EXHIBIT 2.1
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
BY AND AMONG
PARK STRUCTURES, INC.,
PARK STRUCTURES SALES, INC.,
XXXX XXXXXX,
XXX XXXXXX
AND
KOALA CORPORATION
AUGUST 14, 1998
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
THIS AGREEMENT FOR SALE AND PURCHASE OF ASSETS ("Agreement") is made
and entered into as of August 14, 1998, by and among Park Structures, Inc., a
Florida corporation ("Park Structures"), and Park Structures Sales, Inc., a
Florida corporation ("Park Structures Sales") (Park Structures and Park
Structures Sales being referred to hereinafter collectively as "Seller"), Xxxx
Xxxxxx, Xxx Xxxxxx and Koala Corporation, a Colorado corporation ("Buyer").
RECITALS
A. Seller conducts a business of designing, constructing, selling
and distributing outdoor play equipment and accessories for children's use in
commercial settings (the "Business").
B. Xxxx Xxxxxx and Xxx Xxxxxx are the shareholders of Seller and are
herein referred to as the "Shareholders."
C. Seller, Xxxx Xxxxxx and Xxx Xxxxxx desire to sell the Business
and substantially all of the assets used in the Business. Buyer desires to
purchase and acquire the Business and substantially all of the assets used in
the Business and to assume only specific liabilities as more specifically set
forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto agree as follows:
ARTICLE I
Assets and Liabilities
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SECTION 1.1 Sale of Assets. Subject to the terms and conditions set
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forth in this Agreement (and except for the assets excluded as provided in
Section 1.2 hereof), Seller shall sell, convey, transfer, assign and deliver to
Buyer or a newly-formed subsidiary of Buyer and Buyer or such subsidiary shall
purchase, all of Seller's right of title and interest in and to the Business and
the assets (the "Purchased Assets") owned by Seller or used in or necessary to
or useful to the Business as of the Effective Time (as hereinafter defined)
including, but not limited to, the following:
(a) All of Seller's cash, cash equivalents and prepaid
expenses;
(b) All of Seller's accounts receivable ("Accounts
Receivable");
(c) Notes receivable from Xxxxxxx and Xxxx Paint ("Notes
Receivable");
(d) All leasehold improvements, property, plant and
equipment, and tangible personal property of all kinds owned by Seller or used
or useful in the Business (the "Personal Property") including without limitation
all of the furniture and fixtures, leasehold
improvements, molds and tooling (the "Molds") and equipment listed on Schedule
1.1(c) attached hereto;
(e) All of Seller's right, title and interest in and to the
name "Park Structures" and the patents, copyrights, trademarks, tradenames,
logos, patterns, designs, goodwill, customer lists, trade secrets, know how,
proprietary rights and other intellectual property rights owned by Seller or
used in the Business (the "Intellectual Property"), including the Intellectual
Property listed on Schedule 1.1(e) attached hereto;
(f) All forms and other supplies and expendables on order
or on hand (the "Supplies");
(g) All of Seller's existing contract rights, commitments,
purchase orders and sales orders relating to the Business and disclosed to Buyer
under Section 4.18 hereof as updated pursuant to Section 4.18 (the "Assigned
Contracts");
(h) All of Seller's franchises, licenses, registrations,
files, papers, books of account, sales and marketing records, personnel files
and all other books and records and files of any kind or description relating to
the Business;
(i) Seller's finished goods, work in process and parts
inventory (the "Purchased Inventory");
(j) All of Seller's rights in and to that certain Lease
Agreement dated March 20, 1997 with Handy & Xxxxxx Electronic Materials
Corporation pertaining to Seller's manufacturing facilities (the "Lease"); and
(k) All originals and copies of agreements, documents,
tapes, maps, books, records and files in the possession of Seller or the
Shareholders relating principally to the Business, including without limitation
electronically stored data.
The Purchased Assets shall include all of Seller's assets described above and/or
reflected in the June 30 Balance Sheet (as hereinafter defined), including
without limitation Other Assets (as hereinafter defined) and any such assets
acquired thereafter and prior to the Closing (as hereinafter defined) except for
inventory transferred or disposed of in the ordinary course of business after
June 30, 1998 or described in Section 1.2.
SECTION 1.2 Excluded Assets. The following assets of Seller (the
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"Excluded Assets") shall be excluded from the Purchased Assets:
(a) Seller's prepaid expenses, as set forth in Seller's
December 31, 1997 balance sheet, deferred rent and other receivables as
described on Schedule 1.2, as such schedule shall be updated and mutually agreed
to by Seller and Buyer as of Closing.
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(b) Anything to the contrary in Section 1.1
notwithstanding, the Purchased Assets shall exclude and Buyer shall not purchase
the following assets of Seller: (i) a 1995 Corvette used by Xxxx Xxxxxx; and
(ii) the corporate minute books and stock records of Seller and any other
corporate records which pertain to the corporation organization and
capitalization of Seller; provided that Buyer may receive a copy thereof at or
prior to Closing.
SECTION 1.3 Liabilities Assumed by Buyer. As of the Closing Date (as
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hereinafter defined in Section 3.1), Buyer shall assume only the following
liabilities of Seller (the "Assumed Liabilities"): (a) liabilities arising from
and after the Closing Date under the Assigned Contracts and the Lease; and (b)
warranty liabilities ("Assumed Warranties"), if any, to the extent of the
warranty reserve reflected in the Closing Balance Sheet (as hereinafter defined
in Section 3.6).
SECTION 1.4 Liabilities Not Assumed by Buyer. Buyer shall not assume
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any liabilities of Seller except those described in Section 1.3 hereof. In
addition, Buyer shall not assume the Toyota-Lexus automobile lease referenced in
Schedule 4.15. Specifically, Buyer is not assuming any disclosed or undisclosed
liabilities of any nature not included as Assumed Liabilities relating to the
Business or its operation prior to the Closing Date, including any payments due
suppliers under any contracts or commitments not included as Assigned Contracts,
taxes of any kind, salaries, bonuses or any other amounts due Seller's employees
for the period prior to the Closing Date, pension or any other liability to any
of Seller's employees for the period prior to the Closing Date, or liabilities
resulting from any products sold by Seller prior to the Closing Date in excess
of the Assumed Warranties. Seller shall promptly pay when due or otherwise
discharge all liabilities relating to the Business and its operations prior to
the Closing Date that are not Assumed Liabilities; provided that Seller shall be
entitled to contest any liabilities in good faith so long as no lien or charge
is imposed on the Purchased Assets or Buyer as a result thereof. To the extent
that Seller shall require parts or other inventory after the Closing to satisfy
its warranty obligations or liabilities, Buyer shall supply such parts or other
inventory to Seller at Buyer's normal and customary prices and charges which
shall be commercially reasonable.
ARTICLE II
Purchase Price
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SECTION 2.1 Purchase Price. The consideration for the purchase
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("Purchase Price") shall be as follows:
(a) Cash in the amount of $12,000,000.00, subject to
adjustment as set forth herein (the "Cash Portion");
(b) Cash in an amount equal to $651,613.00, representing
the cost of leasehold improvements made to the manufacturing plant covered by
the Lease, net of accumulated depreciation, as reflected on the June 30 Balance
Sheet (as hereafter defined);
(c) Cash in an amount equal to leasehold improvements made
after June 30, 1998 approved by Buyer which are not greater than $30,000.00;
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(d) Cash in an amount equal to $82,444.00, representing
amounts paid for furniture, fixtures and equipment, net of depreciation, from
January 1, 1998 to June 30, 1998, as reflected on the June 30 Balance Sheet, and
amounts paid for such items after June 30, 1998 approved by Buyer;
(e) The Additional Purchase Price described in Section 2.2;
and
(f) The amount of the Assumed Liabilities.
The Purchase Price is based on Current Assets included in the
Purchased Assets being equal to $2,540,000.00 and Other Assets being equal to
$67,500.00. The Cash Portion will be increased or decreased on a dollar for
dollar basis by the amount that Current Assets is more or less than
$2,540,000.00 and Other Assets is more or less than $67,500.00, and will be
decreased by the amount of the Assumed Warranties described in Section 1.3(b),
if any. Current Assets shall mean the sum of cash, cash equivalents, accounts
receivable, inventory and prepaid expenses included in the Purchased Assets.
Other Assets shall mean other assets of Seller consistent with those reflected
in the Reports (as hereafter defined). Current Assets, Other Assets and Assumed
Warranties shall be determined based on the Closing Balance Sheet as specified
in Section 3.6.
SECTION 2.2 Additional Purchase Price. Buyer shall pay Seller an
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additional amount based on EBITA for the Business for the nine month period
ended September 30, 1998 ("Nine Month Additional Purchase Price"), the twelve
(12) month period ended December 31, 1998 ("1998 Additional Purchase Price") and
for the six (6) month period ended June 30, 1999 ("1999 Additional Purchase
Price") (the Nine Month Additional Purchase Price, the 1998 Additional Purchase
Price and the 1999 Additional Purchase Price are collectively referred to as the
"Additional Purchase Price"). The Nine Month Additional Purchase Price shall be
determined under the following formula:
$1,500,000.00 - (($2,000,000.00 - the lesser of (i) Nine Month EBITA or
(ii) $2,000,000) x 3.5), provided that if the Nine Month Additional Purchase
Price is less than $1,500,000.00 (the "Nine Month Shortfall Amount") and
Adjusted 1998 EBITA is at least $2,000,000.00, Buyer shall pay Seller the Nine
Month Shortfall Amount.
The 1998 Additional Purchase Price shall be determined under the following
formula:
$3,500,000.00 - (($3,000,000.00 - the lesser of (i) Adjusted 1998 EBITA or
(ii) $3,000,000) x 3.5)
EBITA shall mean net income of the Business before interest, taxes,
amortization of acquisition intangibles, expenses of Xxxxxxxxx Xxxxx & Co. in
preparing the Reports (as hereinafter defined) and reasonable legal fees and
costs relating to the transactions contemplated by this Agreement determined on
the basis of generally accepted accounting principles by Buyer's independent
certified public accountants in a manner that is materially consistent with the
preparation of the Reports. No deduction shall be taken for payments for or in
respect of pricing or other intercompany transactions or arrangements or
payments to Buyer's independent certified public
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accountants or legal expenses made after the Closing between Seller, Buyer or
their affiliates. Nine Month EBITA shall mean EBITA for the nine (9) month
period ended September 30, 1998, and 1998 EBITA shall mean EBITA for the twelve
(12) month period ended December 31, 1998. To the extent that sales from the
Business are less than $11,754,000.00 for the twelve (12) month period ended
December 31, 1998, 1998 EBITA shall be adjusted ("Adjusted 1998 EBITA") to
include the net contribution of backlog orders at December 31, 1998, to the
extent that the amount of such backlog orders exceeds $646,000.00 ("Excess
Backlog Orders"). Net contribution shall mean the gross dollar amount of the
Excess Backlog Orders multiplied by the average gross profit percentage for the
Business for the twelve (12) month period ended December 31, 1998, less
commissions or bonuses to representatives or salespersons associated with such
excess Backlog Orders. In any event, the amount of the Excess Backlog Orders
utilized in the above calculation shall not exceed the lesser of (i) the amount
of the shortfall in sales from $11,754,000.00, or (ii) $500,000. By way of
example but without limitation, if 1998 XXXXX (xx 0000 Xxxxxxxx XXXXX) is
$2,900,000.00, the 1998 Additional Purchase Price shall be $3,150,000, and if
1998 XXXXX (xx 0000 Xxxxxxxx XXXXX) is less than $2,000,000.00, no 1998
Additional Purchase Price shall be paid. Buyer shall pay 57% of the 1998
Additional Purchase Price in cash and 43% of the Additional Purchase Price in
common stock of Buyer ("Koala Common Stock"). The number of shares of Koala
Common Stock to be issued to Seller shall be based on the average daily closing
sale price of Buyer's Common Stock on the Nasdaq National Market in the month of
December 1998 (with the number of shares rounded to the nearest whole number).
If payable, the Nine Month Additional Purchase Price shall be payable on the
later of October 15, 1998 or fifteen (15) days after the Closing. If payable,
the 1998 Additional Purchase Price and the Nine Month Shortfall Amount shall be
paid to Seller on or before March 1, 1999. Seller agrees that the shares of
Koala Common Stock may not be sold, exchanged or otherwise transferred for two
(2) years from their date of issuance and that the certificates representing
such shares shall bear a legend to that effect; provided that Seller may assign
such shares to the Shareholders, any trust for the benefit of the Shareholders
and to any members of their immediate families (i.e., spouse and children)
subject to the same restriction.
The 1999 Additional Purchase Price shall equal $1,000,000.00 in cash. The
1999 Additional Purchase Price shall be payable only if EBITA for the six (6)
months ended June 30, 1999 is greater than 120% of EBITA for the six (6) months
ended June 30, 1998 (as shown in the Reports). The 1999 Additional Purchase
Price shall be paid to Seller on or before September 1, 1999. EBITA for the
purposes of the 1999 Additional Purchase Price shall be reduced by the amount of
any adjustment to 1998 EBITA for Excess Backlog Orders.
If after the Closing a Force Majeure (as hereinafter defined) occurs, the
periods used in computing the Nine Month Additional Purchase Price, the 1998
Additional Purchase Price and the 1999 Additional Purchase Price shall be
extended by the number of days during which the effects of a Force Majeure cause
the operation of the Business to be suspended or materially limited. "Force
Majeure" shall mean a fire, hurricane, tornado, flood or other Act of God,
explosion, labor dispute, accident or other calamity, civil disturbance, riot,
material slowdown or shutdown of any major supplier, government action or other
similar event not within the control of Buyer or the death or incapacitation of
Xxxx Xxxxxx.
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SECTION 2.3 Allocation of Purchase Price. The Purchase Price shall be
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allocated among the Purchased Assets in the manner set forth in Schedule 2.3.
Buyer and Seller shall not take any position on their respective income tax
returns that is inconsistent with the allocation of the Purchase Price as set
forth in Schedule 2.3, and Buyer and Seller shall duly prepare and timely file
such reports and information returns as may be required under Section 1060 of
the Internal Revenue Code of 1986 to report the allocation of the Purchase Price
among the assets as set forth in Schedule 2.3.
SECTION 2.4 Past Due Payments. If any payment due Seller is not timely
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paid and delivered to it on the due date, interest thereon shall accrue and be
due at the rate of twelve (12.00%) per annum.
ARTICLE III
The Closing
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SECTION 3.1 Place and Time. The closing (the "Closing") under this
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Agreement will take place on a date specified by Buyer (the date on which the
Closing occurs is referred to herein as the "Closing Date"). The Closing will
take place on three business days notice to Seller at the offices of Parcel
Mauro PC, 0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx. The Closing
will be effective as of the 12:01 a.m. Eastern Time on the first day of the
month in which the Closing occurs (the "Effective Time").
SECTION 3.2 Payment and Delivery by Buyer. At the Closing, and subject
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to the terms and conditions as set forth herein, Buyer shall:
(a) deliver to Seller the Cash Portion of the Purchase
Price, net of the holdbacks described in Sections 3.8 and 3.9, and the amount
determined under Section 2.1(b) in the form of a certified or bank cashier's
check or by wire transfer of funds;
(b) execute and deliver the certificate required by Section
9.1 hereof;
(c) cause Buyer to execute and deliver the General
Assignment, Conveyance and Assumption Agreement described in Section 3.3
pursuant to which Buyer will assume the Assumed Liabilities; and
(d) deliver an opinion of Buyer's counsel reasonably
acceptable to Seller and the Shareholders.
SECTION 3.3 Delivery by Seller. At the Closing, and subject to the
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terms and conditions as set forth herein, Seller shall:
(a) execute and deliver a General Assignment, Conveyance
and Assumption Agreement, with warranty of title, conveying to Buyer all of the
Purchased Assets;
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(b) execute and deliver such other warranty bills of sale,
endorsements, assignments, certificates of title, and other instruments of
transfer and conveyance as are reasonably requested by Buyer including if
required an Assignment of Lease;
(c) deliver fully executed releases of all liens, charges,
encumbrances or security interests affecting the Purchased Assets;
(d) execute and deliver appropriate documents changing its
name to a name that does not include "Park Structures";
(e) deliver duly signed consents required for the
assignment of any Assigned Contracts;
(f) execute and deliver the certificate required by Section
8.1 hereof; and
(g) deliver an opinion of counsel to Seller and the
Shareholders reasonably acceptable to Buyer.
The documents described in (a), (b), (e) and (f) shall be prepared by
Buyer's counsel and shall be reasonably satisfactory to Seller and Seller's
counsel. All of the Purchased Assets shall be conveyed to Buyer free and clear
of all liens and encumbrances. Each party will from time to time after the
Closing, at the other party's request, execute such further instruments as the
other party reasonably deems necessary to carry out the sale of the Purchased
Assets pursuant to this Agreement.
SECTION 3.4 Other Deliveries. At the Closing, and subject to the terms
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and conditions as set forth herein, Buyer and Xxxx Xxxxxx shall enter into the
letter agreement regarding his employment by Buyer attached as Exhibit A.
SECTION 3.5 Possession. Buyer shall be entitled to take possession of
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and Seller shall deliver to Buyer the Purchased Assets at the close of business
on the Closing Date effective as of the Effective Time. The delivery shall take
place at Seller's principal place of business.
SECTION 3.6 Calculation of Current Assets, Other Assets and Assumed
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Warranties. Current Assets, Other Assets and Assumed Warranties shall be
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determined as of the close of business on the business day immediately preceding
the Closing Date (the "Closing Balance Sheet Date") based on a balance sheet
(the "Closing Balance Sheet") prepared by Buyer's independent certified public
accountants in accordance with generally accepted accounting principles subject
to the following:
(a) Purchased Inventory shall be valued at the lower of
cost or market value, with no value being given to obsolete (i.e., not usable or
saleable in the ordinary course within 120 days) or damaged inventory not usable
in the ordinary course of business;
(b) Cash equivalents shall be valued at fair market value
as of the close of business on the Closing Balance Sheet Date;
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(c) Other Assets shall be valued as of the close of
business on the Closing Balance Sheet Date in a manner consistent with Other
Assets established in the Reports; and
(d) the warranty reserve for the Assumed Warranties shall
be determined in a manner consistent with the warranty reserve established in
the Reports.
SECTION 3.7 Disputes Concerning Financial Calculations Affecting
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Purchase Price. Buyer, Seller and the Shareholders agree not to dispute any
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calculations agreed to as of the Closing under Section 2.1 absent manifest
error. For the purpose of the Additional Purchase Price calculation described
in Section 2.2 and the calculation in Section 3.8, Seller shall receive copies
of the calculations prepared by Buyer's independent certified public accountants
and may dispute any aspect of the calculations by giving written notice to Buyer
within twenty-one (21) business days following the delivery of such calculation
to Seller. If such dispute is not resolved promptly by agreement and in any
event within twenty-one (21) business days after the delivery of the notice of
dispute to Buyer, the matter will be referred to binding arbitration before a
certified public accountant qualified to practice in Denver, Colorado who is
mutually agreeable to the parties. If Seller and Buyer cannot agree on an
arbitrator, each shall designate a certified public accountant qualified to
practice in Denver, Colorado who shall meet and select another certified public
accountant qualified to practice in Denver, Colorado to serve as the arbitrator.
The arbitrator will determine the matter in dispute in accordance with the rules
of the American Arbitration Association and will be instructed to make a
decision within thirty (30) days of being appointed. At any time during such
thirty (30) day period, Seller or Buyer may make written submissions to the
arbitrator concerning the specific items in dispute, copies of which submissions
will be delivered to the other parties contemporaneously with the delivery
thereof to the arbitrator. The decision of the arbitrator with respect to any
matter in dispute shall be final and binding on Buyer and Seller and, to the
fullest extent permitted by law, shall not be subject to appeal or review by any
party. The fees and expenses of the arbitrator shall be borne equally by Seller
and Buyer. Upon agreement with respect to all matters in dispute, or upon a
decision of the arbitrator with respect to all matters in dispute, such
amendments shall be made to the calculations as may be appropriate to reflect
such agreement or such decision, as the case may be.
SECTION 3.8 Purchase Price Adjustment Procedures. Schedule 3.8 is a
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preliminary calculation of the Current Assets, Other Assets and Assumed
Warranties and the Cash Portion of the Purchase Price relating thereto to be
paid at Closing based upon the June 30 Balance Sheet. Pending final calculation
of Current Assets, Other Assets and Assumed Warranties under Sections 3.6 and
3.7 and the Accounts Receivable Shortfall (as hereinafter defined), if any,
$400,000.00 (the "Holdback Amount") of the Cash Portion of the Purchase Price
shall be held back at the Closing. Seller and Buyer shall cooperate to complete
the final calculation of Current Assets, Other Assets and Assumed Warranties as
soon as possible, but in no event later than one hundred fifty (150) days
following the Closing Date. Accounts Receivable shall be valued as of the close
of business on the Closing Balance Sheet Date, net of a reserve in an amount
consistent with the reserve established in the Reports, with no value being
given to Accounts Receivable more than one hundred fifty (150) days past due
(the "Net Accounts Receivable Value"). The Notes Receivable shall be valued at
their outstanding principal and accrued interest balances on the Closing Balance
Sheet Date. After the
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Closing, Buyer shall use reasonable diligence to collect the Accounts Receivable
in the ordinary course of business. Buyer shall not settle any Accounts
Receivable for less than full payment without obtaining the prior written
consent of Seller. If within one hundred fifty (150) days of the Closing, Buyer
has not collected cash from such Accounts Receivable in an amount that is at
least equal to the Net Accounts Receivable Value, the difference between the Net
Accounts Receivable Value and the amount so collected (the "Accounts Receivable
Shortfall") shall be retained by Buyer and any uncollected Accounts Receivable
shall be immediately assigned to Seller. To the extent Buyer collects any
Accounts Receivable for which it has attributed no value, Buyer shall promptly
pay Seller such collected amounts. If a default occurs under a Note Receivable
and Buyer is unable to collect such Note Receivable after making reasonable non-
judicial collection attempts, Seller and the Shareholders shall promptly pay
Buyer the outstanding amounts due under such Note Receivable and Buyer shall
immediately assign to Seller the Note Receivable and any security interest
therein. Within ten (10) days after Current Assets, Other Assets and Assumed
Warranties and the Accounts Receivable Shortfall are calculated, the parties
will determine the correct Cash Portion of the Purchase Price based on the
adjustments described in Section 2.1, and the amount owed by Buyer to Seller or
Seller to Buyer, as applicable, will be paid immediately by bank cashier's check
or wire transfer as Seller may direct based on disbursement instructions signed
by Buyer and Seller or, if Buyer and Seller are unable to agree, based on the
decision of the arbitrator under Section 3.7. The amount paid to Seller shall
include interest thereon from the Closing Date to the date of payment at five
(5) percent per annum.
SECTION 3.9 Warranty Holdback. To further protect Buyer against
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warranty claims for products and services sold by Seller prior to the Effective
Time ("Pre-Closing Warranty Claims"), Seller shall, for a period of two (2)
years after the Closing (the "Warranty Period"), satisfy any Pre-Closing
Warranty Claims that individually have a cost ("Warranty Cost") in excess of
$1,000 ("Covered Warranty Claims"). Buyer shall determine Warranty Cost
consistently with the cost of satisfying warranty claims for products and
service in the Business sold by Buyer after the Closing. Warranty Cost shall
include Buyer's normal and customary prices and charges, including the cost of
parts or other inventory and labor and shall be reduced by recoveries by Buyer
from suppliers or other third parties. Seller shall promptly reimburse Buyer
for the Warranty Cost of any Covered Warranty Claims.
ARTICLE IV
Representations and Warranties of Seller and the Shareholders
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Seller and the Shareholders, jointly and severally, represent, promise
and warrant to Buyer as of the date hereof and as of the Closing as follows:
SECTION 4.1 Organization. Each of Park Structures and Park Structures
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Sales is a corporation duly organized, validly existing, and in good standing
under the laws of Florida. Each has all power and authority to own its property
and carry on the business as now conducted and has all necessary and material
licenses, permits and government approvals. Each of Park Structures and Park
Structures Sales is duly qualified to transact business in the jurisdictions
listed on Schedule 4.1.
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SECTION 4.2 Authorization. Xxxx Xxxxxx and Xxx Xxxxxx are the sole
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shareholders, beneficially and of record, of each of Park Structures and Park
Structures Sales. The execution, delivery and performance of this Agreement and
any other documents or instruments contemplated hereby have been duly authorized
by all necessary action of Seller, Xxxx Xxxxxx and Xxx Xxxxxx and this Agreement
has been executed and delivered by Seller, Xxxx Xxxxxx and Xxx Xxxxxx and
constitutes a legal, valid and binding obligation of Seller, Xxxx Xxxxxx and Xxx
Xxxxxx enforceable in accordance with its terms, except that such enforcement
may be limited by applicable bankruptcy, insolvency or other laws of general
application affecting the enforceability of creditor's rights generally and
except that specific performance and equitable remedies may only be granted in
the discretion of a court of competent jurisdiction.
SECTION 4.3 Financial Reports. Attached hereto as Schedule 4.3 are true
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and correct copies of the audited financial statements (including a balance
sheet and statement of income) of Seller for the two years ended December 31,
1997 and the audited financial statements (including a balance sheet (the "June
30 Balance Sheet") and statement of income) of Seller for the six months ended
June 30, 1998. The foregoing audited financial statements shall be prepared by
Xxxxxxxxx Xxxxx & Co. and are referred to hereinafter collectively as the
"Reports". The Reports shall contain an unqualified opinion of Xxxxxxxxx Xxxxx
& Co. Until Closing, Seller shall deliver to Buyer no later than the 15th day
of each month a true and correct copy of the financial statements (including a
balance sheet and statement of income) of Seller as of the last day of each
preceding month prepared from the books of Seller without audit (the "Interim
Reports") (collectively, the Reports and the Interim Reports shall be referred
to as the "Financial Reports"). All such Financial Reports are in accordance
with the books and records of Seller and have been prepared in accordance with
generally accepted accounting principles consistently followed throughout the
periods indicated (except as indicated therein), reflect all assets and
liabilities of Seller, including all contingent liabilities, and present fairly
and completely the financial condition of Seller and the business at such dates
and results of its operations for the periods then ended, subject only, in the
case of the Interim Reports, to normal year end adjustments.
SECTION 4.4 Absence of Undisclosed Liabilities. Except to the extent
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reflected or reserved against in the Reports or disclosed on Schedule 4.4, to
the best knowledge of Seller and the Shareholders, Seller did not have as of the
date of the Reports any material liabilities or obligations of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due.
SECTION 4.5 Absence of Certain Changes. Except as contemplated by this
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Agreement, since June 30, 1998, Seller has not and will not have as of the
Closing Date:
(a) Except as disclosed in Schedule 4.5, suffered any
material adverse change in its financial condition, assets, liabilities,
business, or prospects; experienced any labor difficulty; or suffered any
material casualty loss (whether or not insured);
(b) Incurred any material obligations or liabilities
(whether absolute, accrued, contingent, or otherwise and whether due or to
become due), except current liabilities in the ordinary course of business and
consistent with past practice;
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(c) Entered into any contracts or agreements except in the
ordinary course of business and consistent with past practice;
(d) Except as disclosed on Schedule 4.5, permitted or
allowed any of its properties or assets, real, personal, or mixed, tangible or
intangible, to be mortgaged, pledged, or subjected to any lien or encumbrance
other than the lien of current property taxes not yet due and payable;
(e) Except as disclosed in Schedule 4.5, written down or
written up the value of any of its inventory, or written off as uncollectible
any of its notes or accounts receivable or any portion thereof, except for write
downs and write-offs in the ordinary course of business, consistent with past
practice;
(f) Canceled any other material debts or claims, or waived
any rights of substantial value, or sold or transferred any of its properties or
assets, real, personal, or mixed, tangible or intangible, except in the ordinary
course of business and consistent with past practice;
(g) Knowingly disposed of or permitted to lapse any patent,
trademark, or copyright or any patent, trademark, or copyright application or
license, or disposed of or disclosed to any person or trade secret, formula,
process, or know-how;
(h) Granted any increase in compensation or rate of
compensation or commission payable or to become payable to any of its employees
or agents except merit or seniority increases made in the usual course of
business and heretofore disclosed to Buyer;
(i) Except for the leasehold improvements approved by Buyer
under Section 2.1(c), made capital expenditures or commitments for additions to
property, plant, or equipment;
(j) Made any changes in any method of accounting or
accounting practice; or
(k) Agreed, whether in writing or otherwise, to take any
action described in this Section 4.5
SECTION 4.6 Title to Purchased Assets. Except as disclosed on Schedule
-------------------------
4.6, the Purchased Assets constitute all of the assets used in the business and
Seller owns, and has the right to transfer to Buyer, the Purchased Assets, free
and clear of any liens, charges, encumbrances or security interests, whether by
mortgage, pledge, lien, conditional sale agreement, encumbrance, charge, or
otherwise, and such Purchased Assets are not subject to any lease or license
other than as described on Schedule 4.6. At the Closing all of the liens and
encumbrances described on Schedule 4.6 affecting the Purchased Assets will be
paid or discharged in full. There are no outstanding options, agreements or
commitments obligating Seller to sell the Business or any of the Purchased
Assets to any other person except for sales of products in the ordinary course
of business. The Purchased
-11-
Assets owned are in good and serviceable condition and suitable for the uses for
which they are intended, and the owned and leased Purchased Assets and their use
conform in all material respects to all applicable laws, including building and
zoning laws or other applicable laws, and no notice of any violation of building
or zoning laws or other applicable ordinances or regulations relating to the
Purchased Assets and their use has been received by Seller. No special
assessment, impact fee or similar charge has been imposed or, to the knowledge
of Seller or the Shareholders is proposed to be imposed against any of the
Purchased Assets. Seller enjoys peaceful and undisturbed possession under all
leases under which it is operating, and all said leases are valid and subsisting
and in full force and effect. Except for the Purchased Assets, Seller has no
other assets or properties, tangible or intangible, used, usable or useful in
the operation of the Business.
SECTION 4.7 Personal Property. Schedule 4.7 contains a complete and
-----------------
accurate list of all of the Personal Property used by Seller in the Business
with a value in excess of $1,000.00. Except as otherwise disclosed on Schedule
4.7, the Personal Property and Supplies are all in possession of Seller and
located at Seller's principal place of business, are in good and useable
condition and repair with no known material defects and of a quality and
quantity useable in, and adequate for, the ordinary course of business.
SECTION 4.8 Property Violations. Seller has not received any
-------------------
notification that there is any violation of any building, zoning, or other law,
ordinance, or regulation in respect of any property used by Seller in the
business, and to the best of its knowledge no such violation exists.
SECTION 4.9 Purchased Inventory. The Purchased Inventory is in good
-------------------
condition and consists of a quality, type and quantity useable and saleable in
the ordinary course of business without discounts or adjustments.
SECTION 4.10 Accounts Receivable. All of the Accounts Receivable have
-------------------
been or will have been created in the ordinary course of business from the sale
of Seller's products or services on normally and customary terms of sale,
represent bona fide obligations from unrelated parties, and are collectible in
the ordinary course except to the extent of the reserve provided for in the
Reports, and no obligor with respect to any Accounts Receivable has any right of
offset against Seller.
SECTION 4.11 Compliance with Other Instruments. Seller and the
---------------------------------
Shareholders have complete and unrestricted power to undertake and perform all
of the obligations contained in this Agreement. Neither the execution and
delivery, nor the consummation of the transactions provided for in this
agreement, will violate the organizational documents of Seller or any material
agreement, mortgage, indenture, license, franchise, permit, lease or other
instrument, judgment, decree, order, law or regulation by which Seller or the
Shareholders are bound. No consent is required for Seller or the Shareholders
to enter into this Agreement or consummate the transactions contemplated thereby
that has not been obtained.
SECTION 4.12 Litigation. Except as disclosed in Schedule 4.12, there is
----------
no action, suit, litigation or proceeding pending, or, to the best knowledge of
Seller and the Shareholders, threatened against or relating to Seller or the
Business.
-12-
SECTION 4.13 Tax Returns. Seller's income tax returns for the years
-----------
ended December 31, 1993, 1994, 1995, 1996 and 1997, true and correct copies of
which have been provided to Buyer, are materially correct and complete. Seller
has duly filed all tax reports and returns required to be filed by it and has
duly paid all taxes and other charges due or claimed to be due from it by
federal, provincial, state, or local taxing authorities (including, without
limitation, those due in respect of its properties, income, franchise, licenses,
sales, and payrolls); there are no tax liens upon any of the Purchased Assets
(other than liens for current taxes not yet due); there are no agreements,
waivers or other arrangements providing for an extension of time with respect to
the assessment of any tax or deficiency against the Purchased Assets or Seller
nor are there to the best knowledge of Seller and the Shareholders any actions,
suits, proceedings, investigations or claims now pending against Seller or
relating to the Business; and, there are no pending discussions or questions
relating to, or claims asserted for taxes or assessments against Seller.
SECTION 4.14 Insurance and Other Claims. Schedule 4.14 contains a
--------------------------
summary of claims filed against Seller, whether or not covered by insurance
maintained by Seller. The current policies issued to Seller, copies of which
are attached as part of Schedule 4.14, are valid, outstanding, and enforceable
policies which shall continue to be in effect through the Closing. Seller has
not been refused any insurance nor has any such coverage been limited by an
insurance carrier to which it has applied for insurance during the last three
years.
SECTION 4.15 Leases. Schedule 4.15 hereto contains an accurate and
------
complete description of the terms of all leases pursuant to which Seller leases
real or personal property from or to others. A true, correct and complete copy
of all leases (including all amendments or modifications thereto) have been
provided to Buyer. All such leases are valid, binding, in full force and effect
with no default thereunder and enforceable in accordance with their terms,
except that such enforcement may be limited by applicable bankruptcy, insolvency
or other laws of general application affecting the enforceability of creditor's
rights generally and except that specific performance and equitable remedies may
only be granted in the discretion of a court of competent jurisdiction. The
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement will not terminate or be a cause for default
under any such leases and no consent to assignment of any of such leases is
required that has not been obtained.
SECTION 4.16 Intellectual Property. Schedule 4.16 hereto contains an
---------------------
accurate and complete description of all Intellectual Property owned or held by
Seller and used in the Business, as well as all pending applications for
registration of any rights in Intellectual Property. No products sold, nor any
patents, formulae, processes, designs, patterns, know-how, trade secrets,
trademarks, trade names, assumed names, copyrights, or designations used in its
business are included in any interference proceeding or infringe on any
proprietary rights of any person. No licenses, sublicenses or covenants have
been granted or entered into by Seller in respect of any Intellectual Property.
Seller validly owns or has valid licenses for Intellectual Property that is
necessary for the conduct of the business as now conducted. Seller and the
Shareholders have no knowledge of any infringement against any Intellectual
Property.
SECTION 4.17 Employee Matters. Schedule 4.17 hereto contains an accurate
----------------
and complete (a) list of all employees showing their date of hire, compensation,
accrued vacation and sick leave
-13-
as of the date of this Agreement and (b) a description of, and the annual amount
payable pursuant to, each fringe-benefit plan or arrangement payable to
employees (including each bonus, deferred compensation, or other arrangement).
Except as disclosed on Schedule 4.17, there are no contracts of employment with
any employees. Seller has complied with all applicable laws relative to employee
benefits. Seller is not a party to any collective bargaining or other labor
agreement and neither Seller nor the Shareholders are aware of any labor union
organizing activities involving Seller's employees. Seller shall update Schedule
4.17 as of the Closing.
SECTION 4.18 Contracts and Commitments. Schedule 1.1(d) hereto is a list
-------------------------
of all of the following contracts, agreements, plans, arrangements, or
commitments currently in effect for the benefit of or relating to the Business:
(a) All contracts, contract rights, purchase orders,
agreements and commitments with respect to the sale of products or services;
(b) all contracts, contract rights, purchase orders,
agreements and commitments for the purchase of supplies, materials, equipment,
parts inventory, or other products involving expenditures or commitments in
excess of $3,000;
(c) All sales agency and distributor agreements or
franchises;
(d) All other agreements with suppliers of goods and
services involving expenditures or commitments in excess of $3,000 or which
cannot be terminated on thirty (30) days' notice;
(e) All agreements providing for the services of any
independent contractor;
Except as specified in Schedule 4.18, all of such contracts,
agreements, and commitments, are valid, binding, and in full force and effect
and there is no existing material default thereunder; and the transaction
contemplated by this Agreement will not create nor result in a default
thereunder and will not cause acceleration of any obligation of any party
thereto or the creation of any lien, encumbrance, or security interest in or
upon any Purchased Assets or grant any other right or remedy to a third party;
copies of all of the documents described in the aforesaid schedules have been
delivered to Buyer or will be delivered upon request and are, or will when
delivered be, true and complete in all material respects and include all
material amendments, supplements or modifications thereto. Seller shall update
Schedule 4.18 as of the Closing Date to reflect changes to such Schedule between
the date of this Agreement and the Effective Time; provided that no such changes
shall be made to such Schedule without Buyer's prior written consent if such
changes, either individually or in the aggregate, would increase the liability
of Buyer beyond that which Buyer shall have under the Assigned Contracts as of
the date of this Agreement.
SECTION 4.19 Compliance with Law. Seller has not received any notice of
-------------------
any violation of, and Seller has complied in all material respects with, all
laws, regulations, and orders applicable to the Business including all rules and
regulations of the Consumer Product Safety Commission.
-14-
Without limiting the foregoing, Seller has not violated and is not now in
violation of any federal, state nor local environmental law. Seller has not
received or is subject to any order, decree, claim, injunction or notice of
violation, noncompliance or potential liability under or relating to any
environmental law, and no threat has been made and, to the knowledge of Seller
no basis exists for the issuance or assertion of any such order, claim or
notice. Except as disclosed in Schedule 4.19, to Seller's and the Shareholders'
knowledge, no environmental conditions exist at, on or under, and there has been
no generation, treatment, storage, disposal, transfer or release of any
hazardous substances or hazardous materials as defined under any environmental
law at, on, under or from, any of the properties owned, leased or operated by
Seller that could give rise to any material liability to Seller. The letter
attached to Schedule 4.19 that establishes an environmental baseline for the
Business is true, accurate and complete.
SECTION 4.20 Licenses and Permits. Schedule 4.20 hereto is a list of all
--------------------
licenses and permits required for Seller's operation of the Business, all of
which are in full force and effect.
SECTION 4.21 Product Warranties. The warranty reserve reflected on the
------------------
Closing Balance Sheet will adequately cover the amount of all warranty claims
for products and services sold by Seller prior to the Effective Time.
SECTION 4.22 No Condemnation. No proceedings are pending or, to the
---------------
knowledge of Seller threatened with respect to the condemnation or taking by
eminent domain of any of the Properties.
SECTION 4.23 Year 2000 Issue. Seller and the Shareholders acknowledge
---------------
that the approach of the year 2000 has become a potential problem for businesses
utilizing computers in their operations since many computer programs are date
sensitive and will only recognize the year 1900 or not at all (the Year "2000
Issue"). To Seller's and the Shareholders' knowledge, except as disclosed in
Schedule 4.23, all software programs included in the Business are Year 2000
compliant, that is, the operation and functionality of such software programs
will not be materially adversely affected by the Year 2000 Issue and there are
no other material Year 2000 Issues involving Seller, its suppliers or customers
that may have a material adverse effect upon the Business.
SECTION 4.24 No Adverse Conditions. Except as otherwise set forth in
---------------------
this Agreement, the Assets are not subject to any adverse conditions or
circumstances that could reasonably be expected to interfere with Buyer's use
and enjoyment of or opportunity to resell or encumber any of the Assets or that
might otherwise impede Buyer's ability to conduct the Business using the Assets.
SECTION 4.25 Disclosure. All material facts of which Seller or the
----------
Shareholders have knowledge relating to the Business or the operations,
financial condition and prospects of Seller and the business are reflected in
the Financial Reports or have been disclosed in this Agreement or otherwise
disclosed in writing to Buyer. No representation or warranty by Seller or the
Shareholders contained in this Agreement and no statement contained in any
exhibit, schedule certificate, list, or other writing furnished to the Buyer
pursuant to the provision hereof contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
therein not materially misleading.
-15-
ARTICLE V
Conduct of Business Prior to Closing
------------------------------------
Seller and the Shareholders, jointly and severally, covenant and agree
that from the date of this Agreement and prior to the Closing, except as Buyer
shall have consented in writing:
SECTION 5.1 Operation in Ordinary Course. The Business will be
----------------------------
conducted only in the ordinary course consistent with past practices. Seller
shall not make any distributions or other payments to Seller's shareholders
except for compensation for services consistent with past practices.
SECTION 5.2 Operation of the Business. Seller and the Shareholders
-------------------------
shall use their best efforts to keep the Business intact and to preserve the
goodwill of suppliers, customers and others having business relations with
Seller and to keep available to Buyer the services of the present employees and
agents.
SECTION 5.3 Employees. Seller shall pay all salaries, wages, payroll
---------
taxes, benefits, vacation pay, all other fringe benefit costs, and all other
costs of every nature whatsoever due or accrued at or prior to the Closing to or
for the benefit of its employees or agents. Seller shall hold Buyer harmless
and indemnify Buyer from loss, cost or expense including but not limited to
attorneys' fees which might result from any claim by or on behalf of any of
Seller's employees relating to the foregoing. Effective as of the close of
business on the Closing Date, Seller shall terminate the employment of all of
Seller's employees and Buyer shall have the right to hire such employees as
contemplated by Section 12.3 hereof.
SECTION 5.4 Payment of Liabilities. Seller shall pay as the same
----------------------
becomes due all of Seller's liabilities accrued after, at, or prior to the
Closing; provided Seller shall be entitled to contest any liabilities in good
faith so long as no lien or charge is imposed on the Purchased Assets or Buyer
as a result thereof.
SECTION 5.5 Payment of Taxes. Seller and the Shareholders shall
----------------
promptly file all tax returns and pay all federal, state and local tax
assessments and governmental charges which are or may be lawfully levied or
assessed against Seller, the Business or the Purchased Assets for periods ending
on or prior to the Effective Time, including, but not limited to income, ad
valorem, sales, use, excise, franchise and personal property taxes. Buyer shall
fully cooperate with Seller and the Shareholders to provide all information
requested by Seller and the Shareholders to file such tax returns.
SECTION 5.6 Access to Information. Seller shall permit Buyer and their
---------------------
authorized employees, agents, consultants, accountants and legal counsel,
access, at Buyer's sole expense, risk and cost, during normal business hours and
in such a manner as will not interfere with the conduct of Seller's business, to
the books and records, properties and other Purchased Assets and will furnish
Buyer with such additional financial and operating data and other information
pertaining to the Business as Buyer may reasonably request; provided, however,
that all site visits and inquiries of employees of Seller shall be coordinated
through Xxxx Xxxxxx.
-16-
SECTION 5.7 Insurance. Seller will maintain in effect through the
---------
Closing Date all existing insurance coverage covering the Purchased Assets.
SECTION 5.8 Maintenance of Properties, etc. Through the Closing Date,
------------------------------
Seller will maintain all the properties in customary repair, order and
condition, reasonable wear and use and damage by fire or other casualty
excepted. Seller shall be responsible for all risk of loss prior to the Closing
Date.
SECTION 5.9 Maintenance of Books, etc. Through the Closing Date, Seller
--------------------------
will maintain the books, accounts and records in the usual manner on a basis
consistent with prior periods. Seller will duly comply in all material respects
with all laws and decrees applicable to it.
SECTION 5.10 Certain Prohibited Transactions. Through the Closing Date,
-------------------------------
except with the prior written consent of the Buyer, Seller will not enter into
any contract to merge or consolidate with or sell all or any substantial part of
the Purchased Assets to any other person, or engage in any discussions with any
other party with respect to any of the foregoing, or change the character of the
Business.
SECTION 5.11 Notice of Adverse Changes. Between the date of this
-------------------------
Agreement and the Closing Date, Seller shall promptly notify Buyer in writing of
any materially adverse developments affecting the Business which become known to
Seller or the Shareholders, including, without limitation, (i) any change in the
condition, financial or otherwise, of the Business and its prospects that could
have a material adverse effect on Seller, including, without limitation the loss
of major sales representatives or other customers or suppliers; (ii) any damage,
destruction or loss (whether or not covered by insurance) materially and
adversely affecting the Business, (iii) any notice of any violation, forfeiture,
or complaint regarding the Business that might have a material adverse effect on
Seller; or (iv) any representation or warranty made by Seller or the
Shareholders hereunder shall have become inaccurate or untrue in any material
respect. The items set forth in clauses (i) through (iv) above, together with
any other item discovered by Buyer between the date of this Agreement and the
Closing that Buyer reasonably believes have the same effect as the items set
forth in clauses (i) through (iv) above, are referred to as a "Seller Material
Adverse Change."
ARTICLE VI
Covenants of Seller
-------------------
SECTION 6.1 Telephone Number. Seller will assist in the transfer of
----------------
Seller's business telephone number to Buyer at the Closing.
SECTION 6.2 Cooperation. The parties shall use their reasonable best
-----------
efforts to cause the sale contemplated by this Agreement to be consummated, and,
without limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with and give notices to
third parties which may be necessary or reasonably required in order to effect
the transactions contemplated hereby. Seller and the Shareholders acknowledge
that Buyer intends to finance the acquisition of the Purchased Assets hereunder
through the public offering and sale of Buyer's Common Stock (the "Offering").
Seller and the Shareholders agree at their expense, except
-17-
as otherwise set forth herein, to provide and to cause their attorneys,
accountants, employees and agents to provide Buyer with all of the information
that Buyer, its attorneys, accountants and agents and the underwriters for the
Offering and their attorneys, accountants and agents may reasonably request in
connection with the Offering. Such information shall be subject to the
Confidentiality Agreement (as hereinafter defined). Prior to and following the
Closing, Seller and the Shareholders shall use their reasonable best efforts to
preserve the Business organization intact and to keep available the services of
Seller's employees and representatives and to preserve the goodwill of the
employees, customers, suppliers and others having business relations with
Seller.
SECTION 6.3 Non-Competition. Each of Xxxx Xxxxxx and Xxx Xxxxxx agrees
---------------
that during the Non-Competition Period (as defined below), he shall not engage,
directly or indirectly, through Seller or otherwise, whether as owner, director,
officer, employee, consultant, agent or otherwise, in any business in
competition with the Business or the business conducted by Buyer or any
affiliate of Buyer following the Closing. The foregoing non-competition
covenant will apply to any country in which Buyer or its affiliates are then
selling its products or services. The foregoing non-competition covenant shall
not preclude the purchase by Xxxx Xxxxxx or Xxx Xxxxxx of up to five (5) percent
of any publicly-held company that is in competition with the Business or the
business conducted by Buyer or any affiliate of Buyer following the Closing.
Each of Xxxx Xxxxxx and Xxx Xxxxxx also covenants and agrees that during the
Non-Competition Period, he will not directly or indirectly induce any employee
of Buyer to terminate his employment with Buyer or hire or offer to hire any
such employee, or hire, offer to hire, contract or otherwise agree to contract
with any sales or marketing representatives or distributors with which Buyer
does business. The "Non-Competition Period" shall mean the period commencing on
the Closing Date and ending on the fifth anniversary of the later of (i) the
Closing Date or (ii) the date that he ceases to be employed by Buyer or an
affiliate. Each of Xxxx Xxxxxx and Xxx Xxxxxx agrees that this non-competition
covenant is reasonable and necessary from the standpoint of protecting Buyer
from competing efforts and acknowledges that Buyer would not enter into this
Agreement without this covenant. The provisions of this non-competition
covenant are severable and shall be enforceable to the maximum extent permitted
by law. If this covenant shall be held by a court of competent jurisdiction to
be unenforceable under applicable law with respect to the entire area, the
entire duration, or the scope of activities of the covenant, then the covenant
shall be deemed enforceable in such part or parts of the area, for such lesser
period of time and for such limited scope of activities as is permissible under
applicable law. Each of Xxxx Xxxxxx and Xxx Xxxxxx acknowledges that a breach
of this non-competition covenant would result in irreparable damage to Buyer,
and without limiting other remedies which may exist for a breach of this
covenant, agree that this covenant may be enforced by temporary restraining
order, temporary injunction, and permanent injunction restraining violation
hereof, pending or following trial on the merits.
SECTION 6.4 Transfer Taxes. Buyer will be responsible for and shall pay
--------------
at Closing or at such other times as when due any taxes, excluding federal,
state, local or foreign income or similar taxes required to be paid by Seller or
the Shareholders, and any registration, transfer or assignment fees or charges
required to be paid by a purchaser in respect of the sale and transfer of the
Purchased Assets to Buyer, and Buyer shall indemnify and save Seller and the
Shareholders harmless from and against any claims, demands, actions, causes of
action, loss, damage, cost, penalty or expense
-18-
whatsoever, including legal fees, suffered or incurred by Seller or the
Shareholders by reason of the failure of Buyer to pay or discharge any such
amounts.
ARTICLE VII
Representations and Warranties of Buyer
---------------------------------------
Buyer represents, promises and warrants to Seller as follows:
SECTION 7.1 Organization. Buyer is a corporation duly organized,
------------
validly existing, and in good standing under the laws of the State of Colorado,
and has all corporate power and authority to own its property and carry on its
business as now conducted.
SECTION 7.2 Authorization. The execution, delivery and performance of
-------------
this Agreement and any other documents or instruments contemplated hereby has
been duly authorized by all necessary corporate actions of Buyer, and this
Agreement has been executed and delivered by Buyer and constitutes a legal,
valid and binding obligation of the Buyer enforceable in accordance with their
terms, except that such enforcement may be limited by applicable bankruptcy,
insolvency or other laws of the general application affecting the enforceability
of creditor's rights generally and except that specific performance and
equitable remedies may only be granted in the discretion of a court of competent
jurisdiction.
SECTION 7.3 Compliance with Other Instruments. Buyer has complete and
---------------------------------
unrestricted power to undertake and perform all of the obligations contained in
this Agreement. Neither the execution and delivery, nor the consummation of the
transactions provided for in this Agreement, will violate the Articles of
Incorporation, or the Bylaws of Buyer or any material agreement, mortgage,
indenture, license, franchise, permit, lease or other instrument, judgment,
decree, order, law or regulation by which Buyer is bound.
SECTION 7.4 Litigation. There is no action, suit, litigation or
----------
proceeding pending, or, to the best knowledge of Buyer, threatened against or
relating to Buyer which could adversely affect the ability of Buyer to perform
the transactions contemplated by this Agreement.
ARTICLE VII
Conditions Precedent to Buyer's Obligations
-------------------------------------------
The obligation of Buyer to consummate the transactions contemplated by this
Agreement is subject to the fulfillment to its satisfaction of the following
conditions prior to or at the Closing (unless expressly waived in writing by
Buyer).
SECTION 8.1 Representations, Warranties and Covenants. The
-----------------------------------------
representations and warranties made by Seller and the Shareholders shall be true
and correct in all material respects at and as of the Closing Date; and Seller
and the Shareholders shall have performed and complied in all material respects
with all covenants, agreements and conditions contained in this Agreement
required to be performed or complied with by them prior to the Closing and
Seller shall provide to Buyer at the Closing a certificate to such effect
executed by Seller and the Shareholders.
-19-
SECTION 8.2 Litigation. There shall be no litigation pending or
----------
threatened against Seller or the Shareholders with respect to the consummation
of this Agreement or which could adversely affect the ability of Seller to
convey the Purchased Assets to Buyer.
SECTION 8.3 Consent and Approval. There shall have been obtained and
--------------------
delivered to Buyer the consent of any party whose failure to consent would
materially affect any asset or right transferred to Buyer or would materially
affect Buyer's ability to operate the Business.
SECTION 8.4 Financing. Buyer shall have closed the Offering on terms
---------
acceptable to Buyer.
SECTION 8.5 Seller Material Adverse Change. There shall not have
------------------------------
occurred a Seller Material Adverse Change.
ARTICLE IX
Conditions Precedent to Seller's Obligations
--------------------------------------------
The obligation of Seller to consummate the transactions contemplated by
this Agreement is subject to the fulfillment to its satisfaction of the
following conditions prior to at the Closing (unless expressly waived in writing
by Seller):
SECTION 9.1 Representations, Warranties and Covenants. The
-----------------------------------------
representations and warranties made by Buyer shall be true and correct in all
material respects at and as of the Closing Date and Buyer shall have performed
and complied in all material respects with all covenants, agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to the Closing and Buyer shall provide to Seller at the Closing a
certificate to such effect executed by an officer of Buyer.
SECTION 9.2 Litigation. There shall be no litigation pending or
----------
threatened against Buyer with respect to the consummation of this Agreement.
ARTICLE X
Termination
-----------
SECTION 10.1 Grounds for Termination. This Agreement may be terminated
-----------------------
at any time prior to the Closing:
(a) by the mutual written agreement of Seller, the
Shareholders and Buyer;
(b) if any court of competent jurisdiction shall have
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated hereby and such
order, decree, ruling or other action shall have become final and nonappealable,
by Buyer or Seller by the delivery of written notice to such effect to the other
party;
-20-
(c) by Buyer if a Seller Material Adverse Change occurs;
(d) by either party (meaning Seller and the Shareholders on
the one hand and Buyer on the other hand) if any of the representations and
warranties made by the other party in this Agreement were materially false or
misleading as of the date given or as of the Closing Date, and these false or
misleading representations or warranties have not been waived by the party
giving notice of termination;
(e) by either party (meaning Seller and the Shareholders on
the one hand and Buyer on the other hand) if any covenant or agreement of the
other party shall not have been materially complied with or performed and this
noncompliance or nonperformance shall not have been waived by the party giving
notice of termination;
(f) by either party (meaning Seller and the Shareholders on
the one hand and Buyer on the other hand) if any condition of such party set
forth in this Agreement is not satisfied as of December 31, 1998 and such
condition has not been waived by the party giving notice of termination; or
(g) by any party if the Closing has not occurred by October
31, 1998 ("Final Closing Date"); provided that if Buyer delivers to Seller, on
or before October 10, 1998 and November 10, 1998, respectively, a letter or
letters stating that Buyer in good faith is seeking to satisfy the condition set
forth in Section 8.4 or otherwise finance the transactions covered by this
Agreement, the Final Closing Date shall be extended to November 30, 1998 and
December 31, 1998, respectively. In no event shall the Final Closing Date be
extended beyond December 31, 1998 without the prior written consent of the
parties to this Agreement..
Notwithstanding the foregoing, a party shall not be allowed to exercise any
right of termination (i) pursuant to Sections 10.1(d), (e) or (f) unless such
party shall first have given the other party written notice of the
misrepresentation, noncompliance, nonperformance or nonsatisfaction and the
other party shall not have cured same within 30 days, or (ii) pursuant to any
provision of this Section 10.1 if (A) the event giving rise to such termination
right shall be due to the failure of such party to perform or observe in any
material respect any of the covenants, agreements or conditions set forth herein
to be performed or observed by such party, or (B) such party is then in material
breach of this Agreement.
SECTION 10.2 Effect of Termination. Any termination of this Agreement
---------------------
pursuant to Section 10.1 shall have the following effect:
(a) if termination is pursuant to Section 10.1(a), then the
parties shall determine the effect of such termination as a part of their
agreement;
(b) if such termination is pursuant to Section 10.1(b),
(c), (f) or (g), then no party shall have any liability to another; provided,
however, each party shall remain liable to the other if a condition is not
satisfied due to the failure of a party to use its best efforts to satisfy such
-21-
condition and provided further that if such termination is pursuant to a failure
by Buyer to satisfy the condition set forth in Section 8.4 then Buyer shall pay
Seller the reasonable audit expenses of Seller in obtaining the audited
financial statements included in the Reports and the reasonable attorneys' fees
of Seller in connection with this Agreement;
(c) if such termination is pursuant to Section 10.1(d) or
(e), then the terminating party may recover from the other(s) any and all
damages, costs and expenses (including, without limitation, reasonable
attorneys' fees) sustained or incurred by the terminating party;
(d) Seller, the Shareholders and Buyer hereby agree that
the provisions of this Section 10.2 and Article XI shall survive any termination
of this Agreement pursuant to the provisions of this Article X; and
(e) Buyer shall return all materials and documents provided
to Buyer by Seller in accordance with the terms of the Confidentiality and Non-
Disclosure Agreement dated March 12, 1998, as amended (the "Confidentiality
Agreement").
ARTICLE XI
Survival and Indemnity
----------------------
SECTION 11.1 Survival of Representations, Warranties and Covenants. All
-----------------------------------------------------
of the representations and warranties contained in Articles IV and VII and in
any documents delivered pursuant to this Agreement shall survive the Closing
hereunder for a period of two (2) years except for representations and
warranties regarding taxes which shall survive for the period of the applicable
limitation period for such taxes. The covenants and agreements of all the
parties herein, including without limitation the agreements of Seller in Section
1.4 and the covenants of Seller and the Shareholders in Article VI and the
indemnity obligations relating thereto, shall survive the Closing subject only
to the applicable limitation period. The representations and warranties of the
parties shall remain in full force and effect for the specified period of time
regardless of the Closing and irrespective of any investigation which the
parties or their respective counsel or accountants or other representatives may
make in connection with this transaction or any matter involved therein.
SECTION 11.2 Indemnity by Seller and the Shareholders. Seller and the
----------------------------------------
Shareholders and their successors, jointly and severally, shall indemnify, save,
and hold harmless Buyer from and against any "Damages" as hereinafter defined.
"Damages," as used herein, shall mean and include any loss, damage, cost,
expense or other liability (including any loss, cost, expense or other
liability, reasonable attorneys' fees and costs incurred in trial and appellate
proceedings) which Buyer may incur or suffer by reason of or arising out of (i)
any breach or default in the performance by Seller or the Shareholders of any
covenant or agreement of Seller or the Shareholders contained in this Agreement;
(ii) any breach of warranty or inaccurate or erroneous representation made by
Seller or the Shareholders herein or in any certificate or other instrument
delivered by or on behalf of the Seller or Shareholders pursuant hereto or (iii)
other than Assumed Liabilities, any liabilities of Seller, including without
limitation those arising from Seller's failure to pay when due or otherwise
discharge all liabilities relating to the Business and its operations prior to
the Effective Time that are not Assumed Liabilities; provided Seller shall be
entitled to contest any liabilities in good faith so
-22-
long as no lien or charge is imposed on the Purchased Assets or Buyer as a
result thereof. The foregoing indemnity is not intended to include any damages
caused by Buyer in the conduct of the Business following the Closing. Buyer
shall be entitled to exercise all remedies provided by law in the event of
Seller's or either Shareholder's breach of any representation, warranty,
covenant or agreement; provided, however that, to the extent applicable, Buyer
agrees to use reasonable efforts to obtain payment from the insurance provided
for in Section 11.5 before pursuing its remedies against Seller or the
Shareholders hereunder.
SECTION 11.3 Indemnity by Buyer. Buyer and its successors shall
------------------
indemnify, save and hold harmless Seller and the Shareholders from and against
any "Damages" as hereinafter defined. "Damages," as used herein, shall mean and
include any loss, damage, cost, expense or other liability (including any loss,
cost, expense or other liability, reasonable attorneys' fees and costs incurred
in trial and appellate proceedings), which Seller or Xxxx Xxxxxx may incur or
suffer by reason of or arising out of (i) except to the extent otherwise
provided herein, any claim made against Seller or either of the Shareholders in
respect of any of the liabilities assumed by Buyer pursuant to Section 1.3, (ii)
any breach or default in the performance by Buyer of any covenant or agreement
of Buyer contained in this Agreement, or (iii) any breach of warranty or
inaccurate or erroneous representation made by Buyer herein or in any
certificate or other instrument delivered by or on behalf of the Buyer pursuant
hereto. The foregoing indemnity is not intended to include any damages caused
by Seller or either Shareholder in the conduct of the Business prior to the
Closing. Seller and the Shareholders shall be entitled to exercise all remedies
provided by law in the event of Buyer's breach of any representation, warranty,
covenant or agreement.
SECTION 11.4 Notice of Claim. If either party to this Agreement (the
---------------
"Indemnified Party") shall become aware of any claim, proceeding or other matter
involving any loss in respect of which the other party (the "Indemnifying
Party") is required to indemnify the Indemnified Party pursuant to this
Agreement, then the Indemnified Party shall promptly and in any case within
ninety (90) days of becoming aware of the Claim give written notice thereof to
the Indemnifying Party. The notice shall specify with reasonable particularity
the factual basis for the claim and the amount of the claim if known.
SECTION 11.5 Security. Seller agrees to maintain discontinued operations
--------
product liability insurance with an insurer and in an amount reasonably
acceptable to Buyer for a period of four (4) years from Closing to secure
Seller's indemnification obligation for product liability claims under Section
11.2 hereof. Seller shall bear the premium cost for such insurance up to a
maximum of $16,000 per year. Upon presentment of an invoice, Buyer shall
reimburse Seller to the extent such premium exceeds $16,000 per year. Such
policy shall name Buyer as an additional insured and shall contain a clause
requiring the insurer to give Buyer at least thirty (30) days' notice of
cancellation or suspension of such policy. Seller shall furnish Buyer with a
copy of such policy and any amendments thereto.
SECTION 11.6 Limitation. The liability of Seller and the Shareholders
----------
for any claim relating to a breach of or any inaccuracy in any of the
representations and warranties shall be limited to the Purchase Price. Seller
and the Shareholders shall not be liable under Section 11.2 for any claim for
indemnity for breach of a warranty or representation until the aggregate of all
such claims exceeds $15,000.
-23-
SECTION 11.7 Right of Set-Off. Buyer shall have no right of set-off
----------------
against any amounts or payments due or to become due under the employment
agreement referenced in Section 3.4 unless Buyer shall obtain an arbitration
award or judgment in respect of any claim asserted by Buyer against one or more
of Seller or Shareholders, and then only to the extent of such award or
judgment. Buyer shall have a right to set-off payments due or to become due
under Sections 2.2 and 3.8 for the amount of any claims under Section 11.2;
provided that (a) Buyer shall remit to Seller the balance of the amounts due or
to become due under Sections 2.2 and 3.8, (b) Buyer shall escrow the amount of
such set-off payment pending resolution of the claim and (c), if an arbitration
award or judgment shall determine that Buyer set-off payments in excess of the
amount due Buyer (the "Wrongful Set-Off Amount"), Seller shall be entitled to
recover interest on the Wrongful Set-Off Amount at a rate of twelve (12) percent
per annum together with reasonable attorney's fees and costs.
ARTICLE XII
Post-Closing Rights and Obligations
-----------------------------------
SECTION 12.1 Delivery of Records. At the Closing, Seller shall deliver
-------------------
to Buyer all of the books, records, and other documents or information relating
to the Business but shall not be required to deliver any records, documents or
other information regarding Seller.
SECTION 12.2 Cooperation. Seller and the Shareholders and Buyer shall
-----------
cooperate with each other as reasonably required to complete a smooth transition
of the ownership of the Business from Seller to Buyer.
SECTION 12.3 Employees. Buyer shall offer to hire all of Seller's
---------
employees following the Closing on substantially the same terms and conditions
as disclosed in Schedule 4.17 including medical, dental and vacation plans, and
consistent with Buyer's employment policies, but Buyer shall thereafter have the
right to modify the terms of employment or terminate the employment of any
employee. Buyer shall be responsible for all payments due employees following
the Closing, including payments due as a result of termination of employment of
any employee following the Closing Date and shall indemnify and hold Seller
harmless with respect thereto.
SECTION 12.4 Further Assurances. After the Closing, Seller and Buyer
------------------
will take all appropriate action and execute any documents, instruments or
conveyances of any kind that may be reasonably necessary to effectuate the
intent of this Agreement.
ARTICLE XII
General
-------
SECTION 13.1 Notice. All notices, requests, demands and other
------
communications hereunder shall be furnished to the other party at its address
listed below (or such other address as notified in writing), shall be in
writing, and shall be deemed to have been duly given if delivered personally or
mailed, by certified or registered mail, return receipt requested and postage
prepaid.
(a) If to Buyer, to:
-00-
Xxxxx Xxxxxxxxxxx
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxx
With a copy to:
Parcel Mauro PC
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
(b) If to Seller, Xxxx Xxxxxx or Xxx Xxxxxx, to:
Park Structures, Inc.
00000 Xxxx Xxxxxx Xxxx
Xxxxx Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxx
With a copy to:
Xxxxxxxxxx, Xxxxxxx & Xxxxx, P.A.
0000 X. Xxxxxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
SECTION 13.2 Amendment. This Agreement may be amended or modified only
---------
by a written instrument executed by the party hereto against which it is to be
enforced.
SECTION 13.3 Specific Performance. Because of the unique nature of the
--------------------
Purchased Assets, Buyer shall have the right to specific performance of this
Agreement.
SECTION 13.4 Expenses of Parties. Except as otherwise specifically
-------------------
provided herein, each party to this Agreement shall pay its own expenses
(including, without limitation, the fees and expenses of their respective
agents, representatives, counsel and accountants) incidental to the preparation
and carrying out of this Agreement. In the event a party commences legal action
against another party to enforce its rights under this Agreement, the prevailing
party in such action shall be entitled to recover all of its costs and expenses
in connection therewith, including reasonable attorneys' fees and costs.
SECTION 13.5 Brokers. Seller and the Shareholders represent and warrant
-------
to Buyer, and Buyer represents and warrants to Seller and the Shareholders, that
they have not engaged any broker, funder, agent or other third party in
connection with this Agreement. Seller and the Shareholders, jointly and
severally, shall indemnify Buyer and Buyer shall indemnify Seller and the
Shareholders, against any claim by any third person for any commission,
brokerage, finder's fee or other payment
-25-
based upon any alleged agreement or understanding between such party and such
third person, whether expressed or implied from the actions of such party.
SECTION 13.6 Governing Law. This Agreement is being delivered in and
-------------
shall be construed in accordance with and governed by the laws of the State of
Colorado.
SECTION 13.7 Headings. The headings contained in this Agreement are for
--------
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 13.8 Prior Agreements; Counterparts. Except for the
------------------------------
Confidentiality Agreement, this Agreement, with its Exhibits and Schedules,
merges and integrates all prior agreements and representations respecting this
transaction, whether written or oral, and constitutes the sole agreement of the
parties in connection therewith. This Agreement may be executed simultaneously
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.
SECTION 13.9 Assignment. This Agreement shall not be assignable by
----------
Seller, the Shareholders or Buyer, except that Buyer may assign this Agreement
to a wholly owned subsidiary provided Buyer remains fully liable to Seller and
the Shareholders hereunder. Subject to the foregoing, this Agreement shall be
binding upon, and inure to the benefit of, and be enforceable by, the respective
successors and permitted assigns of Seller, the Shareholders and Buyer. Nothing
in this Agreement, express or implied, is intended to confer upon any other
person any rights or remedies under or by reason of this Agreement.
SECTION 13.10 Waiver. The failure of any party to enforce any right
------
arising under this Agreement on one or more occasions shall not operate as a
waiver of that or any other right on that or any other occasion.
SECTION 13.11 Submission to Jurisdiction. Each of the parties irrevocably
--------------------------
submits to the jurisdiction of the federal or state courts of Colorado in any
action and each party to this Agreement waives, and will not assert by way of
motion, as a defense, or otherwise, in any action, claim that:
(a) that party is not subject to the jurisdiction of the
courts of Colorado;
(b) the action is brought in an inconvenient forum;
(c) the venue of the action is improper; or
(d) any subject matter of the action may not be enforced in
or by the courts of Colorado; provided that Seller or the Shareholders may bring
an action asserting breach of this Agreement by Buyer (other than as a
counterclaim to an action already commenced by Buyer in Colorado) in the federal
or state courts of Florida.
SECTION 13.12 Press Release. The parties will consult with each other
-------------
prior to the issuance of any press release regarding this Agreement. Seller and
the Shareholders acknowledge, however,
-26-
that Buyer is required to make certain disclosures regarding this Agreement as
required by applicable securities laws.
SECTION 13.13 Counterparts. This Agreement may be executed in multiple
------------
counterparts and by facsimile signature, all of which together shall be deemed
one and the same originally executed document.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
SELLER:
PARK STRUCTURES, INC.
By:_____________________________________
President
PARK STRUCTURES SALES, INC.
By:_____________________________________
President
SHAREHOLDER
________________________________________
Xxxx Xxxxxx
SHAREHOLDER
________________________________________
Xxx Xxxxxx
BUYER:
KOALA CORPORATION
By:_____________________________________
Chairman and Chief
Executive Officer
-27-
EXHIBIT A
EMPLOYMENT LETTER
_________________, 1998
Xx. Xxxx Xxxxxx
Park Structures, Inc.
00000 Xxxx Xxxxxx Xxxx
Xxxxx Xxxxxxx, Xxxxxxx 00000
Dear Xxxx:
This letter will set forth your compensation during the term of your
employment as President of the Park Structures division of Koala Corporation
("Koala"). The Park Structures division is referred to herein as "Park
Structures."
1. This letter is given in connection with the acquisition of the
business and substantially all of the assets of Park Structures, Inc. pursuant
to the terms of the Agreement for Sale and Purchase of Assets dated as of August
7, 1998 (the "Purchase Agreement").
2. Effective upon the closing under the Purchase Agreement, you will be
employed on a full-time basis as President of Park Structures and, subject to
the direction of the Chairman and Chief Executive Officer of Koala, will be
responsible for all of the operations of Park Structures. You will have the
authority delegated to you by, and will report to, the Chairman and Chief
Executive Officer of Koala.
3. You will serve as President of Park Structures until either the
Chairman and Chief Executive Officer of Koala or you elect to terminate your
employment upon not less than ninety (90) days prior written notice. Koala will
not terminate your employment without "cause" as defined below prior to the end
of the period described in Section 2.2 of the Purchase Agreement upon which the
Additional Purchase Price is to be calculated.
4. If your employment is terminated by Koala pursuant to paragraph 3
effective prior to December 31, 1999, without cause or as a result of your
death, disability, incapacitation or other medical condition that precludes you
from performing your duties hereunder, Koala will pay you or, in the event of
death, your estate, a lump sum severance payment equal to your then current base
salary from the effective date of termination through December 31, 1999. You
will not be entitled to any severance payment if you voluntarily terminate your
employment with Koala, Koala terminates your employment for cause or the Company
terminates your employment effective after December 31, 1999 for any reason.
For this purpose, "cause" shall mean misappropriation of company funds, failure
to perform your duties as directed by the Chairman and Chief Executive
Officer of Koala, usurping a corporate opportunity, acting outside the scope of
your authority, conviction of a felony or other similar actions.
5. You will be entitled to a base salary of $100,000.00 per year, payable
in accordance with Koala's regular payroll practices. Through June 30, 1999,
you, as shareholder of Park Structures, will be receiving a contingent payment
under the Purchase Agreement based on the performance of Park Structures. After
June 30, 1999, you will be entitled to participate in Koala's incentive
compensation plan which will provide for additional compensation based on the
performance of Park Structures in the form of quarterly cash bonuses and
discretionary stock options under Koala's Stock Option Plan. Koala will adopt
the incentive compensation plan prior to June 30, 1999.
6. Your base salary will be reviewed by the Chairman and Chief Executive
Officer of Koala during November of each year commencing in 1999 and may be
increased for the subsequent year.
7. All payments to you under this agreement will be subject to required
withholding.
8. You will be entitled to participate in all of Koala's benefit plans
for its employees, including vacation plans and medical insurance. These fringe
benefits will be comparable to the benefits provided to the Chairman and Chief
Executive Officer of Koala.
9. Koala will reimburse you for your reasonable travel and lodging
expenses in connection with travel for Koala as well as for other reasonable
expenses you incur in connection with the performance of your duties for Koala.
The reimbursements will include reasonable expenses (e.g., mileage and business
insurance costs) for your use of your personal automobile for business purposes.
We look forward to working with you as President of Park Structures.
Please confirm your agreement to the terms of this letter by signing and
returning the enclosed copy.
Very truly yours,
KOALA CORPORATION
By:___________________________________
Xxxx X. Xxxxxx
Chairman and Chief Executive Officer
AGREED:
________________________________ Date:_________________________
Xxxx Xxxxxx
SCHEDULE 1.1(C)
SCHEDULE 1.1(D)
SCHEDULE 1.2
SCHEDULE 2.3
SCHEDULE 3.8
SCHEDULE 4.1
SCHEDULE 4.3
SCHEDULE 4.4
SCHEDULE 4.5
SCHEDULE 4.6
SCHEDULE 4.7
SCHEDULE 4.12
SCHEDULE 4.14
SCHEDULE 4.15
SCHEDULE 4.16
SCHEDULE 4.17
SCHEDULE 4.18
SCHEDULE 4.19
SCHEDULE 4.20
SCHEDULE 4.23
TABLE OF CONTENTS
-----------------
Page
----
RECITALS....................................................................................... 1
AGREEMENT...................................................................................... 1
ARTICLE I
Assets and Liabilities ................................................................... 1
----------------------
SECTION 1.1 Sale of Assets..................................................... 1
--------------
SECTION 1.2 Excluded Assets.................................................... 2
---------------
SECTION 1.3 Liabilities Assumed by Buyer....................................... 3
----------------------------
SECTION 1.4 Liabilities Not Assumed by Buyer................................... 3
--------------------------------
ARTICLE II
Purchase Price ........................................................................... 3
--------------
SECTION 2.1 Purchase Price..................................................... 3
--------------
SECTION 2.2 Additional Purchase Price.......................................... 4
-------------------------
SECTION 2.3 Allocation of Purchase Price....................................... 5
----------------------------
SECTION 2.4 Past Due Payments.................................................. 6
-----------------
ARTICLE III
The Closing .............................................................................. 6
-----------
SECTION 3.1 Place and Time..................................................... 6
--------------
SECTION 3.2 Payment and Delivery by Buyer...................................... 6
-----------------------------
SECTION 3.3 Delivery by Seller................................................. 6
------------------
SECTION 3.4 Other Deliveries................................................... 7
----------------
SECTION 3.5 Possession......................................................... 7
----------
SECTION 3.6 Calculation of Current Assets, Other Assets and Assumed Warranties 7
------------------------------------------------------------------
SECTION 3.7 Disputes Concerning Financial Calculations Affecting Purchase Price 8
-------------------------------------------------------------------
SECTION 3.8 Purchase Price Adjustment Procedures............................... 8
------------------------------------
SECTION 3.9 Warranty Holdback.................................................. 9
-----------------
ARTICLE IV
Representations and Warranties of Seller and the Shareholders ............................. 9
-------------------------------------------------------------
SECTION 4.1 Organization........................................................ 9
------------
SECTION 4.2 Authorization...................................................... 9
-------------
SECTION 4.3 Financial Reports.................................................. 10
-----------------
SECTION 4.4 Absence of Undisclosed Liabilities................................. 10
----------------------------------
SECTION 4.5 Absence of Certain Changes......................................... 10
--------------------------
SECTION 4.6 Title to Purchased Assets.......................................... 11
-------------------------
SECTION 4.7 Personal Property.................................................. 12
-----------------
SECTION 4.8 Property Violations................................................ 12
-------------------
Page
----
SECTION 4.9 Purchased Inventory................................................ 12
-------------------
SECTION 4.10 Accounts Receivable................................................ 12
-------------------
SECTION 4.11 Compliance with Other Instruments.................................. 12
---------------------------------
SECTION 4.12 Litigation......................................................... 12
----------
SECTION 4.13 Tax Returns........................................................ 12
-----------
SECTION 4.14 Insurance and Other Claims......................................... 13
--------------------------
SECTION 4.15 Leases............................................................. 13
------
SECTION 4.16 Intellectual Property.............................................. 13
---------------------
SECTION 4.17 Employee Matters................................................... 13
----------------
SECTION 4.18 Contracts and Commitments.......................................... 14
-------------------------
SECTION 4.19 Compliance with Law................................................ 14
-------------------
SECTION 4.20 Licenses and Permits............................................... 15
--------------------
SECTION 4.21 Product Warranties................................................. 15
------------------
SECTION 4.22 No Condemnation.................................................... 15
---------------
SECTION 4.24 No Adverse Conditions.............................................. 15
---------------------
SECTION 4.25 Disclosure......................................................... 15
----------
ARTICLE V
Conduct of Business Prior to Closing...................................................... 15
------------------------------------
SECTION 5.1 Operation in Ordinary Course....................................... 16
----------------------------
SECTION 5.2 Operation of the Business.......................................... 16
-------------------------
SECTION 5.3 Employees.......................................................... 16
---------
SECTION 5.4 Payment of Liabilities............................................. 16
----------------------
SECTION 5.5 Payment of Taxes................................................... 16
----------------
SECTION 5.6 Access to Information.............................................. 16
---------------------
SECTION 5.7 Insurance.......................................................... 16
---------
SECTION 5.8 Maintenance of Properties, etc..................................... 16
------------------------------
SECTION 5.9 Maintenance of Books, etc.......................................... 17
-------------------------
SECTION 5.10 Certain Prohibited Transactions.................................... 17
-------------------------------
SECTION 5.11 Notice of Adverse Changes.......................................... 17
-------------------------
ARTICLE VI
Covenants of Seller....................................................................... 17
-------------------
SECTION 6.1 Telephone Number................................................... 17
----------------
SECTION 6.2 Cooperation........................................................ 17
-----------
SECTION 6.3 Non-Competition.................................................... 18
---------------
SECTION 6.4 Transfer Taxes..................................................... 18
--------------
ARTICLE VII
Representations and Warranties of Buyer................................................... 19
---------------------------------------
SECTION 7.1 Organization....................................................... 19
------------
SECTION 7.2 Authorization...................................................... 19
-------------
SECTION 7.3 Compliance with Other Instruments.................................. 19
---------------------------------
Page
----
SECTION 7.4 Litigation......................................................... 19
----------
ARTICLE VIII
Conditions Precedent to Buyer's Obligations............................................... 19
-------------------------------------------
SECTION 8.1 Representations, Warranties and Covenants.......................... 19
-----------------------------------------
SECTION 8.2 Litigation......................................................... 20
----------
SECTION 8.3 Consent and Approval............................................... 20
--------------------
SECTION 8.4 Financing.......................................................... 20
---------
SECTION 8.5 Seller Material Adverse Change..................................... 20
------------------------------
ARTICLE IX
Conditions Precedent to Seller's Obligations.............................................. 20
--------------------------------------------
SECTION 9.1 Representations, Warranties and Covenants.......................... 20
-----------------------------------------
SECTION 9.2 Litigation......................................................... 20
----------
ARTICLE X
Termination............................................................................... 20
-----------
SECTION 10.1 Grounds for Termination............................................ 20
-----------------------
SECTION 10.2 Effect of Termination.............................................. 21
---------------------
ARTICLE XI
Survival and Indemnity.................................................................... 22
----------------------
SECTION 11.1 Survival of Representations, Warranties and Covenants.............. 22
-----------------------------------------------------
SECTION 11.2 Indemnity by Seller and the Shareholders........................... 22
----------------------------------------
SECTION 11.3 Indemnity by Buyer................................................. 23
------------------
SECTION 11.4 Notice of Claim.................................................... 23
---------------
SECTION 11.5 Security........................................................... 23
--------
SECTION 11.6 Limitation......................................................... 23
----------
SECTION 11.7 Right of Set-Off................................................... 24
----------------
ARTICLE XII
Post-Closing Rights and Obligations....................................................... 24
-----------------------------------
SECTION 12.1 Delivery of Records................................................ 24
-------------------
SECTION 12.2 Cooperation........................................................ 24
-----------
SECTION 12.3 Employees.......................................................... 24
---------
SECTION 12.4 Further Assurances................................................. 24
------------------
ARTICLE XIII
General................................................................................... 24
-------
SECTION 13.1 Notice............................................................. 24
------
SECTION 13.2 Amendment.......................................................... 25
---------
SECTION 13.3 Specific Performance............................................... 25
--------------------
SECTION 13.4 Expenses of Parties................................................ 25
-------------------
Page
----
SECTION 13.5 Brokers............................................................ 25
-------
SECTION 13.6 Governing Law...................................................... 26
-------------
SECTION 13.7 Headings........................................................... 26
--------
SECTION 13.8 Prior Agreements; Counterparts..................................... 26
------------------------------
SECTION 13.9 Assignment......................................................... 26
----------
SECTION 13.10 Waiver............................................................. 26
------
SECTION 13.11 Submission to Jurisdiction......................................... 26
--------------------------
SECTION 13.12 Press Release...................................................... 26
-------------
SECTION 13.13 Counterparts....................................................... 27
------------
