Exhibit 2.1
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
BY AND AMONG
SUPERIOR FOAM & POLYMERS, INC.,
▇▇▇▇▇ ▇. NEW, JR.,
▇▇▇▇▇ ▇. ▇▇▇▇▇
AND
KOALA CORPORATION
March 26, 1999
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
THIS AGREEMENT FOR SALE AND PURCHASE OF ASSETS ("Agreement")
is made and entered into as of March 26, 1999, by and among Superior Foam &
Polymers, Inc., a Texas corporation ("Superior"), ▇▇▇▇▇ ▇. New, Jr., ▇▇▇▇▇ ▇.
▇▇▇▇▇ and Koala Corporation, a Colorado corporation ("Buyer").
RECITALS
A. Superior conducts a business of designing, constructing, selling
and distributing foam play equipment and accessories for children's use in
commercial settings under its own name and the name "Superior Foam, Inc."
(the "Business").
B. ▇▇▇▇▇ ▇. New, Jr. and ▇▇▇▇▇ ▇. ▇▇▇▇▇ are the shareholders of
Superior and owners of certain intellectual property used in the Business
and are herein referred to as the "Shareholders."
C. Superior, ▇▇▇▇▇ ▇. New, Jr. and ▇▇▇▇▇ ▇. ▇▇▇▇▇ desire to sell the
Business and substantially all of the assets used in the Business,
including the intellectual property owned by the Shareholders. 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
Section 1.1 Sale of Assets. Subject to the terms and conditions set forth
in this Agreement (and except for the assets excluded as provided in Section 1.2
hereof), Superior and ▇▇▇▇▇ ▇. New, Jr. and ▇▇▇▇▇ ▇. ▇▇▇▇▇ (as applicable) 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 the right of title
and interest of Superior, ▇▇▇▇▇ ▇. New, Jr. and ▇▇▇▇▇ ▇. ▇▇▇▇▇ (as applicable)
in and to the Business and the assets (the "Purchased Assets") 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 Superior's cash, cash equivalents and prepaid
expenses;
(b) All of Superior's accounts receivable ("Accounts
Receivable");
(c) All equipment, and tangible personal property of all kinds
owned by Superior or used or useful in the Business (the "Personal
Property") including without limitation all of the furniture and
fixtures, molds and tooling (the "Molds") and equipment listed on
Schedule 1.1(c) attached hereto;
(d) All of Superior's and the Shareholder's right, title and
interest in and to the name "Superior Foam" and the patents, patent
applications, copyrights, trademarks, tradenames, logos, patterns,
designs, goodwill, customer lists, trade secrets, know how,
proprietary rights and other intellectual property rights owned by
Superior or used in the Business (the "Intellectual Property"),
including the Intellectual Property listed on Schedule 1.1(d) attached
hereto;
(e) All forms and other supplies and expendables on order or on
hand (the "Supplies");
(f) All of Superior'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");
(g) All of Superior'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;
(h) Superior's finished goods, work in process and raw materials
inventory (the "Purchased Inventory");
(i) All originals and copies of agreements, documents, tapes,
maps, books, records and files in the possession of Superior or the
Shareholders relating principally to the Business, including without
limitation electronically stored data.
The Purchased Assets shall include all of Superior's assets described above
and/or reflected in the December 31 Balance Sheet (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 December 31, 1998 or described in Section 1.2.
Section 1.2 Excluded Assets. The items listed on Schedule 1.2 hereof (the
"Excluded Assets") shall be excluded from the Purchased Assets.
Section 1.3 Liabilities Assumed by Buyer. As of the Closing Date (as
hereinafter defined in Section 3.1), Buyer shall assume only the liabilities of
Superior arising from and after the Closing Date under the Assigned Contracts of
Superior (the "Assumed Liabilities").
Section 1.4 Liabilities Not Assumed by Buyer. Buyer shall not assume any
liabilities of Superior except those described in Section 1.3 hereof.
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 Superior's employees for the
period prior to the Closing Date, pension or any other liability to any of
Superior's employees for the period prior to the Closing Date, or liabilities
resulting from any products sold by Superior prior to the Closing Date in excess
of the Assumed Warranties. Superior 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 Superior shall
be entitled to
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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 Superior
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
Superior 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 ("Purchase
Price") shall be as follows:
(a) Cash in the amount of $500,000.00, subject to adjustment as
set forth herein (the "Superior Cash Portion") to be paid to Superior,
representing the Purchased Assets other than the `178 Patent
Application (as defined in Section 4.16) included in the Intellectual
Property;
(b) Cash in the amount equal to $4,500,000.00 (the "Shareholders'
Cash Portion") to be paid to the Shareholders, representing partial
consideration for the `178 Patent Application; and
(c) Shares of Common Stock of Buyer (the "Koala Common Stock") to
the Shareholders (the "Stock Portion") equal in number to $1,000,000
divided by the average daily closing sale price of Koala Common Stock
on the Nasdaq National Market for the 30 trading days prior to the
Closing Date (with the number of shares rounded to the nearest whole
number) representing the remaining consideration for the `178 Patent
Application . The Shareholders agree 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.
Section 2.2 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets in the manner set forth in Schedule 2.2.
Buyer and Superior 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 2.2, and Buyer and Superior 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 2.2.
Article III
The Closing
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Section 3.1 Place and Time. The closing (the "Closing") under this
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 five business days notice to Superior at the offices of ▇▇▇▇▇,
Johnson, Robinson, ▇▇▇▇ & Ragonetti, P.C., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇. 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").
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Section 3.2 Payment and Delivery by Buyer. At the Closing (or such later
date as described below), and subject to the terms and conditions as set forth
herein, Buyer shall:
(a) deliver to Superior the Superior Cash Portion of the Purchase
Price, net of the holdback described in Section 3.7, in the form of a
certified or bank cashier's check or by wire transfer of funds;
(b) deliver to the Shareholders, in the proportion set forth in
Schedule 3.2, the Shareholders' Cash Portion of the Purchase Price, in
the form of a certified or cashier's check or by wire transfer of
funds;
(c) deliver to the Shareholders within five business days after
written demand by the Shareholders, which demand may be given on or
after the Closing Date, the Stock Portion of the Purchase Price, in
the proportion set forth in Schedule 3.2;
(d) execute and deliver the certificate required by Section 9.1
hereof;
(e) execute and deliver the General Assignment, Conveyance and
Assumption Agreement described in Section 3.3 pursuant to which Buyer
will assume the Assumed Liabilities;
(f) execute and deliver the Patent Assignment described in
Section 3.3; and
(g) deliver an opinion of Buyer's counsel reasonably acceptable
to Superior and the Shareholders.
Section 3.3 Delivery by Superior. At the Closing, and subject to the terms
and conditions as set forth herein, Superior shall:
(a) execute and deliver a General Assignment, Conveyance and
Assumption Agreement, with warranty of title, conveying to Buyer all
of the Purchased Assets;
(b) execute a Patent Assignment, with warranty of title,
conveying to Buyer the `178 Patent Application;
(c) 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;
(d) deliver fully executed releases of all liens, charges,
encumbrances or security interests affecting the Purchased Assets;
(e) execute and deliver appropriate documents changing its name
to a name that does not include "Superior Foam";
(f) deliver duly signed consents required for the assignment of
any Assigned Contracts;
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(g) execute and deliver the certificate required by Section 8.1
hereof; and
(h) deliver an opinion of counsel to Superior and the
Shareholders reasonably acceptable to Buyer.
The documents described in (a), (b), (c), (e) and (f) shall be prepared by
Buyer's counsel and shall be reasonably satisfactory to Superior, the
Shareholders and their 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 and
conditions as set forth herein Buyer and ▇▇▇▇▇ ▇. New, Jr. shall enter into the
lease agreement attached as Exhibit A.
Section 3.5 Possession. Buyer shall be entitled to take possession of and
Superior 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 Superior's principal place of business.
Section 3.6 Disputes Concerning Financial Calculations Affecting Purchase
Price. For the purpose of the calculation in Section 3.7, Superior 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 Superior. 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 Superior 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, Superior 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
Superior 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 Superior 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 3.7 Purchase Price Adjustment Procedures. Pending final calculation
of the Accounts Receivable Shortfall (as hereinafter defined), if any,
$200,000.00 (the "Holdback Amount") of the Cash Portion of the Purchase Price
shall be held back at the Closing. Accounts Receivable shall be valued as of the
close of business on the business day immediately preceding the Closing Date
(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
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Receivable more than one hundred fifty (150) days past due (the "Net Accounts
Receivable Value"). After the 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 Superior. 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 Superior. To
the extent Buyer collects any Accounts Receivable for which it has attributed no
value, Buyer shall promptly pay Superior such collected amounts. Within ten (10)
days after the Accounts Receivable Shortfall is 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 Superior
or Superior to Buyer, as applicable, will be paid immediately by bank cashier's
check or wire transfer as Superior may direct based on disbursement instructions
signed by Buyer and Superior or, if Buyer and Superior are unable to agree,
based on the decision of the arbitrator under Section 3.6. The amount paid to
Superior shall include interest thereon from the Closing Date to the date of
payment at five (5) percent per annum.
Article IV
Representations and Warranties of Superior and the Shareholders
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Superior 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. Superior is a corporation duly organized, validly
existing, and in good standing under the laws of Texas. 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. Superior
is duly qualified to transact business in the jurisdictions listed on Schedule
4.1.
Section 4.2 Authorization. ▇▇▇▇▇ ▇. New, Jr. and ▇▇▇▇▇ ▇. ▇▇▇▇▇ are the
sole shareholders, beneficially and of record, of Superior. 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 Superior, ▇▇▇▇▇ ▇. New, Jr. and ▇▇▇▇▇ ▇. ▇▇▇▇▇ and this Agreement has
been executed and delivered by Superior, ▇▇▇▇▇ ▇. New, Jr. and ▇▇▇▇▇ ▇. ▇▇▇▇▇
and constitutes a legal, valid and binding obligation of Superior, ▇▇▇▇▇ ▇. New,
Jr. and ▇▇▇▇▇ ▇. ▇▇▇▇▇ 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 and
correct copies of the financial statements (including a balance sheet ) (the
"December 31 Balance Sheet") and statement of income) of Superior for the two
years ended December 31, 1998 (the "Report"). Until Closing, Superior 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 Superior as of the last day of each preceding month prepared from the
books of Superior without audit (the "Interim Reports") (collectively, the
Reports and the Interim
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Reports shall be referred to as the "Financial Reports"). All such Financial
Reports are in accordance with the books and records of Superior, reflect all
assets and liabilities of Superior, including all contingent liabilities, and
present fairly and completely the financial condition of Superior 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
reflected or reserved against in the Reports or disclosed on Schedule 4.4,
Superior 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
Agreement, since December 31, 1998, Superior 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;
(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) Made capital expenditures or commitments for additions to
property, plant, or equipment;
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(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
Superior 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 Superior 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 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 Superior. No special assessment, impact fee or similar charge
has been imposed or, to the knowledge of Superior or the Shareholders is
proposed to be imposed against any of the Purchased Assets. Superior 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, Superior 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 Superior 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 Superior and
located at Superior'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. Superior 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 Superior 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
Superior'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
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provided for in the Reports, and no obligor with respect to any Accounts
Receivable has any right of offset against Superior.
Section 4.11 Compliance with Other Instruments. Superior 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 Superior or any material
agreement, mortgage, indenture, license, franchise, permit, lease or other
instrument, judgment, decree, order, law or regulation by which Superior or the
Shareholders are bound. No consent is required for Superior 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
Superior and the Shareholders, threatened against or relating to Superior or the
Business.
Section 4.13 Tax Returns. Superior's income tax returns for the years ended
December 31, 1993, 1994, 1995, 1996, 1997, and 1998, true and correct copies of
which have been provided to Buyer, are materially correct and complete. Superior
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 Superior
nor are there to the best knowledge of Superior and the Shareholders any
actions, suits, proceedings, investigations or claims now pending against
Superior or relating to the Business; and, there are no pending discussions or
questions relating to, or claims asserted for taxes or assessments against
Superior.
Section 4.14 Insurance and Other Claims. Schedule 4.14 contains a summary
of claims filed against Superior, whether or not covered by insurance maintained
by Superior. The current policies issued to Superior, 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. Superior 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 Superior 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
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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.
(a) Schedule 4.16 hereto contains an accurate and complete
description of all Intellectual Property owned or held by Superior and
used in the Business, as well as all pending applications for
registration of any rights in Intellectual Property. To the knowledge
of Superior and the Shareholders, no products sold, nor any patents,
patent applications, 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 Superior in respect of any Intellectual Property. Other than the
`178 Patent Application (defined below), Superior validly owns or has
valid licenses for Intellectual Property that is necessary for the
conduct of the business as now conducted. Superior and the
Shareholders have no knowledge of any infringement against any
Intellectual Property.
(b) The Shareholders are the sole owners of the technology
disclosed in pending United Stated patent application S/N 09/143,178,
(the "'178 Patent Application") filed August 28, 1998 and claiming
priority of provisional patent application S/N 60/079,564, filed March
27, 1998. The Shareholders have disclosed to Buyer all relevant and
material prior art relating to the `178 Patent Application that is
known by the Shareholders. Neither the Shareholders nor Superior have
ever been a party to any litigation, action or suit or been threatened
to be made a party to any litigation, action or suit for patent or
copyright infringement, trade secret misappropriation or for any other
cause of action related to the technology disclosed in the `178 Patent
Application.
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 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. Superior has complied with
all applicable laws relative to employee benefits. Superior is not a party to
any collective bargaining or other labor agreement and neither Superior nor the
Shareholders are aware of any labor union organizing activities involving
Superior's employees. Superior shall update Schedule 4.17 as of the Closing.
Section 4.18 Contracts and Commitments. Schedule 4.18 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;
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(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. Superior 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. Superior has not received any notice of
any violation of, and Superior has complied in all material respects with, all
laws, ordinances, regulations, and orders applicable to the Business including
all rules and regulations of the Consumer Product Safety Commission
Section 4.20 Environmental Matters.
(a) As used in this Agreement, "Environmental Law" means any
federal, state or local statute, regulation or ordinance pertaining to
the protection of human health or the environment any applicable
orders, judgements, decrees, permits, licenses or other authorizations
or mandates under such laws. "Hazardous Substance" means any
hazardous, toxic, radioactive or infectious substance, material or
waste as defined, listed or regulated under any Environmental Law, and
includes without limitation, petroleum oil and its fractions.
"Contamination" means the existence (actual or reasonably suspected)
in the environment of a Hazardous Substance, if the existence or
suspected existence of such Hazardous Substance required any
investigatory, remedial, removal or other response action under any
Environmental Law, if such response action legally could be required
by any governmental entity under prevailing Environmental Laws.
(b) Except as disclosed in Schedule 4.20, to the knowledge of
Superior and the Shareholders, Superior and the Business are in
material compliance with all Environmental Laws and has all permits
required under Environmental Laws in connection with ownership or
operation of Superior, the Business or the Purchased Assets. Neither
Superior nor the Shareholders are aware of nor have received notice of
any past, present or anticipated future events, conditions,
activities, investigations, studies, plans or proposals that (a) would
interfere
11
with or prevent compliance by Superior with any Environmental Law, or
(b) may give rise to any common law or other liability, or otherwise
form the basis of a claim, action, suit, proceeding, hearing or
investigation, involving Superior, the Business or the Purchased
Assets and related in any way to Hazardous Substances or Environmental
Laws.
(c) Except as disclosed in Schedule 4.20, to the knowledge of
Superior and the Shareholders, no Hazardous Substance has been
disposed of, spilled, leaked or otherwise released on, in, under or
from, or otherwise come to be located in the soil or water (including
surface and ground water) on or under, any real property owned, leased
or occupied by Superior now or in the past. Except as disclosed in
Schedule 4.20, none of the assets of Superior have incorporated into
them any asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyl (in electrical equipment or otherwise), lead-based paint or
any other Hazardous Substance that is prohibited, restricted or
regulated when present in buildings, structures, fixtures or
equipment. Except as disclosed in Schedule 4.20, all wastes generated
in connection with the Business are and have been transported to and
disposed of at an authorized facility in compliance with all
Environmental Laws. Except as disclosed in Schedule 4.20, neither
Superior nor the Shareholders are liable under any Environmental Law
for investigation, remediation, removal or other response costs,
natural resources, damages or other damages or for any other claims
(including administrative orders) arising out of the release or
threatened release of, or exposure to, any Hazardous Substance and no
basis exists for any such liability. Neither Superior nor the
Shareholders have entered into any contract pursuant to which it has
assumed the liability for any other person or entity, or agreed to
indemnify any other person or entity for any liability, under any
Environmental Law or arising out of the release or threatened release
of, or exposure to, any Hazardous Substance.
(d) Except as disclosed in Schedule 4.20, Superior and the
Shareholders have made available to Buyer true, complete and correct
copies of any reports, studies, analysis, tests, monitoring,
correspondence with any government entity or other documents in the
possession of or initiated by Superior or the Shareholders or
otherwise known to Superior or the Shareholders, pertaining to
Hazardous Substances, the existence of Contamination, compliance with
Environmental Laws, or any other environmental concern relating to
Superior, the Business or the Purchased Assets. The Phase I
Environmental Study attached to Schedule 4.20 that establishes an
environmental baseline for the Business is true, accurate and
complete.
Section 4.21 Licenses and Permits. Schedule 4.21 hereto is a list of all
licenses and permits required for Superior's operation of the Business, all of
which are in full force and effect.
Section 4.22 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 Superior prior to the Effective Time.
Section 4.23 No Condemnation. No proceedings are pending or, to the
knowledge of Superior threatened with respect to the condemnation or taking by
eminent domain of any of the Properties.
Section 4.24 Year 2000 Issue. Superior 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
12
year 1900 or not at all (the Year "2000 Issue"). To Superior's and the
Shareholders' knowledge, except as disclosed in Schedule 4.24, 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 Superior, its suppliers or customers that may have a
material adverse effect upon the Business.
Section 4.25 No Adverse Conditions. Except as otherwise set forth in this
Agreement, to the knowledge of Superior and the Shareholders, 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 4.26 Stock Portion.
(a) Buyer has made available to the Shareholders, and their
attorneys and accountants, any and all documents that the Shareholders
have requested relating to the Stock Consideration and has provided
answers to all of the Shareholders' questions concerning the Stock
Portion.
(b) Each of the Shareholders has such knowledge and expertise in
financial and business matters that such Shareholder is capable of
evaluating the merits and risks involved in acquiring the Stock
Portion.
(c) The Shareholders understand that: (i) the Stock Portion has
not been registered under the Securities Act of 1933, as amended (the
"Act") or the securities laws of any state, based upon the exemption
from such registration requirements pursuant to Section 4(2) and/or
Regulation D under the Act; (ii) the Stock Portion is and will be
"restricted securities," as such term is defined in Rule 144 under the
Act; (iii) the Stock Portion may not be sold or otherwise transferred
unless it has been first registered under the Act and all applicable
state securities laws, or unless exemptions from such registration
provisions are available with the respect to said resale and transfer;
(iv) this Agreement contains restrictions on the transferability of
the Stock Portion for a period of two years from issuance; and (v) the
certificates representing the Stock Portion will bear a legend to the
effect that the transfer of the securities represented thereby is
subject to the provisions hereof.
(d) Each Shareholder is acquiring the Stock Portion solely for
the account of such Shareholder, for investment purposes only, and not
with a view towards their resale or distribution.
(e) Each Shareholder will not sell or otherwise transfer any of
the Stock Portion or any interest therein, unless and until (i) such
transfer is in compliance with this Agreement, and (ii)(A) such Stock
Portion shall have first been registered under the Act and all
applicable state securities laws or (B) such Shareholders shall have
delivered to Buyer a written opinion of counsel (which counsel and
opinion (in form and substance) shall be reasonable satisfactory to
Buyer), to the effect that the proposed sale or transfer is exempt
from the registration provisions of the Act and all applicable state
laws.
13
(f) The Shareholders acknowledge that Buyer will rely on these
representations in order to comply with the Act and applicable state
securities laws.
Section 4.27 Disclosure. All material facts of which Superior or the
Shareholders have knowledge relating to the Business or the operations,
financial condition and prospects of Superior 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 Superior 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.
Article V
Conduct of Business Prior to Closing
------------------------------------
Superior 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. Superior shall not
make any distributions or other payments to Superior's shareholders except for
compensation for services consistent with past practices.
Section 5.2 Operation of the Business. Superior 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 Superior and
to keep available to Buyer the services of the present employees and agents.
Section 5.3 Employees. Superior 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. Superior 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
Superior's employees relating to the foregoing. Effective as of the close of
business on the Closing Date, Superior shall terminate the employment of all of
Superior's employees and Buyer shall have the right, but no obligation, to hire
such employees.
Section 5.4 Payment of Liabilities. Superior shall pay as the same becomes
due all of Superior's liabilities accrued after, at, or prior to the Closing;
provided Superior 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. Superior 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
Superior, 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. Superior or the Shareholders
shall promptly reimburse Buyer for Superior's pro rata share (based on the
portion
14
of the tax period such property was owned) for any personal property taxes owed
by Superior with respect to the Purchased Assets. Buyer shall fully cooperate
with Superior and the Shareholders to provide all information requested by
Superior and the Shareholders to file such tax returns.
Section 5.6 Access to Information. Superior 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 Superior'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.
Section 5.7 Insurance. Superior 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,
Superior will maintain all the properties in customary repair, order and
condition, reasonable wear and use and damage by fire or other casualty
excepted. Superior shall be responsible for all risk of loss prior to the
Closing Date.
Section 5.9 Maintenance of Books, etc. Through the Closing Date, Superior
will maintain the books, accounts and records in the usual manner on a basis
consistent with prior periods. Superior 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, Superior 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, Superior shall promptly notify Buyer in writing of any
materially adverse developments affecting the Business which become known to
Superior 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 Superior, 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 Superior; or (iv) any representation or warranty made by
Superior 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
"Superior Material Adverse Change."
15
Article VI
Covenants of Superior and the Shareholders
------------------------------------------
Section 6.1 Telephone Number. Superior will assist in the transfer of
Superior's business telephone and facsimile numbers 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. Superior and the Shareholders acknowledge
that Buyer is a company registered under the Securities Exchange Act of ▇▇▇▇
(▇▇▇ "▇▇▇▇▇▇▇▇ ▇▇▇"). Superior agrees to maintain all of its accounting books
and records prior to and following the Closing and upon request of Buyer provide
such books and records to Buyer and use its best efforts to cooperate in the
audit of Superior's financial statements. Superior and the Shareholders agree at
their expense, except 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 may reasonably
request in connection with its reporting requirement under the Exchange Act.
Prior to and following the Closing, Superior and the Shareholders shall use
their reasonable best efforts to preserve the Business organization intact and
to keep available the services of Superior's employees and representatives and
to preserve the goodwill of the employees, customers, suppliers and others
having business relations with Superior.
Section 6.3 Non-Competition. Each of ▇▇▇▇▇ ▇. New, Jr. and ▇▇▇▇▇ ▇. ▇▇▇▇▇
agrees that during the Non-Competition Period (as defined below), he shall not
engage, directly or indirectly, through Superior 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 ▇▇▇▇▇ ▇. New, Jr. or ▇▇▇▇▇ ▇. ▇▇▇▇▇ 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 ▇▇▇▇▇ ▇. New, Jr. and ▇▇▇▇▇ ▇. ▇▇▇▇▇ 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 tenth 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 ▇▇▇▇▇ ▇. New, Jr. and ▇▇▇▇▇ ▇. ▇▇▇▇▇ 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
16
scope of activities as is permissible under applicable law. Each of ▇▇▇▇▇ ▇.
New, Jr. and ▇▇▇▇▇ ▇. ▇▇▇▇▇ 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 Superior 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 Superior and the
Shareholders harmless from and against any claims, demands, actions, causes of
action, loss, damage, cost, penalty or expense whatsoever, including legal fees,
suffered or incurred by Superior or the Shareholders by reason of the failure of
Buyer to pay or discharge any such amounts.
Section 6.5 `178 Patent Application. Any improvements or modifications to
the technology disclosed in the `178 Patent Application that have been conceived
or are conceived in the future by the Shareholders or Superior or the agents or
employees of the Shareholders or Superior shall be the sole property of Buyer.
Prior to or following the Closing, the Shareholders and Superior agree to
execute any assignment documents, inventor's declarations or other necessary
documents related to the prosecution of the `178 Patent Application or patents
related to the `178 Patent Application.
Article VII
Representations and Warranties of Buyer
---------------------------------------
Buyer represents, promises and warrants to Superior 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.
17
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 VIII
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 Superior and the Shareholders shall be true and correct
in all material respects at and as of the Closing Date; and Superior 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 Superior shall
provide to Buyer at the Closing a certificate to such effect executed by
Superior and the Shareholders.
Section 8.2 Due Diligence. Buyer shall have completed its due diligence
review of the Business and the Purchased Assets and have determined in it sole
discretion to complete the transactions contemplated hereby.
Section 8.3 Board of Directors Approval. The Board of Directors of Buyer
shall have approved this Agreement and the transactions contemplated hereby and
such approval shall not have been revoked prior to the Closing.
Section 8.4 Bank Consent. U.S. Bank National Association shall have given
its consent to Buyer entering into this Agreement and completing the
transactions contemplated hereby.
Section 8.5 Litigation. There shall be no litigation pending or threatened
against Superior or the Shareholders with respect to the consummation of this
Agreement or which could adversely affect the ability of Superior to convey the
Purchased Assets to Buyer.
Section 8.6 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 8.7 Superior Material Adverse Change. There shall not have occurred
a Superior Material Adverse Change.
Article IX
Conditions Precedent to Superior's Obligations
----------------------------------------------
The obligation of Superior 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 Superior):
18
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 Superior 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 Superior, 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 Superior by the delivery
of written notice to such effect to the other party;
(c) by Buyer if a Superior Material Adverse Change occurs;
(d) by either party (meaning Superior 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 Superior 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; or
(f) by either party (meaning Superior 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 April 30, 1999 and
such condition has not been waived by the party giving notice of
termination.
Notwithstanding the foregoing, a party shall not be allowed to exercise any
right of termination (i) pursuant to Section 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
19
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) or
(f), 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 condition;
(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; and
(d) Superior, 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.
Article XI
Survival and Indemnity
----------------------
Section 11.1 Survival of Representations, Warranties and Covenants. All of
the representations and warranties contained in Article IV and Article 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 Superior in
Section 1.4 and the covenants of Superior 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 Superior and the Shareholders. Superior 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 Superior or the Shareholders of any
covenant or agreement of Superior or the Shareholders contained in this
Agreement; (ii) any breach of warranty or inaccurate or erroneous representation
made by Superior or the Shareholders herein or in any certificate or other
instrument delivered by or on behalf of the Superior or Shareholders pursuant
20
hereto or (iii) other than Assumed Liabilities, any liabilities of Superior,
including without limitation those arising from Superior'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 Superior 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. 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
Superior's or either Shareholder's breach of any representation, warranty,
covenant or agreement.
Section 11.3 Indemnity by Buyer. Buyer and its successors shall indemnify,
save and hold harmless Superior 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 Superior or the Shareholders may
incur or suffer by reason of or arising out of (i) except to the extent
otherwise provided herein, any claim made against Superior 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 Superior or either Shareholder in the conduct of the Business prior to
the Closing. Superior 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 Right of Set-Off. Buyer shall have the right of set-off
against any amounts or payments due or to become due under Section 2.1 or
Section 3.7 hereof.
Article XII
Post-Closing Rights and Obligations
-----------------------------------
Section 12.1 Delivery of Records. At the Closing, Superior 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 Superior.
Section 12.2 Cooperation. Superior 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 Superior to Buyer.
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Section 12.3 Further Assurances. After the Closing, Superior 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 XIII
General
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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.
If to Buyer, to:
Koala Corporation
▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
With a copy to:
▇▇▇▇▇, Johnson, Robinson, ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.C.
Suite 1600
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to Superior, ▇▇▇▇▇ ▇. New, Jr. or ▇▇▇▇▇ ▇. ▇▇▇▇▇ , to:
Superior Foam, Inc.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. New
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, 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.
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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. Superior and the Shareholders represent and warrant
to Buyer, and Buyer represents and warrants to Superior and the Shareholders,
that they have not engaged any broker, finder, agent or other third party in
connection with this Agreement. Superior and the Shareholders, jointly and
severally, shall indemnify Buyer and Buyer shall indemnify Superior and the
Shareholders, against any claim by any third person for any commission,
brokerage, finder's fee or other payment 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
Superior, the Shareholders or Buyer, except that Buyer may assign this Agreement
to a wholly owned subsidiary provided Buyer remains fully liable to Superior 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 Superior, 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 Superior 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 Colorado.
Section 13.12 Press Release. The parties will consult with each other prior
to the issuance of any press release regarding this Agreement. Superior and the
Shareholders acknowledge, however, 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.
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Section 13.14
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
SUPERIOR:
SUPERIOR FOAM & POLYMERS, INC.
By: ___________________________________
President
SHAREHOLDER
_______________________________________
▇▇▇▇▇ ▇. New, Jr.
SHAREHOLDER
_______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇
BUYER:
KOALA CORPORATION
By: ___________________________________
Chairman and Chief
Executive Officer