorganization
of the outstanding shares of Common Stock), or in the case of any sale or
conveyance to another corporation or entity of the property of the Company as an
entirety or substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Option shall have the right thereafter (until the
expiration of the right of exercise of this Option) to receive upon the exercise
hereof, for the same aggregate purchase price payable hereunder immediately
prior to such event, the kind and amount of shares of stock or other securities
or property (including cash) receivable upon such reclassification,
reorganization, merger or consolidation, or upon a dissolution following any
such sale or other transfer, by a Holder of the number of shares of Common Stock
of the Company obtainable upon exercise of this Option immediately prior to such
event; and if any reclassification also results in a change in shares of Common
Stock covered by Sections 5.1.1 or 5.1.2, then such adjustment shall be made
pursuant to Sections 5.1.1, 5.1.2, 5.1.3 and this Section 5.1.4. The provisions
of this Section 5.1.4 shall similarly apply to successive reclassifications,
reorganizations, mergers or consolidations, sales or other transfers.
5.1.5 Changes in Form of Option. This form of Option need not
be changed because of any change pursuant to this Section 5, and Options issued
after such change may state the same purchase price and the same number of
shares of Common Stock and Options as are stated in the Options initially issued
pursuant to this Agreement. The acceptance by any Holder of the issuance of new
Options reflecting a required or permissive change shall not be deemed to waive
any rights to a prior adjustment or the computation thereof.
6. The Company hereby represents and warrants to Optionee that the
shares of Common Stock issuable upon exercise of this Option, when issued and
delivered by the Company to Optionee in accordance with the terms and conditions
hereof, will be duly and validly issued and fully paid and non-assessable.
- 2 -
<PAGE>
7. Optionee hereby represents and warrants to the Company that he is
acquiring the Option and shall acquire the shares of Common Stock issuable upon
exercise of this Option for his own account and not with a view to the
distribution thereof.
8. Anything in this Agreement to the contrary notwithstanding, Optionee
hereby agrees that he shall not sell, transfer by any means or otherwise dispose
of the shares of Common Stock issuable upon exercise of this Option acquired by
him without registration under the Securities Act of 1933 (the "Act"), or in the
event that they are not so registered, unless (a) an exemption from the Act is
available thereunder, and (b) he has furnished the Company with notice of such
proposed transfer and the Company's legal counsel, in its reasonable option,
shall deem such proposed transfer to be so exempt.
9. Optionee hereby acknowledges that:
(a) All reports and documents required to be filed by the
Company with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934 within the last 12 months have been made available to him
for inspection.
(b) If Optionee exercises the Option, Optionee must bear the
economic risk of the investment in the shares of Common Stock issuable upon
exercise of this Option for an indefinite period of time because such shares
will not have been registered under the Act and cannot be sold by him unless
they are registered under the Act or an exemption therefrom is available.
(c) In Optionee's position with the Company, Optionee has had
both the opportunity to ask questions of and receive answers from the officers
of the Company and all persons acting on its behalf concerning the terms and
conditions of the offer made hereunder and to obtain any additional information
to the extent the Company possesses or may possess such information or can
acquire it without unreasonable effort or expense necessary to verify the
accuracy of the information obtained pursuant to subparagraph (a) above.
(d) The Company shall place stop transfer orders with its
transfer agent against the transfer of the shares of Common Stock issuable upon
exercise of this Option in the absence of registration under the Act or an
exemption therefrom.
(e) The certificates evidencing the shares of Common Stock
issuable upon exercise of this Option shall bear the following legends:
"The shares represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of
1933. The shares may not be sold or transferred in the absence of such
registration or an exemption therefrom under said Act."
10. Subject to the terms and conditions of the Agreement, the Option
may be exercised by written notice to the Company at its principal place of
business. Such notice shall state the election to exercise the Option and the
number of Option Shares in respect to which it is being exercised, shall contain
a representation and agreement by the person or persons
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<PAGE>
so exercising the Option that the Option Shares are being purchased for
investment and not with a view to the distribution or resale thereof, and shall
be signed by the person or persons so exercising the Option. Such notice shall
be accompanied by payment of the full purchase price of the Option Shares.
Payment of the purchase price shall be made in cash or by check, bank draft or
money order payable to the order of the Company; provided, however, that, at the
election of Optionee, the purchase price for any or all of the Option Shares to
be acquired may be paid by the surrender of shares of Common Stock of the
Company held by or for the account of Optionee with a fair market value equal to
the purchase price multiplied by the number of Option Shares to be purchased.
The fair market value of the surrendered shares shall be determined as of the
date of exercise as follows: "Fair market value" of the Common Stock means, as
of the exercise date: (i) if the Common Stock is listed on a national securities
exchange or quoted on the Nasdaq National Market or Nasdaq SmallCap Market, the
last sale price of the Common Stock in the principal trading market for the
Common Stock on the last trading day preceding such date, as reported by the
exchange or Nasdaq, as the case may be; (ii) if the Common Stock is not listed
on a national securities exchange or quoted on the Nasdaq National Market or
Nasdaq SmallCap Market, but is traded in the over-the-counter market, the
closing bid price of the Common Stock on the last trading day preceding such
date for which such quotations are reported by the National Quotation Bureau,
Incorporated or similar publisher of such quotations; and (iii) if the fair
market value of the Common Stock cannot be determined pursuant to clause (i) or
(ii) above, such price as the Company shall determine, in good faith. The "fair
market value" of a surrendered portion of the Option means, as of the exercise
date, an amount equal to the excess of the total fair market value of the shares
of Common Stock underlying the surrendered portion of the Option (as determined
in accordance with the immediately preceding sentence) over the total purchase
price of such shares of Common Stock underlying the surrendered portion of the
Option. The Company shall issue a certificate or certificates evidencing the
Option Shares as soon as practicable after the notice and payment is received.
The certificate or certificates evidencing the Option Shares shall be registered
in the name of the person or persons so exercising the Option.
11. All notices, requests, deliveries, payments, demands and other
communications which are required or permitted to be given under this Agreement
shall be in writing and shall either be delivered personally or sent by
certified mail, return receipt requested, postage prepaid, to the parties at
their respective addresses set forth below, or to such other address as either
shall have specified by notice in the writing to the other, and shall be deemed
duly given hereunder when so delivered or three days after being mailed, as the
case may be.
12. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other or
subsequent breach.
13. This Agreement constitutes the entire agreement between the parties
with respect to the subject matter thereof.
14. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and to the extent not prohibited herein, their respective
heirs, successors, assigns and representatives. Nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto and as provided above, their respective heirs, successors, assigns and
representatives any rights, remedies, obligations or liabilities.
- 4 -
<PAGE>
15. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York without regard to conflicts of
law.
- 5 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of
the date first above written.
CHILDROBICS, INC. Address: 200 Smith Street
Farmingdale, N.Y. 11735
By:
----------------------------
EMPLOYEE Adress: ------------------------
------------------------
- ---------------------------------`
<PAGE>
Exhibit E
GENERAL RELEASE
This general release is made as of the __ day of July, 1996 by ____________
("Releasor").
TO ALL TO WHOM THESE PRESENTS SHALL COME OR MAY CONCERN, KNOW THAT RELEASOR, for
good and valuable consideration, receipt of which is hereby acknowledged,
pursuant to and in conjunction with the execution and delivery of that certain
Employment Termination and Option Termination Agreement (the "Termination
Agreement"), among the Releasor, Salvatore Casaccio, A. Joseph Melnick and
Richard Bartlett, hereby releases and forever discharges Childrobics, Inc., its
officers, directors, employees, and attorneys (collectively, the "Releasees"
and, individually, a "Releasee") from all actions, causes of action, suits,
debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, contracts, guarantees, liabilities, controversies, agreements,
promises, variances, trespasses, damages, judgments, extents, executions, claims
and demands whatsoever, in law, equity or otherwise, whether known or unknown,
contemplated or not contemplated, foreseen or unforeseen, fixed or contingent,
which against the Releasee, the Releasor ever had, now has, or hereafter can,
shall or may have, for, upon, or by reason of any matter, cause or thing,
whatsoever from the beginning of the world to the day of the date hereof,
provided, however, such release shall not include, from and after the date
hereof, the rights, powers, liabilities and obligations arising out of or under
the Termination Agreement or any other instrument, document or agreement that is
an exhibit or schedule thereto or is signed and delivered pursuant thereto or
the transactions contemplated thereby.
This General Release may not be amended, waived, terminated or
otherwise changed in any respect, except with respect to a specific Releasee by
a writing signed by such Releasee. The validity, construction and interpretation
of this General Release and all rights, obligations and liabilities arising
hereunder shall be governed by the laws of the State of New York and for the
purpose of legal proceedings this General Release shall be deemed to have been
made and performed in the State of New York.
This General Release may be executed in one or more counterparts, and
shall become effective when one or more counterparts have been signed by each of
the parties thereto.
THIS GENERAL RELEASE IS FREELY AND VOLUNTARILY GIVEN TO THE RELEASEES
BY RELEASOR WITHOUT ANY DURESS OR COERCION AND AFTER SUCH RELEASOR HAS EITHER
CONSULTED WITH COUNSEL OR HAS BEEN GIVEN AN OPPORTUNITY TO DO SO, AND THE
RELEASOR HAS CAREFULLY AND COMPLETELY READ ALL OF THE TERMS AND PROVISIONS OF
THIS GENERAL RELEASE.
<PAGE>
IN WITNESS WHEREOF, each Releasor has hereunto executed this General
Release as of the date first written above.
-------------------------
Name:
On this _________ day of __________________, 1996, before me personally
appeared ____________________ to me known and known to me to be the individual
described in and who executed the foregoing instrument, and he duly acknowledged
to me that he executed the same for the purpose above stated, and, being by me
duly sworn, did depose and say that the statements therein contained are true.
--------------------------
Notary Public
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<PAGE>
Exhibit F
GENERAL RELEASE
This general release is made as of the day ____ of July, 1996 by
Childrobics, Inc. ("Releasor").
TO ALL TO WHOM THESE PRESENTS SHALL COME OR MAY CONCERN, KNOW THAT
RELEASOR, for good and valuable consideration, receipt of which is hereby
acknowledged, pursuant to and in conjunction with the execution and delivery of
that certain Employment Termination and Option Termination Agreement (the
"Termination Agreement"), among the Releasor, Salvatore Casaccio, A. Joseph
Melnick and Richard Bartlett, hereby releases and forever discharges ___________
and his heirs, executors, administrators and assigns (collectively, the
"Releasees" and, individually, a "Releasee") from all actions, causes of action,
suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, guarantees, liabilities, controversies,
agreements, promises, variances, trespasses, damages, judgments, extents,
executions, claims and demands whatsoever, in law, equity or otherwise, whether
known or unknown, contemplated or not contemplated, foreseen or unforeseen,
fixed or contingent, which against the Releasee, the Releasor ever had, now has
or hereafter can, shall or may have, for, upon, or by reason of any matter,
cause or thing whatsoever from the beginning of the world to the day of the date
hereof, provided, however, such release shall not include any claims which the
Releasor may have against Releasee for which a New York corporation may not
eliminate the personal liability of its directors pursuant to Section 402(b)(1)
of the New York Business Corporation Law and shall not include, in any case,
from and after the date hereof, the rights, powers, liabilities and obligations
arising out of or under the Termination Agreement.
This General Release may not be amended, waived, terminated or
otherwise changed in any respect, except with respect to a specific Releasee by
a writing signed by such Releasee. The validity, construction and interpretation
of this General Release and all rights, obligations and liabilities arising
hereunder shall be governed by the laws of the State of New York and for the
purpose of legal proceedings this General Release shall be deemed to have been
made and performed in the State of New York.
This General Release may be executed in one or more counterparts, and
shall become effective when one or more counterparts have been signed by each of
the parties thereto.
THIS GENERAL RELEASE IS FREELY AND VOLUNTARILY GIVEN TO THE RELEASEES
BY RELEASOR WITHOUT ANY DURESS OR COERCION AND AFTER SUCH RELEASOR HAS EITHER
CONSULTED WITH COUNSEL OR HAS BEEN GIVEN AN OPPORTUNITY TO DO SO, AND THE
RELEASOR HAS CAREFULLY AND COMPLETELY READ ALL OF THE TERMS AND PROVISIONS OF
THIS GENERAL RELEASE.
<PAGE>
IN WITNESS WHEREOF, each Releasor has hereunto executed this General
Release as of the date first written above.
Childrobics, Inc.
By:______________________
Name:
Title:
On this ______________ day of __________, 1996, before me personally
appeared _____________________________ to me known and known to me to be the of
Childrobics, Inc. who executed the foregoing instrument on behalf of
Childrobics, Inc., and he duly acknowledged to me that he executed the same on
behalf of Childrobics, Inc. for the purpose above stated, and, being by me duly
sworn, did depose and say that the statements therein contained are true.
---------------------------
Notary Public
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Childrobics, Inc.
200 Smith Street
Farmingdale, New York 11735
July 3, 1996
Jerry Reda, President
Just Kiddie Rides, Inc.
122 Dubon Court
Farmingdale, New York 11735
Gentlemen:
This letter of intent sets forth the basic terms of a proposal pursuant
to which Childrobics, Inc., a New York corporation ("Buyer"), will acquire all
or substantially all of (either by way of a merger, asset acquisition or stock
purchase) Just Kiddie Rides, Inc., a New York corporation ("Seller"). It is
anticipated that the consummation of the transactions contemplated herein will
occur on or before September 30, 1996, or on such other date as the parties may
agree.
This letter of intent is designed to reflect the essential terms of the
proposed transaction and the parties' agreement to negotiate in good faith
toward the consummation of the transactions contemplated herein. Both Seller and
Buyer recognize that this letter is a non-binding understanding and that the
closing (the "Closing") of the contemplated transaction is subject to all of the
terms and conditions hereof, a review of substantial additional documentation
and other matters.
1. Acquisition. Buyer will acquire Seller, either by way of merger,
asset acquisition or stock purchase, as shall be mutually acceptable.
2. Purchase Price. The purchase price will be (i) $1,000,000 in cash,
of which (A) $250,000 shall be payable upon receipt of proceeds by
Buyer from the sale of Units in connection with the proposed private
placement of securities of Buyer (the "Private Placement") and (B)
$750,000 shall be payable upon receipt of proceeds by Buyer from the
exercise of the warrants to be issued in the Private Placement, and
(ii) 3,273,750 shares of common stock, par value $.01 per share (the
"Common Stock"), of Buyer. In addition Seller will be granted
registration rights with respect to the sale of 250,000 of such shares
of Common Stock, excluding the registration statement to be filed by
the Buyer in connection with the Private Placement. The shares shall be
subject to a lock-up agreement pursuant to which Seller may not sell
greater than one-third of such shares until six months following the
effectiveness of the registration statement to be filed in connection
with the Private Placement (the "Effective Date"), an additional
one-third of such shares until nine
<PAGE>
months following the Effective Date, and the remaining one-third of
such shares until one year following the Effective Date, without the
consent of the Buyer. The obligation to make the payments set forth in
this Section 2 shall be evidenced by notes (the "Notes") to be executed
by Buyer in favor of Seller. The Notes shall bear interest at a rate
equal to the rate published by the Internal Revenue Service for debt of
such maturity and shall be secured by a pledge of stock of the
subsidiary of Buyer holding the assets of Seller. The Notes shall be
due one year after the closing of the acquisition and shall provide for
mandatory prepayments in accordance with this Section 2.
3. Closing Conditions. The consummation of the transactions
contemplated herein is subject to the fulfillment of the following
conditions:
(a) the negotiation and execution of definitive agreements
with respect to the transactions contemplated herein;
(b) the formal approval of the Board of Directors of Buyer to
the transactions contemplated herein and, if deemed necessary
by the Board, receipt of an opinion from an investment bank to
the effect that the transaction is fair to the stockholders of
Buyer from a financial point of view;
(c) Buyer shall have entered into a five-year employment
agreement with Jerry Reda providing for annual compensation of
$250,000 per annum, subject to adjustment upon agreed upon
terms after the first year. Such employment agreement shall
also provide for the grant of options to purchase 100,000
shares of Common Stock if Buyer's net income for the first
full fiscal year after the completion of the acquisition is at
least $1,500,000 (excluding any decrease in net income
attributable to options granted to current management as part
of their buy-out agreements), provided that if such $1,500,000
is not achieved in such fiscal year, but at least 85% of such
$1,500,000 is achieved, then the 100,000 options will be
earned if the Buyer's net income for the second full fiscal
year is at least $2,000,000 and for the grant of additional
options to purchase 100,000 shares of Common Stock if Buyer's
net income for the second full fiscal year after the Closing
is at least $2,500,000, provided that if such $2,500,000 is
not achieved in such fiscal year, but at least 85% of such
$2,500,000 is achieved, then the 100,000 options will be
earned if the Buyer's net income for the third full fiscal
year after the Closing is at least $3,000,000. Such net income
shall be derived from the audited financial statements of
Buyer for each such fiscal year and any options earned will be
granted as of the date such financial statements are signed by
the Company's independent certified
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<PAGE>
accountants. The exercise price of such options shall be equal
to the fair market value on the date of the grant and such
options shall vest immediately and be exercisable for 10 years
from the date of grant;
(d) After the Closing, Buyer shall use its best efforts to
have Mr. Reda removed as guarantor of Seller's bank loans;
(e) Messrs. Casaccio, Melnick and Bartlett shall resign as
officers and directors of Buyer and their employment
agreements shall be terminated as of the closing date; and
(f) Mr. Reda shall be elected to the Board of Directors of
Buyer prior to the Closing.
4. Definitive Agreements. The definitive agreements with respect to the
transactions contemplated herein will contain mutually agreeable
representations and warranties, mutually agreeable provisions for
indemnification, and break up fees and other appropriate terms and
conditions. All definitive agreements, as well as this letter of
intent, will be governed by the internal laws of the State of New York.
Additionally, the parties hereto agree, and shall agree in the
definitive agreements, to consent to the jurisdiction of the courts of
the State of New York and any Federal court situated therein.
5. Expenses. The parties shall each pay their respective expenses
(including fees and expenses of legal counsel) in connection with the
transactions contemplated herein.
6. Public Disclosure. Neither Buyer nor Seller shall make any public
disclosure concerning the subject matter hereof or the transactions
contemplated herein without the prior written consent of the other
party, except as required by the federal securities laws.
7. Exclusivity. Seller agrees that, for 60 days commencing from the
date of execution of this letter agreement, it will deal exclusively
with Buyer in connection with the sale of capital stock or assets of
Seller, any financing transaction(s) for Seller (except for financing
tractor-trailers or other vehicles for use in the business of Seller in
an aggregate amount not to exceed $250,000), or the merger or joint
venture of Seller with any other entity (all such transactions being
referred to herein as an "Acquisition Transaction"), and that Seller
shall not solicit, initiate or encourage any offer, proposal or inquiry
from, or engage in negotiations with, or provide any information to,
any corporation, partnership, person or other entity or group with
respect to any Acquisition Transaction nor shall Seller accept any
proposal with respect to an Acquisition Transaction.
Seller and Buyer acknowledge that this letter is a statement of their
mutual intention only, and unless a definitive agreement is executed and
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<PAGE>
delivered by the parties, there are no legally binding agreements between the
parties with respect to the transactions contemplated herein. Notwithstanding
the foregoing, the provisions of Section 5, 6 and 7 above shall constitute
binding legal agreements, shall be enforceable against Buyer and Seller in
accordance with their respective terms and shall survive any termination of the
transactions contemplated herein.
If you are in agreement with the terms and conditions of this letter of
intent, please sign and date the enclosed duplicate of this letter agreement in
the space provided below and return it to the undersigned.
Very truly yours,
CHILDROBICS, INC.
By: /s/ Salvatore Casaccio
------------------------
Accepted and agreed this 3rd
day of July, 1996
JUST KIDDIE RIDES, INC.
By: /s/ Gerard A. Reda
----------------------
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FOR IMMEDIATE RELEASE
Date: July 10, 1996
Contact: Michael Sable
(516) 694-0999 or Fax (516) 694-1062
Childrobics, Inc. Announces Signing Of Termination Agreements With Current
Officers And Directors, The Appointment Of Two New Directors, And The Intent To
appoint A New CEO/President.
Farmingdale, New York -- Childrobics, Inc. announced today that it has entered
into agreements to terminate the Employment Agreements and certain Option
Agreements between the Company and its current officers and directors. Salvatore
Casaccio, the Company's CEO and Director; Joseph Melnick, the Company's
President, COO, and Director; and Richard Bartlett, the Company's Executive Vice
President and Director have agreed to terminate their employment agreements,
resign as officers and directors, return certain options previously granted to
them by the Company, and relinquish current control of the Company to the new
directors that have been appointed.
The Company has taken the initial steps towards redirecting and
redesigning the Company's focus and image. First, the Company has appointed
Douglas B. Fox and Conrad J. Gunther, Jr. to serve as members of the board.
Mr. Fox is the former Vice President of Marketing for Times Mirror,
Inc. a newspaper group, the former President and Chief Operating Officer of New
York Newsday, the former Chief Operating Officer and President of Publishing and
Video games of
- 1 -
<PAGE>
Landmark Communications, Inc., a multi-divisional media company, and is still
currently employed at Landmark.
Mr. Gunther is the former Chief Operating Officer and Executive Vice
President of North Fork Bancorporation, a publicly traded company, and is
currently a business development manager and financial advisor for the Allied
Group, a privately-owned insurance brokerage firm.
The second step for the Company was to eliminate certain playcenter
locations that have proven to be a negative cash flow on the Company's balance
sheet. As part of Mr. Casaccio's agreement, he has agreed to take the stock of
the Company's subsidiaries which operate playcenters in Bayside, Brooklyn, and
Manhattan. In addition to the assets, Mr. Casaccio will assume any and all
outside liabilities of those locations. Next, Mr. Casaccio and Mr. Bartlett will
take the stock of the Company's subsidiary which operates the playcenter in
Staten Island, New York. Once again, in addition to the assets, Mr. Casaccio and
Mr. Bartlett will assume any and all outside liabilities of the location, but in
this case the Company will retain the right to operate all the video and vending
machines at this location, which has proven to be a profit center for the
Company.
Next, the Company has completed the terms of the letter of intent for
the acquisition of Just Kiddie Rides, Inc. pursuant to which the Company will
acquire all of Just Kiddie's common stock. Pursuant to the agreement Gerard A.
Reda, the President of Just Kiddie will enter into an employment agreement with
the Company and as a result will become the new President, Chief Executive
Officer, and Director of the Company.
Mr. Reda has stated that "the joining of these two companies the
elimination of the negative assets of
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<PAGE>
Childrobics, while keeping the assets that have proven to be a strong positive
cash flow for the Company and the addition of new management and directors will
position this Company for a strong financial position in the relative near
future."
