EXHIBIT 2
TO
FORM 8-K REPORT
FILED
JANUARY 16, 2001
STOCK PURCHASE AGREEMENT
Between
THE SHAREHOLDERS OF
ACTIVITY RECORDS, INC.
as Seller
and
SIBONEY LEARNING GROUP, INC.
as Buyer
December 12, 2000
Table of Contents
Page
1. DEFINITIONS...........................................................1
2. TRANSFER OF STOCK; CLOSING............................................1
2.01. Shares.......................................................1
2.02. Purchase Price...............................................1
2.03. Other Transactions at Closing................................2
3. WARRANTIES AND REPRESENTATIONS OF SELLERS.............................3
3.01. Capitalization of the Company................................3
3.02. Organization, Standing and Power of the Company..............3
3.03. Payment of Debts and Liabilities.............................4
3.04. Financial Statements.........................................4
3.05. Books and Records............................................4
3.06. Accounts Receivable..........................................4
3.07. Inventory....................................................4
3.08. Good Title and Condition of Assets...........................4
3.09. No Conflicting Agreements or Orders; No Approvals............4
3.10. Litigation...................................................5
3.11. Intellectual Property........................................5
3.12. Material Contracts...........................................5
3.13. Customers....................................................6
3.14. Information for Due Diligence Review.........................6
3.15. No Undisclosed Liabilities...................................6
3.16. Taxes........................................................6
3.17. ERISA........................................................6
3.18. Related Party Transactions...................................6
3.19. No Misrepresentation.........................................6
4. REPRESENTATIONS AND WARRANTIES OF BUYER...............................7
4.01. Organization and Standing of Buyer...........................7
4.02. Binding Agreement............................................7
4.03. Agreement Within Authority...................................7
4.04. No Conflicting Agreements or Orders; Approvals...............7
4.05. Corporate Action.............................................8
4.06. No Conflict..................................................8
4.07. No Misrepresentation.........................................8
4.08. Merger or Sale...............................................8
5. COVENANTS OF BUYER....................................................8
5.01. Information..................................................8
5.02. Performance of Material Contracts............................9
5.03. Marketing and Customer Support...............................9
6. COVENANTS OF SELLERS..................................................9
6.01. Access to Information........................................9
6.02. Maintain Assets..............................................9
6.03. Business Changes.............................................9
6.04. Consents.....................................................9
6.05. Information..................................................9
6.06. Termination of Employees and Employee Benefit Plans..........9
6.07. Financial Information........................................9
6.08. Year 2000 Tax Returns.......................................10
6.09. Use of Name.................................................10
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.........................10
7.01. No Adverse Change...........................................10
7.02. Representations, Warranties and Agreements of Sellers.......10
7.03. Opinion of Counsel..........................................10
7.04. Absence of Litigation.......................................10
7.05. Consents....................................................10
7.06. Sellers' Certificate........................................10
7.07. Approval of Documents.......................................11
7.08. Casualty Loss...............................................11
7.09. [Intentionally Deleted].....................................11
7.10. Non-Competition Agreements with Alfred S. Harris,
Adele N. Harris, Carol Stern and
Alan Stern..................................................11
7.11. Employment Agreement........................................11
7.12. Due Diligence Review........................................11
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS.......................12
8.01. Representations, Warranties and Agreements of Buyer.........12
8.02. Opinion of Counsel..........................................12
8.03. Consents....................................................12
8.04. Officers' Certificate.......................................12
8.05. Approval of Documents.......................................12
9. INDEMNIFICATION......................................................12
9.01. Indemnification of Buyer by Sellers.........................12
9.02. Indemnification of Sellers by Buyer.........................13
9.03. Notice to Indemnifying Party................................14
10. CLOSING AND RISK OF LOSS.............................................14
10.01. Place and Time..............................................14
10.02. Simultaneous Performance....................................14
10.03. Transfer of Possession......................................14
11. MISCELLANEOUS........................................................14
11.01. No Commission...............................................14
11.02. Survival of Representations and Warranties..................14
11.03. Incorporation of Schedules..................................15
11.04. Further Assurances..........................................15
11.05. Transfer Taxes..............................................15
11.06. Submission to Jurisdiction..................................15
11.07. Notices.....................................................15
11.08. Entire Agreement............................................16
11.09. Binding Effect..............................................16
11.10. Third Parties...............................................16
11.11. Expenses of the Parties.....................................16
11.12. Counterparts................................................16
11.13. Headings....................................................16
11.14. Mail and Communications.....................................17
11.15. Acquisition Subsidiary......................................17
11.16. Missouri Law to Govern......................................17
11.17. Sellers' Representative.....................................17
STOCK PURCHASE AGREEMENT BETWEEN
SIBONEY LEARNING GROUP, INC. AND
THE SHAREHOLDERS OF ACTIVITY RECORDS, INC.
This Stock Purchase Agreement (the "Agreement") is entered into as of
the 12th day of December, 2000, by SIBONEY LEARNING GROUP, INC., a Missouri
corporation ("Buyer"), and the shareholders listed on Exhibit A attached hereto
corporation (individually, a "Seller" and, collectively, the "Sellers"), of
ACTIVITY RECORDS, INC., a New York corporation (the "Company").
RECITALS
Seller desires to sell, and Buyer desires to purchase, all the issued
and outstanding shares (the "Shares") of capital stock of the Company for the
consideration and on the terms set forth in this Agreement.
THEREFORE, in consideration of the agreements set forth herein, and
subject to the conditions herein contained, it is mutually agreed as follows:
1. DEFINITIONS.
Schedule 1.01 contains certain definitions of capitalized terms used in
this Agreement for ease of reference.
2. TRANSFER OF STOCK; CLOSING.
2.01. Shares. Subject to the terms and conditions of this Agreement, at
the Closing, Sellers will sell and transfer the Shares to Buyer, and Buyer will
purchase the Shares from Sellers.
2.02. Purchase Price. The Purchase Price ("Purchase Price") for the
Shares will be as follows:
(a) Five Hundred Fifty Thousand Dollars ($550,000.00) in cash,
by wire transfer or cashier's check, payable at Closing to Sellers in
the respective amounts listed on Exhibit A; and
(b) Three Hundred Thousand Dollars ($300,000.00) by delivery
to Sellers of the promissory notes of Buyer in the respective principal
amounts listed on Exhibit A, calling for twelve (12) quarterly
principal payments, without interest, of Twenty-Five Thousand Dollars
($25,000.00) in the aggregate, allocated as set forth on Exhibit A, to
the Sellers, with first payment on March 31, 2001, and succeeding
payments every three months thereafter (June 30, September 30, December
31 and March 31) with a final payment on December 31, 2003, as provided
in the form of promissory note attached hereto as Schedule 2.01(b)
("the Note"); and
(c) If, for the year beginning January 1, 2001 and ending
December 31, 2001, annual Net Sales (defined as revenues received less
product returns) of products included in or based primarily on the
Assets exceed $900,000.00, Buyer will pay Sellers (until the maximum
aggregate referred to in subsection (e) is paid), an amount, in the
aggregate, equal to 15% of such annual net sales over $900,000.00
during such calendar year, which amounts will be allocated to each
Seller in accordance with the percentages set forth in Exhibit A, and
the same arrangement will remain in effect each calendar year
thereafter through December 31, 2003, with annual payments to be made
not later than 45 days after the close of each year (2001, 2002 and
2003) in which Buyer invoices for such sales; and
(d) Buyer will also pay Sellers within fifteen (15) days after
receipt of each royalty payment from Havas Interactive/Class Works
(until the maximum aggregate referred to subsection e is paid), fifty
percent (50%), in the aggregate, of revenue received from licensing
Seller products to Havas Interactive/Class Works from sales generated
in calendar years 2001, 2002 and 2003, which payment shall be allocated
in accordance with the percentages set forth in Exhibit A (the payments
to be made under subsection (c) and (d) being referred to as the
"contingent payments"); and
(e) The maximum aggregate amount payable by Buyer to Sellers
under subsections (a), (b), (c) and (d) above combined shall not exceed
$1,100,000.00. Regardless of the payments made under subsection (c) and
(d) above, within sixty (60) days after the end of calendar year 2003,
Buyer will pay Sellers, in the aggregate, an amount equal to the
difference, if any between the aggregate amounts paid to Sellers under
subsections (a), (b), (c) and (d) above, and $925,000.00, which amounts
will be paid to Sellers in accordance with the percentages set forth on
Exhibit A. Buyer will provides Sellers such documentation of Net Sales
referred to in subsections (c) and (d) above as Sellers may reasonably
request.
2.03. Other Transactions at Closing. At the Closing:
(a) Sellers will deliver the Shares to Buyer, with appropriate
stock powers attached, and will cause the Company to deliver full
possession of the Assets and business of the Company to Buyer effective
as of the Closing;
(b) Buyer will confirm to the other parties under the Authors'
Agreements that the Company, under Buyer's ownership, will perform the
post-Closing obligations of the Company under the Authors' Agreements;
(c) Alfred S. Harris, Jr., Adele N. Harris, Carol Stern and
Alan Stern shall have executed and delivered to Buyer the
Non-Competition Agreements referred to in Section 7.10;
(d) Siboney Corporation, parent company of Buyer, will
guarantee payment by Buyer of all amounts required to be paid to
Sellers under Section 2.02 of this Agreement, including without
limitation, all payments under the Notes;
(e) Buyer will cause Company to grant Sellers a security
interest in the Assets as provided in the form of Security Agreement
attached hereto as Schedule 2.03(e), to secure Buyer's payment
obligations under the Notes and the Contingent Payments and will cause
the Company to execute such UCC-1 financing statements as Sellers may
reasonably request for the purpose of Sellers perfecting such security
interest;
(f) Sellers will cause the Company to provide Buyer a list of
the Company's customers for products produced by the Company with the
Assets (the "Customer List"). The Customer List and the amount of
purchases by each of them for the year ended August 31, 2000 and,
separately, for the three-month period ended November 30, 2000;
(g) Sellers will cause the Company to provide Buyer the source
codes for all programs included in those Assets of the Company owned by
the Company immediately prior to Closing;
(h) the parties will perform all of the other obligations
required to be performed by them at or before the Closing, including
without limitation, fulfilling the conditions delivering the documents
and fulfilling the conditions set forth in Article VII hereof; and
(i) all directors and officers of the Company will deliver
written resignations from all such positions with the Company and
acknowledge in writing that the Company has no further obligations to
them that have not been paid, or adequately provided for under Section
3.03 hereof, at or prior to Closing.
3. WARRANTIES AND REPRESENTATIONS OF SELLERS.
Sellers jointly and severally represent, warrant to and covenant and
agree with Buyer as follows:
3.01. Capitalization of the Company.
The authorized equities securities of the Company consist of 100 shares
of common stock, no par value, of which 100 are issued and outstanding and
constitute the Shares. Sellers are and will be on the Closing Date the record
and beneficial holders of the Shares, free and clear of all encumbrances. Each
Seller owns the numbers of shares set forth opposite such Seller's name on
Exhibit A attached hereto. All the Shares have been duly authorized and validly
issued and are fully paid and nonassessable. There are no contracts or other
commitments relating to the issuance, sale or transfer of any equity securities
or other securities of the Company. None of the Shares was issued in violation
of federal or state securities laws or any other legal requirement. The Company
does not own, and has no contract or commitment to acquire, any equity
securities or other securities of any other entity or any direct or indirect
equity or ownership interest in any other business.
3.02. Organization, Standing and Power of the Company. The Company is a
corporation duly organized, validly existing and is in good standing under the
corporate and other laws of the State of New York and has all necessary power
and authority to operate its business as currently operated.
3.03. Payment of Debts and Liabilities. Sellers will pay or will cause
to be paid or will provide for the payment in a manner reasonably acceptable to
Buyer of, all accounts, debts, bills and liabilities of the Company which are
payable through the Closing Date or which subsequent to the Closing could become
an Encumbrance on or result in a secured interest in the Assets or otherwise
affect the use of the Assets subsequent to the Closing or constitute a liability
of the Company after the Closing Date.
3.04. Financial Statements. Sellers have delivered to Buyer the balance
sheets and related statements of income for the years ended August 31, 2000, and
for the three months ended November 30, 2000. Such financial statements fairly
present the financial condition and the results of operations of the company as
of the respective dates thereof and for the periods referred to therein.
3.05. Books and Records. The books of account, minute books, stock
record books and other records of the Company, all of which have been made
available to Buyer, are complete and correct in all material respects. The
minute books of the Company contain accurate and complete records of all
meetings held, and corporate action taken by, the stockholders, the Board of
Directors and committees of the Board of Directors of the Company, and no
meeting of any such stockholders, Board of Directors or committee has been held
for which minutes have not be prepared are not contained in such minute books.
At the Closing, Sellers will cause the Company to place all of such books and
records in the possession of Buyer.
3.06. Accounts Receivable. All accounts receivable of the Company as
they may exist on the Closing Date represent or will represent valid obligations
arising from sales actually made or services actually performed in the ordinary
course of business. Unless paid prior to the Closing Date, such accounts
receivable are or will be as of the Closing Date current and collectible net of
any reserve shown on the financial statements heretofore furnished to Buyer.
There is no contest, claim or right of set-off under any contract with any
obligor of any of the accounts receivable.
3.07. Inventory. All inventory of the Company consists of a quality and
quantity usable in the ordinary course of the business of the Company.
3.08. Good Title and Condition of Assets.
The Company has good and marketable title to and interest in all of the
assets. Its assets are free and clear of any restrictions on or conditions to
transfer or assignment, mortgages, conditional sales agreements, liens, pledges,
charges, encumbrances, claims, security interests, easements, covenants,
conditions or restrictions (collectively, "Encumbrances").
3.09. No Conflicting Agreements or Orders; No Approvals.
(a) There is no provision of the Articles of Incorporation or
By-laws of the Company or of any contract, security agreement, lease,
mortgage, indenture, or other document, instrument, license, franchise
or agreement which is binding on the Company or which affects the
Company or its properties, which conflicts with or in any way prevents
or will be violated by the execution, delivery or carrying out of the
terms of this Agreement.
(b) The execution, delivery and consummation of this Agreement
by the Company will not constitute or result in: the creation or
imposition of an Encumbrance on, or give to others any interest or
right in or with respect to, any of the Assets.
(c) The Company is not subject to any order, writ, injunction,
decree, judgment, award, determination, direction or demand of any
court, arbitrator, or federal, state, municipal or other governmental
department, bureau, agency or instrumentality which would be violated
by the execution, delivery or carrying out of the terms of this
Agreement.
(d) No approval or consent of any foreign, federal, state,
county, local or other governmental or regulatory body is required as a
condition to the validity of this Agreement as it relates to the
Company to give effect to the transactions contemplated hereby.
3.10. Litigation. No suit, action, decree, arbitration or legal,
administrative or other proceeding, controversy or investigation is pending or
(to the knowledge of Sellers) threatened against the Company, or any Seller, or
which otherwise might adversely affect the use or value of the assets of the
Company, any Seller's right to transfer the Shares, or the continued use of the
assets of the Company by the Company.
3.11. Intellectual Property.
(a) The Company is the sole owner or the e9xclusive licensee
(in each case, separately identified as such) of the software programs
and other works of authorship, trade names and trademarks listed on
Schedule 3.11 (collectively, the "Intellectual Property"), which
constitute all of the intellectual property sold, licensed or otherwise
used by Seller in connection with the Assets.
(b) The sale, license or use of the Intellectual Property by
the Company does not infringe upon or conflict with the rights of
others. None of the software programs or works of authorship, trade
names or trademarks listed on Schedule 3.11, or any registration
thereof, is infringed or has been challenged or threatened in any way.
There is no potentially interfering trademark or trade name application
of any third party.
3.12. Material Contracts. Schedule 3.12 contains a complete and
accurate list of all contracts and commitments that are material to the business
of the Company, including without limitation, all Authors' Agreements (the
"Material Contracts"). Sellers have caused the Company to furnish to Buyer true
and complete copies of all Material Contracts. There is no default of the
Company or event that with notice or lapse of time, or both, would constitute a
default, nor, to the knowledge of Sellers, any default or threatened default by
any other party thereto, existing with respect to any of such agreements. The
Company has received no notice that any party to any of such agreements intends
to cancel or terminate any of the Material Contracts or to exercise or not
exercise any options under any of the Material Contracts.
3.13. Customers The Customer List to be furnished at the Closing will
be true, accurate and complete in all material respects.
3.14. Information for Due Diligence Review. Sellers has caused the
Company to provide to Buyer all information requested by Buyer for the purpose
of completing Buyer's due diligence review referred to in Section 7.12 hereof.
3.15. No Undisclosed Liabilities.
Except as set forth in Schedule 3.15 attached hereto, the Company has
no liabilities or obligations except for liabilities or obligations reflected or
reserved against in the financial statements heretofore delivered to Buyer and
current liabilities incurred by the Company in the ordinary course of the
Company's business since the respective dates of such financial statements.
3.16. Taxes.
The Company has filed or caused to be filed on a timely basis all
federal, state and local income and other tax returns that are or were required
to be filed by or with respect to the Company pursuant to applicable legal
requirements. Sellers have caused the Company to deliver or make available to
Buyer or its representatives copies of all such tax returns relating to income
taxes filed for all years since 1996. The Company has paid all taxes that have
or may have become due pursuant to such tax returns or otherwise or pursuant to
any assessment received by the Company.
3.17. ERISA.
The Company does not maintain or contribute to and has not maintained
or contributed to, nor has the Company been a party to an profit sharing,
defined benefit, deferred compensation or employee benefit plan (as defined in
Section 3(3) of ERISA) for employees of the Company or contributed by the
Company.
3.18. Related Party Transactions.
Except as set forth on Schedule 3.18, no Seller or any person related
to a Seller has had any business dealings or material financial interest in any
transaction with the Company or is a party to any contract or commitment with or
has any claim or rights against the Company that will remain in existence after
Closing.
3.19. No Misrepresentation. No representation or warranty made by
Seller in this Agreement or any Schedule hereto or in any document or instrument
delivered by or on behalf of any Sellers or by or on behalf of the Company to
Buyer in connection with this Agreement contains or will contain an untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein and therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to, and covenants and agrees with,
Seller as follows:
4.01. Organization and Standing of Buyer. Buyer is a Missouri
corporation, validly existing and in good standing under the laws of the State
of Missouri and has all necessary power and authority to purchase the Assets
from Seller on the terms set forth herein and has full power and authority to
purchase the Shares from Sellers on the terms set forth herein and has full
power and authority to enter into this Agreement and to complete the Closing,
which have been duly authorized by all required corporate and other action on
the part of Buyer.
4.02. Binding Agreement. This Agreement constitutes, and each other
instrument to be executed and delivered by Buyer in accordance herewith will
constitute, when executed and delivered pursuant hereto, the valid and legally
binding obligations of Buyer.
4.03. Agreement Within Authority. The execution and delivery of this
Agreement by Buyer, the consummation of the transactions contemplated hereunder
and the performance by Buyer of this Agreement and the agreements and
instruments which are executed and delivered in connection herewith in
accordance with each of their terms will not violate: (a) the Articles of
Incorporation or Bylaws of Buyer, or (b) any judgment, order, writ, injunction,
decree or demand against Buyer of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality.
4.04. No Conflicting Agreements or Orders; Approvals.
(a) There is no provision of the Articles of Incorporation or
Bylaws of Buyer or of any contract, security agreement, lease,
mortgage, indenture, or other document, instrument, license, franchise
or agreement which is binding on Buyer or which affects Buyer or its
properties, which conflicts with or in any way prevents or will be
violated by the execution, delivery or carrying out of the terms of
this Agreement.
(b) The execution, delivery and consummation of the Agreement
by Buyer will not constitute or result in the creation or imposition of
an Encumbrance against or give to others any interest or right in or
with respect to, any of payments to be made to Sellers under this
Agreement.
(c) Buyer is not subject to any order, writ, injunction,
decree, judgment, award, determination, direction or demand of any
court, arbitrator, or federal, state, municipal or other governmental
department, bureau, agency or instrumentality which would be violated
by the execution, delivery or carrying out of the terms of this
Agreement.
(d) No approval or consent of any foreign, federal, state,
county, local or other governmental or regulatory body is required as a
condition to the validity of this Agreement as it relates to Buyer to
give effect to the transactions contemplated hereby.
4.05. Corporate Action. The execution and delivery of this Agreement by
Buyer and the performance of all acts contemplated to be performed by Buyer
hereunder have been duly authorized by all necessary corporate action. Buyer has
duly executed and delivered this Agreement and the agreements or instruments
which are executed by Buyer in connection herewith.
4.06. No Conflict. The execution and delivery of this Agreement and
each other instrument to be executed by Buyer in accordance herewith and the
consummation of the transactions contemplated herein by Buyer will not conflict
or be inconsistent with or result in the termination of or constitute a breach
of or default under the terms of any indenture, mortgage, deed of trust,
covenant, agreement or other instrument to which Buyer is a party or to which
its property is subject.
4.07. No Misrepresentation. No representation or warranty made by Buyer
in this Agreement or any Schedule hereto or in any document or instrument
delivered by Buyer in connection with this Agreement or in any reports filed
with the United States Securities and Exchange Commission contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein and therein not
misleading.
4.08. Merger or Sale. Until the payment in full of the obligations of
Buyer under Section 2.02, Buyer will maintain its corporate existence and will
not sell the Shares to an independent third party or merge with or sell all or
substantially all of the assets of Buyer to an unaffiliated party unless such
transferee assumes (either by agreement or by operation of law) Buyer's
obligations hereunder and Siboney Corporation remains obligated under its
guaranty of payment of Buyer's obligations under this Agreement.
5. COVENANTS OF BUYER.
Buyer further covenants and agrees with Sellers as follows:
5.01. Information. In the event the Closing is not consummated for any
reason:
(a) all copies of non-public proprietary documents and
information provided to one party hereto to the other party hereto will
be returned;
(b) each party shall maintain the same in confidence and will
not disclose or utilize the same except with the consent, or for the
benefit, of the other party, subject to any disclosure duty of Buyer
under applicable federal securities laws, in which case Buyer will use
reasonable efforts to advise Seller in advance of the content and
timing of such disclosure; and
(c) any communication by Buyer with parties to the Authors'
Agreements will be subject to Seller's approval, which shall not be
unreasonably withheld.
5.02. Performance of Material Contracts. After the Closing, Buyer shall
cause the Company to perform and discharge the obligations that arise after the
Closing Date under the Material Contracts.
5.03. Marketing and Customer Support. Following Closing, Buyer agrees
to use its reasonable efforts to continue the Company's current marketing
efforts and customer support for the Seller Products.
6. COVENANTS OF SELLERS.
Sellers further jointly and severally covenant and agree with Buyer
that, at all times prior to the Closing:
6.01. Access to Information. Promptly after the execution of this
Agreement: Sellers shall cause the Company to give Buyer and its counsel,
accountants and other representatives shall have full access during normal
business hours to all properties, books, accounts, records, agreements and
documents of or relating to the Company.
6.02. Maintain Assets. Sellers will cause the Company to maintain the
Assets on a current basis and in customary repair, order and condition.
6.03. Business Changes. Sellers will cause the Company not to do or
agree to do any of the following without the prior written consent of Buyer:
(a) Make any material change in the Assets to be owned by the
Company immediately prior to Closing; or
(b) Modify, amend, cancel or terminate any of the Material
Contracts.
6.04. Consents. As soon as reasonably practical after the execution and
delivery of this Agreement, and in any event on or before the Closing Date,
Sellers will cause the Company to obtain the written consent of all persons
whose consent to the execution and performance of this Agreement by Sellers or
the transfer of the Shares under this Agreement is required, in form and
substance acceptable to Buyer; and Sellers will cause the Company to furnish
Buyer original executed copies of such consents as they are obtained.
6.05. Information. Sellers agree to the restrictions on disclosure of
information set forth in Section 5.01 hereof.
6.06. Termination of Employees and Employee Benefit Plans. Prior to the
Closing Date, Sellers will cause the Company to (a) terminate all of its
employees and employee benefit plans effective December 31, 2000 without
liability to the Company thereafter; and (b) comply with all laws applicable to
such terminations.
6.07. Financial Information. Sellers will cause the Company to provide
Buyer sufficient financial and other information, records and schedules to
permit Buyer and its independent accountants to prepare financial statements
meeting the applicable requirements of the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, including without
limitation, the information, schedules, and records described on Schedule 6.07
attached hereto.
6.08. Year 2000 Tax Returns. Sellers will prepare and file, at Seller's
cost, all federal, state and local income, franchise and other tax returns for
all periods through December 31, 2000 and pay or provide for the payment of all
taxes attributable to the business of the Company through December 31, 2000.
6.09. Use of Name. Sellers acknowledge that Buyer may market the
products of the Company under the name "EA Software" or "Educational Activities
Software" or similar names and covenant that use of such names will not be
challenged by Sellers or any entity owned in whole or in part by Sellers.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.
The obligations of Buyer to consummate the Closing are subject to
fulfillment (or waiver by Buyer), prior to or on the Closing Date, of the
following conditions:
7.01. No Adverse Change. There shall have been no adverse change in or
loss or damage to the Assets.
7.02. Representations, Warranties and Agreements of Sellers. The
representations, warranties, covenants and agreements of Seller shall be true
and not breached as of the Closing Date, with the same effect as though such
representations, warranties, covenants and agreements of Sellers shall be true
and not breached as of the Closing Date, and all of the obligations of Seller
hereunder shall have been duly performed.
7.03. Opinion of Counsel. Buyer shall have received the favorable
opinion of counsel for Sellers, dated as of the Closing Date, in the form of
Schedule 7.03 and otherwise in form and substance reasonably satisfactory to
Buyer and Buyer's counsel. In rendering such opinion, counsel for Sellers may
rely on written certificates of the chief executive officer or the chief
financial officer of the Company and appropriate public officials as to factual
matters, provided a copy thereof is attached to and forms a part of the opinion
of counsel with the knowledge and consent of the chief executive officer or the
chief financial officer of the Company.
7.04. Absence of Litigation. No action, suit or proceeding before any
court or any governmental body or authority pertaining to the consummation of
the Closing or to the Assets shall have been instituted or threatened on or
before the Closing Date.
7.05. Consents. All necessary agreements, approvals and consents of any
parties to the consummation of the transactions by Sellers contemplated by this
Agreement, or otherwise pertaining to the matters covered by this Agreement
related to Sellers, shall have been obtained by Sellers and delivered to Buyer.
7.06. Sellers' Certificate. Buyer shall have received one or more
certificates, dated the Closing Date, signed and verified by each Seller, in the
form of Schedule 7.06 hereto.
7.07. Approval of Documents. The form and substance of all
certificates, instruments, opinions and other documents (other than the
documents attached hereto) delivered to Buyer under this Agreement shall be
satisfactory to Buyer and its counsel.
7.08. Casualty Loss. The Assets shall not have been affected by any
loss, destruction or damage due to fire or other casualty, unless, if any such
destruction or damage has occurred, Buyer has determined that available
insurance proceeds are sufficient to repair or replace any damaged or lost
Assets and Buyer shall have confirmed to its satisfaction that the proceeds of
any such insurance are delivered to the Company and are used either to repair or
replace such damaged or lost Assets or are otherwise utilized as directed by
Buyer.
7.09. [Intentionally Deleted]
7.10. Non-Competition Agreements with Alfred S. Harris, Adele N.
Harris, Carol Stern and Alan Stern. Each of Alfred S. Harris, Adele N. Harris,
Carol Stern and Alan Stern will have executed and delivered the Non-Competition
Agreement set forth in Schedule 7.10 (the "Non-Competition Agreements").
7.11. Employment Agreement. Buyer and Alan Stern shall have entered
into a mutually acceptable employment agreement for a term ending December 31,
2001.
7.12. Due Diligence Review. Buyer shall have completed its due
diligence investigation with results satisfactory to Buyer, including without
limitation:
(a) Determination of the accuracy of Net Sales information
provided by Seller to Buyer;
(b) Confirmation that Seller is the owner, free and clear, of
all Encumbrances, and has the unencumbered right to transfer the Assets
to Buyer free and clear of all Encumbrances;
(c) Confirmation that receipts from Seller Products for the 12
months ended September 30, 2000 are less than 10% below $966,479;
(d) Confirmation that the Seller Products operate successfully
on popular computer platforms and network systems;
(e) Confirmation that all authors of computer software or
other works of authorship utilized in connection with the Seller
Products have transferred to Seller (for transfer to Buyer at Closing)
all electronic rights of such authors relating to such software and
other works of authorship; and
(f) Confirmation that the information requested by the Company
in its Document and Information Request transmitted on or about
November 29, 2000 to the Company, Sellers and Sellers' counsel, shall
have been reviewed by and approved as acceptable to Buyer.
If Buyer does not notify Seller in writing, within 21 days after the date of
this Agreement, that the conditions in this Section 7.12 have not been
fulfilled, such conditions will be deemed to have been fulfilled.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS.
The obligations of Sellers to consummate the Closing are conditioned on
the fulfillment (or waiver by Sellers), prior to or on the Closing Date, of the
following:
8.01. Representations, Warranties and Agreements of Buyer. The
representations, warranties, covenants and agreements of Buyer herein will be
true and not breached as of the Closing Date, with the same effect as though
such representations, warranties, covenants and agreements had been repeated by
Buyer as of such time, and all of the obligations of Buyer hereunder shall have
been duly performed.
8.02. Opinion of Counsel. Sellers will have received the favorable
opinion of counsel for Buyer, dated as of the Closing Date, in the form of
Schedule 8.02 and otherwise in form and substance satisfactory to Sellers and
Sellers' counsel. In rendering their opinion, counsel for Buyer may rely on
written certificates of the officers of Buyer and appropriate public officials
as to factual matters, provided a copy thereof is attached to and forms a part
of the opinion of Buyer's counsel with the knowledge and consent of such
officers.
8.03. Consents. Any necessary agreements and consents of any parties to
the consummation of the transactions by Buyer contemplated by this Agreement, or
otherwise pertaining to the matters covered by this Agreement related to Buyer,
shall have been obtained by Buyer and delivered to Sellers.
8.04. Officers' Certificate. Sellers will have received a certificate,
dated the Closing Date, signed and verified by Buyer's chief executive officer
and chief financial officer, in the form of Schedule 8.04.
8.05. Approval of Documents. The form and substance of all
certificates, instruments, opinions and other documents (other than the
documents attached hereto) delivered to Seller by or on behalf of Buyer under
this Agreement shall be satisfactory to Seller and its counsel.
9. INDEMNIFICATION.
This Article sets forth the respects in which Buyer shall be
indemnified by Sellers, jointly and severally, in the event of any
misrepresentation or breach of warranty or agreement on the part of Sellers
hereunder, and the respects in which Sellers shall be indemnified by Buyer in
the event of any misrepresentation or breach of warranty or agreement on the
part of Buyer hereunder.
9.01. Indemnification of Buyer by Sellers.
(a) Representations, Warranties, Covenants and Agreements.
Sellers, jointly and severally, agree to indemnify Buyer and hold Buyer
harmless against any and all loss, liability, damage, claim, cost and
expense of any nature including, without limitation, attorneys' fees,
arising from or in connection with: (i) any representation or warranty
made by Sellers not being complete, accurate and true at the date of
this Agreement and on the Closing Date; (ii) the failure by Sellers to
fulfill and fully perform each covenant or agreement to be performed on
the part of Sellers under this Agreement or under any other instrument
or document executed and delivered by Sellers in connection with the
transactions contemplated hereby, as any of the same may be amended
from time to time; (iii) any liability of the Company arising prior to
the Closing Date or arising from conduct prior to the Closing Date that
is not paid or provided for in accordance with Section 3.03 hereof or
(iv) termination of the Company's employees or employee benefit plans
as required under Section 6.06 hereof.
(b) Remedies Not Exclusive. The rights and remedies of Buyer
under this Article or otherwise in this Agreement shall be cumulative
and in addition to and not in limitation or exclusion of all other
rights and remedies, whether by the terms of this Agreement or at law
or in equity or otherwise, which may exist on the part of Buyer by
reason of any misrepresentation or breach of warranty, covenant or
agreement on the part of Sellers. Such rights and remedies shall be
cumulative and may be exercised at any time or from time to time, and
any failure or delay of Buyer in exercising any right or remedy at any
time shall not constitute a waiver thereof or restrict its subsequent
enforcement or the enforcement of any other right or remedy of Buyer.
In addition to any other rights and remedies of Buyer hereunder or
otherwise, if Sellers are liable to indemnify Buyer under the foregoing
provisions, any amounts due and payable to Buyer by reason of the
obligations of Sellers to indemnify Buyer and hold Buyer harmless
hereunder shall be subject to a right of setoff and reduction on the
part of Buyer against any amounts due and payable by Buyer to Sellers
hereunder or under any other agreement, including without limitation,
any amounts due under the Notes and any amounts due under the
Contingent Payments. The choice of whether to set off such amounts or
to pursue other remedies shall be at the discretion and designation of
Buyer.
9.02. Indemnification of Sellers by Buyer.
(a) Representations, Warranties, Covenants and Agreements.
Buyer agrees to indemnify Sellers and hold Sellers harmless against any
and all loss, liability, damage, claim, cost and expense of any nature
whatsoever, including, without limitation, attorneys' fees, arising
from or in connection with any representation or warranty made by Buyer
not being complete, accurate and true at the date of this Agreement and
on the Closing Date, or the failure by Buyer to fulfill and fully
perform each covenant or agreement to be performed on the part of Buyer
under this Agreement or under any other instrument or document executed
and delivered by Buyer in connection with the transactions contemplated
hereby, as any of the same may be amended from time to time.
(b) Remedies Not Exclusive. The rights and remedies of Sellers
provided for in this Article or otherwise in this Agreement shall be
cumulative and in addition to and not in limitation or exclusion of all
other rights and remedies, whether by the terms of other provisions of
this agreement or at law or in equity or otherwise, which may exist on
the part of Sellers by reason of any misrepresentation or breach of
warranty, covenant or agreement on the part of Buyer hereunder. Such
rights or remedies may be exercised at any time or from time to time,
and any failure or delay of Sellers in exercising any right or remedy
at any time shall not constitute a waiver thereof or restrict its
subsequent enforcement or the enforcement of any other right or remedy
of Sellers.
9.03. Notice to Indemnifying Party. In the event that any party may be
entitled to, or intends to assert a claim for, indemnification hereunder, not
later than thirty (30) days after actual notice of any claim or the filing of
any action giving rise to such claim for indemnification, the indemnified party
will, if a claim in respect thereof is to be made against another party or
parties hereto, notify the indemnifying party or parties thereof. In case any
action is threatened or brought against any indemnified party, and it notifies
the indemnifying party or parties thereof, the indemnifying party or parties
will be entitled to participate in or assume the defense thereof with counsel
reasonably satisfactory to such indemnified party and, after notice of its
election to assume the defense thereof, the indemnifying party or parties will
no longer be liable for any legal or other expense subsequently incurred by the
indemnified party in connection with the defense thereof; provided, however,
that the indemnified party shall be entitled at all times to participate in the
defense of any such action at its own cost.
10. CLOSING AND RISK OF LOSS.
10.01. Place and Time. The Closing shall take place on the Closing Date
by delivery in escrow to the respective counsel for Sellers and for Buyer of the
Shares, stock powers sufficient to transfer the Shares to Buyer, and the
agreements, documents and payments required to be delivered at Closing, subject
to the mutual written direction by Sellers and Buyer to cause all such items
(including wire transfer of funds) to be delivered to the recipients designated
in this Agreement.
10.02. Simultaneous Performance. None of the transactions described in
Article II to be performed at the Closing will occur unless all such
transactions occur.
10.03. Transfer of Possession. Possession of the Assets shall be
delivered to Buyer at Closing.
11. MISCELLANEOUS.
11.01. No Commission. Except for JPMC Associates and Jim McGough,
business brokers representing Sellers, whose fee shall be paid in full by
Sellers, all negotiations on behalf of Seller and Buyer, respectively, relative
to this Agreement and the transactions contemplated hereby have been carried on
by Sellers and Buyer directly between Sellers and Buyer and without the
intervention of any third party, either as the result of any action of Sellers
or Buyer, or otherwise, to the knowledge of Sellers or Buyer, in such manner as
to give rise to any valid claim against Sellers, any shareholder of Sellers or
Buyer for a finders' fee, brokerage commission or other like payment.
11.02. Survival of Representations and Warranties. The representations
and warranties of Buyer and of Sellers, respectively, contained herein shall
survive the Closing, regardless of any investigations made by or on behalf of or
any disclosure to Buyer or Sellers.
11.03. Incorporation of Schedules. The Schedules hereto shall be deemed
to be incorporated in and form a part of this Agreement.
11.04. Further Assurances. Each of the parties agrees to do, execute,
acknowledge and deliver, and cause to be done, executed, acknowledged and
delivered, all such further acts, assignments, transfers, instruments,
documents, deeds and assurances as shall be required in order to carry out this
Agreement and give effect hereto.
11.05. Transfer Taxes. All sales, transfer, excise and other taxes, if
any, payable by reason of the transactions contemplated hereunder shall be paid
by Sellers.
11.06. Submission to Jurisdiction.
Buyer and Sellers agree that the state or federal courts located in St.
Louis, Missouri and Nassau County, New York have non-exclusive jurisdiction to
hear and determine any claims or disputes pertaining to this Agreement, and each
party agrees to submit to such jurisdiction and each hereby waives any objection
to such jurisdiction based on lack of personal jurisdiction, improper venue or
forum non conveniens.
11.07. Notices. Any notice, consent, request, claim or other
communication hereunder shall be in writing and shall be deemed to have been
duly given at the time of mailing by United States Certified, Registered or
Express mail, or by next business day courier (for example, Federal Express)
postage or charges prepaid, addressed as follows:
If to Buyer:
Ernest R. Marx
Siboney Learning Group, Inc.
325 North Kirkwood Road, Suite 200
St. Louis, Missouri 63122
with a copy to:
John P. Walsh, Esq.
Gallop, Johnson & Neuman, L.C.
16th Floor
101 South Hanley Road
St. Louis, Missouri 63105
If to Sellers:
c/o Carol Stern, Sellers' Representative
1937 Grand Avenue
Baldwin, New York 11510
with a copy to:
Richard Kestenbaum, Esq.
40 Cutter Mill Road
Suite 300
Great Neck, New York 11021
or to such other address as any party may designate by written notice
hereunder.
11.08. Entire Agreement. This Agreement embodies the entire Agreement
between the parties, and no representations, inducements, promises or other
agreements, oral or otherwise, not embodied herein, shall be of any force or
effect. This Agreement may not be modified or terminated except in writing
signed by the parties hereto.
11.09. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors, assigns, heirs
and personal representatives. In the event Buyer sells the Shares or sells all
or substantially all of the Assets to any third party, Buyer will require the
transferee to assume (either by express agreement or, if applicable, by
operation of law) Buyer's obligations under the Notes and Buyer's obligations to
make the Contingent Payments. Such assumption, however, will not relieve Buyer
of its ultimate obligation to cause such obligations to be fulfilled.
11.10. Third Parties. Nothing contained in this Agreement or in any
instrument or document executed by any party hereto in connection with the
transactions contemplated hereby shall create any rights in, or be deemed to
have been executed for the benefit of, any person, firm or corporation that is
not a party hereto.
11.11. Expenses of the Parties. All expenses involved in the
preparation, authorization and consummation of this Agreement, including,
without limitation, all fees and expenses of agents, representatives, counsel
and accountants in connection therewith, shall be borne solely by the party who
shall have incurred the same, and no other party shall have any liability in
respect thereof. Anything to the contrary, however, in this Agreement
notwithstanding, in the event that the sale of Shares to Buyer does not close in
accordance with this Agreement, Sellers jointly and severally agree to pay to
Buyer 50% of all out-of-pocket expenses incurred by Buyer, including without
limitation, legal fees, related costs and out-of-pocket expenses of Buyer's
legal counsel, incurred in connection with the drafting of this Agreement and
the conduct of due diligence from and after November 29, 2000, provided that the
amount thereof payable by Sellers shall not exceed $5,000.
11.12. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
11.13. Headings. The headings in the Articles and Sections of this
Agreement are inserted for convenience only and shall not constitute a part
hereof.
11.14. Mail and Communications. After the Closing, each party will
promptly deliver to the other party the original of any mail or other
communication received by that party but pertaining to the business of the other
party.
11.15. Acquisition Subsidiary. Buyer may, in its sole discretion,
establish a subsidiary wholly owned by Buyer for the purpose of acquiring the
Shares and, if such subsidiary is so established, all references to Buyer
hereunder, where applicable, shall be deemed to be references to such
subsidiary.
11.16. Missouri Law to Govern. This Agreement shall be governed by and
construed under the internal laws of the State of Missouri, without regard to
its conflict of law provisions or interpretations which would otherwise cause
the law of another jurisdiction to be applicable hereto, in any respect.
11.17. Sellers' Representative.
Carol Stern is hereby designated as the representative of Sellers (the
"Sellers' Representative") to serve, and Buyer hereby acknowledges that Sellers'
Representative shall serve, as the sole representative of Sellers with respect
to matters set forth in this Agreement. Sellers' Representative hereby accepts
such designation. By virtue of execution of this Agreement, each Seller
irrevocably appoints Sellers' Representative as the agent, proxy and
attorney-in-fact for each such Seller for all purposes of this Agreement,
including full power and authority on such Seller's behalf to take all action
which the Sellers' Representative considers necessary or desirable (i) to
consummate the transaction contemplated by this Agreement prior to, at or
subsequent to Closing; (ii) in connection with the defense, pursuit or
settlement of any claim for indemnification pursuant to Article 9, including the
right to sue, defend, negotiate, settle and compromise any such claims for
indemnification made by or against, and other disputes with, Buyer pursuant to
this Agreement or any of the agreements or transactions contemplated by this
Agreement; (iii) to accept and receive notices required or permitted under this
Agreement; and (iv) to take all other actions and exercise all other rights
which Sellers' Representative considers necessary or appropriate in connection
with the foregoing. The agency and the proxy created hereunder are coupled with
an interest and are therefore irrevocable without the consent of the Buyer and
the Sellers' Representative and shall survive the death, incapacity or
bankruptcy of any Seller. All decisions and acts by the Sellers' Representative
shall be binding upon all Sellers. In the event that the Sellers' Representative
shall die, become incapacitated, resign or otherwise fail to act on behalf of
the Sellers, Sellers may select another person by a majority-in-interest of the
Sellers.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
SIBONEY LEARNING GROUP, INC.,
a Missouri corporation
By: /s/ Ernest R. Marx
-------------------------------------------
Ernest R. Marx, President
/s/ Carol Stern
-------------------------------------------
Carol Stern
/s/ Richard Harris
-------------------------------------------
Richard Harris
Being all the Sellers
The undersigned are signing this Agreement solely for the purpose of
agreeing to sign the Non-Competition Agreement in the form set forth in Schedule
7.10 to this Agreement.
/s/ Alfred S. Harris
-------------------------------------------
Alfred S. Harris
/s/ Adele N. Harris
-------------------------------------------
Adele N. Harris
/s/ Alan Stern
-------------------------------------------
Alan Stern
The undersigned is signing this Agreement solely for the purposes of
guaranteeing the payment of Buyer's payment obligations to Sellers as set forth
in Section 2.01 of this Agreement, as required by in Section 2.02(b) of this
Agreement.
SIBONEY CORPORATION
a Maryland corporation
By: /s/ Ernest R. Marx
-----------------------------------------
Title: Vice President
--------------------------------------
The undersigned is signing this Agreement for the purpose of agreeing
to serve as Sellers' Representative as described in Section 11.17 of this
Agreement.
/s/ Carol Stern
-------------------------------------------
Carol Stern
EXHIBIT A
---------
Shareholders
------------
Percentage of Issued
Name and Address Number of Shares Owned and Outstanding Shares
---------------- ---------------------- ----------------------
Richard Harris 50 50%
Carol Stern 50 50%
SCHEDULE 1.01
"Assets" means the following property, real, personal and mixed,
tangible or intangible, of Seller: wherever located;
(a) The Seller Products;
(b) All furniture, fixtures and other items of tangible
personal property, if any, listed on Schedule 1.01A;
(c) All computer software and other works of authorship, data
bases, technologies, methods, trade secrets, know-how, inventions,
copyrights, trade names, trademarks (and the goodwill symbolized
thereby), and other intangible property rights, including the
trademarks, copyrights and registrations therefor listed on Schedule
3.11;
(d) All rights of Seller under the Material Contracts, and all
other rights, privileges, claims, demands and choices in action,
including all rights under express or implied warranties; and
(e) All records of Seller relating to Material Contracts.
"Authors' Agreements" means those agreements listed in Schedule 1.01C
under which the ownership of computer software programs (the "Software
Programs") have been transferred to and are owned by the Company, in
consideration of the payment of certain royalty payments.
"Closing" means the consummation of the transactions contemplated by
this Agreement.
"Closing Date" means January 2, 2001, with an effective date and time
of 12:01 a.m. on January 1, 2001, or such other date and time as are mutually
agreed upon in writing by Seller and Buyer.
"Customer List" is defined in Section 3.08.
"Environmental Law" means any laws and related rules, regulations and
orders, relating to pollution, nuisance or the environment including, without
limitation: (i) the Federal Clean Air Act, 42 U.S.C.ss.ss.7401 et sec.; (ii) the
Comprehensive Environmental Response, Compensation, and Liability Act, 42
U.S.C.ss.ss.9601 et sec.; (iii) the Federal Emergency Planning and Community
Right-to-Know Act, 42 U.S.C.ss.ss.1101 et sec.; (iv) the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C.ss.ss.136 et sec.; (v) the Federal Water
Pollution Control Act, 33 U.S.C.ss.ss.1251 et sec.; (vi) the Solid Waste
Disposal Act, 42 8.S.C.ss.ss.6901 et sec.; (vii) the Toxic Substances Control
Act, 15 U.S.C.ss.ss.2601 et sec.; (viii) laws relating in whole or part to
emissions, discharges, releases or threatened releases of any Hazardous
Material; and (ix) laws relating in whole or part to the manufacture,
processing, distribution, use, coverage, disposal, transportation, storage or
handling of any Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder.
"Hazardous Materials" means any hazardous, infectious or toxic
substance, chemical, pollutant, contaminant, emission or waste which is or
becomes regulated by any local, state, federal or foreign authority, including,
without limitation, anything which is (i) defined as a "pollutant" under 33
U.S.C. ss. 1362(6); (ii) defined as a "hazardous waste" under 42 U.S.C. ss.
6921; (iii) defined as a "regulated substance" under 42 U.S.C. ss.6991; (iv)
defined as a "hazardous substance" under 42 U.S.C. ss. 9601(14); (v) defined as
a "pollutant or contaminant" under 42 U.S.C. ss. 9601(33); (vi) petroleum; (vii)
asbestos; and (viii) polychlorinated biphenyl.
"Material Contracts" is defined in Section 3.12.
"Seller Products" means the educational software products of Seller set
forth in Schedule 3.11 and included in the Assets.
SCHEDULE 1.01A
TANGIBLE ASSETS DESIGNATED BY PURCHASER
Equipment Type Make Model
Desktop Computer UMAX P2-350 EZ
Printer HP LaserJet 1100
Monitor Sony Trinitron Multiscan HG
Notebook Computer* Dell Inspiron 5000
Projector* Boxlite CP7T
Desktop Computer Apple Imac 350
Desktop Computer Ibuild 4000N
Monitor Sony Trinitron 100ES
Notebook Computer Fujitsu FPC02001A
3 Telephone Instruments Panasonic DBS Digital
3 Desks
3 Office Chairs
1 Copy Machine Mita CD1656
1 Adding Machine Sharp EL1197 GII
File Drawers:
1 Lateral
4 Vertical
1 Metal Shelf
* Upon termination of his employment with the Company or Buyer, Alan Stern would
retain this equipment.
SCHEDULE 1.01C
AUTHORS' AGREEMENTS
===============================================================================
Title of Software Author contract date
===============================================================================
Algebra - Introduction To Solving
Algebraic Word Problem David Herzog 04/06/99
-------------------------------------------------------------------------------
Algebra - Signed Numbers David Herzog 04/06/99
-------------------------------------------------------------------------------
Arithmetic Skills Assessment Test Howard Behrns 8/15/84 &
10/31/00
-------------------------------------------------------------------------------
Basic Math Competency Skill Building Michael P. Conlon 07/03/80 &
10/31/00
-------------------------------------------------------------------------------
Biology Concepts Through Discovery Harvey Goodman 04/06/96
-------------------------------------------------------------------------------
Citizenship Preparation Program House none
-------------------------------------------------------------------------------
CORE Reading & Vocabulary Priscilla Hamilton 7/5/83
Development & Barbara Hombs & 10/3/100
-------------------------------------------------------------------------------
Diascriptive Cloze & Writing Carol Buchter 2/23/81
Practice Activities & Ronald Buchter
-------------------------------------------------------------------------------
Diascriptive Language Johanna Pomeroy, 6/6/99
Development Carol Buchter &
Ronald Bu
-------------------------------------------------------------------------------
Diascriptive Reading In The
Content Areas: Science Carol Buchter 05/26/87
-------------------------------------------------------------------------------
Diascriptive Reading In The
Content Areas: Social Studies Carol Buchter 05/26/87
-------------------------------------------------------------------------------
Diascriptive Reading Programs I-IV Carol Buchter & 01/13/83
Ronald Buchter
-------------------------------------------------------------------------------
Dilemma Joshua Lichtenstein 2/28/89 &
& Alfred Weinstein 10/31/00
-------------------------------------------------------------------------------
Dilemma In The Workplace Johanna Pomeroy 04/06/98
-------------------------------------------------------------------------------
How To Read For Everyday Living Ann Edson & 1/9/99 &
Eunice Insel 10/31/00
-------------------------------------------------------------------------------
How To Write For Everyday Living Ann Edson & 1/9/99 &
Eunice Insel 10/31/00
-------------------------------------------------------------------------------
Informal Reading Comprehension Ann Edson & 4/6/95 &
Placement Test Eunice Insel 10/31/00
-------------------------------------------------------------------------------
Learning Styles Inventory Salina Software 1/3/83 &
10/11/00
-------------------------------------------------------------------------------
Life Science Series:
Classification Of Living Things Ann Bella &
William Sawyer 04/01/83
-------------------------------------------------------------------------------
The Human Body, Cells &
Tiss David Herzog 04/06/99
-------------------------------------------------------------------------------
Green Plants, Genetics &
Her David Herzog 04/06/99
-------------------------------------------------------------------------------
Math For Everyday Living Ann Edson & 1/9/98 &
Allan Schwartz 10/31/00
-------------------------------------------------------------------------------
Math In The Workplace David Herzog 04/06/99
-------------------------------------------------------------------------------
Reading In The Workplace:
Automotive, Clerical,
-------------------------------------------------------------------------------
Health and Construct Beverly Davis, Mary Meng 5/3/93 &
& Elaine Reese 10/31/00
-------------------------------------------------------------------------------
Reading In The Workplace:
Food Services Beverly Davis & 3/15/94 &
Mary Meng 10/31/00
-------------------------------------------------------------------------------
Reading in the Workplace:
Electronics Sandra Linn 8/28/97 &
10/31/00
-------------------------------------------------------------------------------
Rockhound Science Mysteries Mark H. Newhouse 7/15/96 &
10/31/00
-------------------------------------------------------------------------------
Sound Sentences I Janet Payne & 10/20/90 &
Keith Jenkin 10/31/00
-------------------------------------------------------------------------------
Sound Sentences II Janet Payne 10/20/90 &
10/31/00
-------------------------------------------------------------------------------
The Magic Letter Factory Dr. Belen Mills, 10/1/90 &
Ralph Mills & 10/31/00
HAP Pal Music
-------------------------------------------------------------------------------
The Math Map Trip Donald Prickel 3/3/77 &
10/31/00
-------------------------------------------------------------------------------
The Writing Process Workshop Priscilla Hamilton & 9/25/87 &
Barbara Hombs 10/31/00
-------------------------------------------------------------------------------
Thematic Applications Ronald Dunaisky 4/27/94 &
10/11/00
-------------------------------------------------------------------------------
Thinking Like A Scientist Harvey Goodman 04/06/96
-------------------------------------------------------------------------------
Voces Latinas Michael Roessler 8/13/93 &
10/31/00
-------------------------------------------------------------------------------
You Be The Reporter House NONE
-------------------------------------------------------------------------------
Word Play House NONE
-------------------------------------------------------------------------------
Workplace Words Beverly Davis 5/5/93 &
10/31/00
-------------------------------------------------------------------------------
SCHEDULE 2.01(b)
Promissory Note
[Separate Promissory Note to each Seller for that Seller's percentage of
the $300,000 deferred payment under Section 2.01(c)]
$____________ as of January 1, 2001
FOR VALUE RECEIVED, the undersigned, Siboney Learning Group, Inc., a
Missouri corporation ("Buyer"), promises to pay to the order of
_______________________________, [Insert name of a Seller] the principal sum of
______________________________ No/100 Dollars ($________), without interest, in
twelve (12) equal quarterly principal payments of Dollars ($ ) each, with first
payment on March 31, 2001, and succeeding payments on the last day of each
quarter thereafter (June 30, September 30, December 31 and March 31), with a
final payment of all then unpaid principal on December 31, 2003; provided,
however, that the first two quarterly principal payment installments shall be
paid by the undersigned, when due, to the escrow agent designated under that
certain Escrow Agreement as provided in that certain Stock Purchase Agreement
dated as of December 12, 2000 by and among the undersigned (and other parties)
and the Seller hereinabove listed (the "Stock Purchase Agreement").
Buyer may at any time prepay all or any part of the principal hereof,
without prepayment penalty.
If default be made in the payment of any installment of principal
hereunder within 15 days after Buyer's receipt of notice of nonpayments, or if a
bankruptcy petition be filed by or against Buyer (and, if filed against Buyer,
is not dismissed within 45 days thereafter) or if Buyer shall violate its
representation and warranty in Section 4.08 (regarding continued existence, sale
of Shares, merger or sale of assets) of the Stock Purchase Agreement, Seller
may, at Seller's option, declare all unpaid indebtedness evidenced by this Note
immediately due and payable. Failure of Seller to exercise such right shall not
constitute a waiver of such right or preclude or affect Seller's right
thereafter to exercise such option with respect to such default or any
subsequent default. After the occurrence of any payment default and the
expiration of the cure period referred to above, and for so long thereafter as
such uncured payment default shall continue, the principal amount in default
shall bear interest of the rate of ten percent (10%) per annum.
If this Note, or any installment, is not paid within the cure period
hereinabove set forth and is placed with an attorney for collection, Buyer shall
pay, in addition to the principal amount of this Note, an amount equal to the
reasonable out-of-pocket attorneys' fees and expenses related to enforcement of
this Note.
Presentment, demand for payment, protest, notice of protest, notice of
dishonor and a diligence in bringing suit against any party hereof or any party
liable hereon are hereby waived by all present and future parties hereto,
whether as maker, endorsers, guarantors, sureties, or in any other capacity.
SIBONEY LEARNING GROUP, INC.,
a Missouri corporation,
By
-----------------------------------------
Ernest R. Marx, President
Payable at: 1937 Grand Avenue, Baldwin, New York 11510; or payable at any other
address Seller may designate by written notice to Buyer.
GUARANTY
The undersigned, for good and valuable consideration, hereby guarantees the
payment, when due, of the obligations of Siboney Learning Group, Inc., a
Missouri corporation, under the foregoing Note.
SIBONEY CORPORATION
a Maryland corporation
By:
----------------------------------------
Title:
-------------------------------------
SCHEDULE 2.03(e)
SECURITY AGREEMENT
This Security Agreement (the "Security Agreement") is entered into as
of January 1, 2001 among the persons listed on Exhibit A attached hereto (each a
"Seller," and collectively, the "Sellers"), and SIBONEY LEARNING GROUP, INC., a
Missouri corporation ("Buyer"), in connection with that certain Stock Purchase
Agreement between Sellers and Buyer dated as of December , 2000 (the "Stock
Purchase Agreement").
1. GRANT OF SECURITY INTEREST
1.1. Grant of Security Interest. To secure the payment in full
of all payment obligations of Buyer to Sellers under Section 2.02 of
the Stock Purchase Agreement, including without limitation, the payment
obligations under those certain Promissory Notes of even date herewith
in aggregate principal amount of $300,000 (collectively, the
"Obligations"), Buyer hereby grants to Sellers a continuing security
interest in and lien upon, and Buyer hereby assigns and pledges to
Sellers for security purposes, all of Buyer's right, title and interest
in and to the Assets, as that term is defined in the Stock Purchase
Agreement, and all proceeds thereof, (collectively, the "Collateral").
2. REPRESENTATIONS, WARRANTIES AND COVENANTS
Buyer hereby represents, warrants and covenants to Seller the
following:
2.1. Locations of Collateral. The Collateral is and will be
located in St. Louis County, Missouri.
2.2. Supplemental Documentation. Upon Sellers' request, at any
time, Buyer shall execute and deliver such agreements, documents and
instruments, and do such further acts as Sellers may reasonably
determine to be necessary to create, preserve, perfect or evidence the
security interest of Sellers in the Collateral.
3. EVENTS OF DEFAULT AND REMEDIES
3.1. Events of Default. The occurrence of any uncured default
under the Note or any other payment default of Buyer under Section 2.01
of the Purchase Agreement if such payment default is not cured within
15 days after Buyer's receipt of notice of such non-payment constitutes
an Event of Default under this Security Agreement.
3.2. Remedies. Upon the occurrence and during the continuation
of an Event of Default, Sellers shall have all rights and remedies
provided in this Security Agreement, the Note, the Uniform Commercial
Code as in effect in Missouri or other applicable law. All rights and
remedies of Sellers are cumulative and not exclusive and are
enforceable, in Sellers' discretion, alternatively, successively, or
concurrently on any one or more occasions and in any order Sellers may
determine.
3.3. Application of Collateral Proceeds. Sellers may apply the
cash proceeds of Collateral actually received by Sellers from any sale,
lease, foreclosure or other disposition of the Collateral to payment,
first, of any payment obligations under the Note and thereafter to
payment of any other payment obligations then due under the Stock
Purchase Agreement, including without limitation, the reasonable
out-of-pocket costs and expenses of collection or enforcement of this
Security Agreement, including reasonable attorneys' fees and expenses.
3.4. Sellers' Representative. Sellers acknowledge that Carol
Stern has been appointed their representative ("Sellers'
Representative") and attorney-in-fact pursuant to the Stock Purchase
Agreement and that any action that may or shall be required to be taken
by Sellers under this Security Agreement and any remedies that may be
available to Sellers under this Security Agreement or otherwise
available to Sellers in accordance with applicable law may be exercised
only by the action of Sellers' Representative, who shall apply
Collateral proceeds to the payment obligations of Buyer to Sellers
based upon the percentages of ownership interest in the Company
reflected on Exhibit A to the Stock Purchase Agreement.
4. GOVERNING LAW; NO IMPLIED WAIVER
4.1. Governing Law. This Security Agreement shall be governed
by, and construed in accordance with, the laws of the State of Missouri
(without giving effect to principles of conflicts of laws).
5. TERM OF AGREEMENT: MISCELLANEOUS
5.1. Term. This Security Agreement shall remain in effect
until Sellers receive full payment of all Obligations.
5.2. Notices. Except as otherwise provided, all notices,
requests and demands hereunder shall be made in the manner and shall
have the effect provided in the Stock Purchase Agreement.
5.3. Severability. If any provision of this Security Agreement
is held to be invalid or unenforceable, such provision shall not affect
the Security Agreement as a whole, but this Security Agreement shall be
construed as though it did not contain the particular provision held to
be invalid or unenforceable.
5.4. Headings. All title and section headings used in this
Security Agreement are for convenience only and shall not be used in
interpreting this Security Agreement.
5.5. Counterparts. This Security Agreement may be executed in
any number of separate counterparts, each of which shall be an original
but all of which shall constitute one and the same agreement.
5.6. Definitions. All terms used herein which are defined in
the Uniform Commercial Code as in effect in Missouri shall have the
meanings given therein unless otherwise defined in this Security
Agreement. All references to the singular or plural herein shall
include the singular and plural, unless the context otherwise requires.
The term "including" is not limiting or exclusive.
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date stated above.
Buyer:
SIBONEY LEARNING GROUP, INC.,
a Missouri corporation
By:
--------------------------------------
Ernest R. Marx, President
Sellers:
-------------------------------------------
Name:
-------------------------------------
-------------------------------------------
Name:
-------------------------------------
Sellers' Representative:
-------------------------------------------
Carol Stern
SCHEDULE 3.11
INTELLECTUAL PROPERTY
A. Trademarks and Tradenames
See Schedule 1.01(c)
B. U.S. Copyright Registrations
See Schedule 1.01(c)
Copyrightable items and trade names not included above:
SCHEDULE 3.12
MATERIAL CONTRACTS
1. All Authors' Agreements.
2.
SCHEDULE 3.15
UNDISCLOSED LIABILITIES
SCHEDULE 3.18
RELATED PARTY TRANSACTIONS
SCHEDULE 6.07
INFORMATION, RECORDS AND SCHEDULES TO PERMIT THE COMPANY TO PREPARE
FINANCIAL STATEMENTS REQUIRED BY THE SECURITIES AND EXCHANGE COMMISSION
The following is a list of information needed and duties to be
performed by the staff of Activity Records, Inc. and/or Educational Activities,
Inc. before commencement of our audit engagement. for the fiscal year ended
August 31, 2000 and to compile pro-forma information for the year ended December
31, 2000. Due to the nature of the acquisition, all areas may not be applicable.
A. CASH
1. Reconcile the bank balance with the balance shown by the
books, and make a copy to give us for our workpapers. Old outstanding
checks should be investigated and, if not likely to clean should be
written off.
2. Please complete standard bank confirmation inquiries (to be
sent later) for each bank with which you have an account or loan. A
person authorized on your bank's signature card should sign the form.
Return the signed forms to us for mailing.
B. TRADE ACCOUNTS RECEIVABLE/SALES
The relationship between Activity Records (AR) and Educational
Activities (EA) is still unclear. In order to audit the "business"
Siboney is purchasing, sales related activity of EA may need to be
combined to reflect the true software business. Further discussions are
needed to detemine the best approach for the audit. Regardless, the
following will be needed.
1. Prepare a schedule of accounts receivable aging as of the
first day and the last day of the fiscal year for our workpapers and
reconcile to the general ledger. (This applies to AR and EA.)
2. Prepare a schedule of the last ten sales invoices in excess
of $1,000 for the months of August 1999 and 2000 and the first ten such
invoices for the months of September 2000 and 2001 along with the
related documentation such as customer purchase orders, sales invoices,
and proof of delivery so we can test proper cut-off.
3. Prepare a listing of all trade accounts receivable written
off (bad debts) or recovered during the fiscal year.
4. Prepare a narrative description of the Company's revenue
recognition policy.
C. INVENTORY/SOFTWARE TITLES
1. Prepare a listing of software titles, and the related
development costs, included in sale agreement which have been developed
within the five year period ending August 31, 2000. Also, include
management's estimate as to the life cycle of these software titles
assuming no significant future modifications.
D. PROPERTY AND EQUIPMENT/OTHER ASSETS
1. Prepare a listing of all property and equipment additions,
disposals, or retirements for the fiscal year ended August 31, 2000.
Also have the applicable invoices available for our inspection.
2. Prepare a listing of all other tangible assets included in
the sale agreement and their related book values (undepreciated cost
basis).
E. PAYABLES
1. Prepare a listing of the accounts payable as of August 31,
2000. Items should not be shown as accounts payable unless all of the
goods and services represented by the accounts had actually been
received but not paid for as of August 31, 2000.
F. ACCRUED EXPENSES
1. Prepare separate listings showing your computations of
accrued expenses at August 31, 2000.
G. NOTES PAYABLE AND ACCRUED INTEREST
1. Prepare a schedule showing all amounts borrowed and/or paid
on all notes payable during the year.
2. On the same schedule, calculate prepaid or accrued
interest; and reconcile interest expense to the general ledger
accounts. Also, have the notes available for our inspection.
H. OTHER
1. Prepare a working trial balance as of August 31, 2000.
2. As a condition of our engagement, management agrees to sign
written representation letters attesting to the completeness and
truthfulness of representations and disclosures made to us during the
course of our work.
I. MINUTES AND AGREEMENTS
1. Copies should be made of all minutes of all meetings of the
Board of Directors and/or stockholders for the fiscal year.
2. Copies of all agreement made during the royalty agreements
year should be made available (e.g., leases, long-term contracts, labor
contracts, pension plans, long-term notes receivable/payable, etc.)
J. FOR THE PRO-FORMA INFORMATION FOR CALENDAR YEAR 2000, PLEASE PREPARE
THE FOLLOWING:
1. Prepare a schedule of assets and liabilities acquired and
of sales and direct expenses of the product line acquired as of and for
the year ended December 31, 2000.
2. Prepare an analysis of direct costs related to the
production, warehousing, selling and distribution of software products
for the year ending December 31, 2000. This analysis should include all
such costs regardless of the company on which they have previously been
recorded. Direct costs are all costs related to the production,
holding, and selling of a product excluding corporate overhead and
interest costs.
3. Prepare a schedule setting forth all estimates,
assumptions, and allocation methods utilized in determining the above
sales and direct cost information and management's methodology for
determining such estimates, assumptions, and allocation methods.
4. Prepare analysis of software sales vs. other sales for the
calendar year ended December 31, 2000.
5. Have available a range of sales invoices for the period
October 1, 2000 through December 31, 2000 from which a sample will be
selected. Documentation to be provided by Educational Activities would
be similar to that provided during the due diligence procedures
performed on October 30, 2000.
SCHEDULE 7.03
January 1, 2001
Siboney Learning Group, Inc.
325 N. Kirkwood Road, Suite 200
St. Louis, Missouri 63122
Ladies and Gentlemen:
We have acted as counsel for the persons listed on Exhibit A attached
hereto (collectively, "Sellers") in connection with that certain Stock Purchase
Agreement (including the Schedules and Exhibits thereto, the "Stock Purchase
Agreement"), dated as of December 12, 2000, by and between Sellers and Siboney
Learning Group, Inc., a Missouri corporation ("Buyer") regarding purchase by
Buyer of Shares of Activity Records, Inc., a New York corporation (the
"Company"). Capitalized terms used in this opinion and not otherwise defined
herein shall have the meanings given them in the Stock Purchase Agreement. This
opinion is furnished to you under Section 7.03 of the Stock Purchase Agreement.
In the preparation of this opinion, we have reviewed and relied upon:
1. The Stock Purchase Agreement, the Security Agreement and the
Non-Competition Agreements;
2. Such other agreements, instruments and documents as are required to
be executed and performed under or in connection with the Closing of the Stock
Purchase Agreement (together with the agreements referred to in Item 1 above
being referred to as the "Transaction Documents"), as delivered by or on behalf
of Sellers or Buyer at the Closing;
3. A Certificate of Good Standing delivered to us by the Secretary of
State of the State of New York, evidencing the good standing of Seller under the
laws of the State of New York;
4. The factual representations and warranties of Sellers in the Stock
Purchase Agreement and the Transaction Documents;
5. A copy of the Articles of Incorporation of the Company, as certified
by the Secretary of State of the State of New York; and
6. A copy of the Bylaws of the Company, as certified to us by an
officer of the Company.
In addition, we have reviewed such matters of law and fact as we have
considered necessary for purposes of rendering the opinion letter.
In the examination of such documents, we have assumed the genuineness
of all signatures, whether original or photostatic, except that of Sellers, the
authenticity of all documents submitted to us as originals and the conformity to
the original documents of all documents submitted to us as certified,
photostatic or conformed copies, the authenticity of the originals of all such
latter documents, and the truth and correctness of statements made by Sellers,
including, without limitation, the representations and warranties of Sellers
contained in the Stock Purchase Agreement and the Transaction Documents, and we
have relied upon the accuracy of material factual matters contained therein.
The opinions expressed by us herein are expressly limited to the laws
of the State of New York and federal law, where applicable. For all purposes
relevant to the opinions stated herein, we assume that the laws of the State of
Missouri are the same as the laws of the State of New York.
Whenever our opinion herein with respect to the existence or absence of
facts is indicated to be based on our knowledge, it is intended to signify only
that no information has come to the attention of our present partners or
associates who have devoted substantive attention to the Stock Purchase
Agreement or Transaction Documents and the attorney primarily responsible for
the representation of the Sellers that would give us actual knowledge of the
existence or absence of such facts. Except to the extent expressly set forth
herein, however, we have not undertaken any independent investigation to
determine the existence or the absence of such facts, and no inference as to our
knowledge of the existence or absence of such facts should be drawn from our
representation of Sellers.
Based solely on the foregoing, we are of the opinion that as of the
date hereof:
1. The Company is a corporation validly existing and in good standing
under the laws of the State of New York and has all of the necessary power and
authority to own and lease its assets as now owned and leased and to carry on
its business as now being conducted.
2. The Stock Purchase Agreement and the Transaction Documents
constitute the legal, valid and binding obligations of each Seller, enforceable
against each Seller in accordance with their respective terms.
3. To our knowledge, the execution, delivery and performance of the
Stock Purchase Agreement by Sellers, and the execution, delivery and performance
of the Transaction Documents, do not violate any provision of the Articles of
Incorporation or Bylaws of the Company or any agreement, indenture, instrument,
lease, contract or other undertaking to which a Seller or the Company is a
party.
4. To our knowledge, the execution, delivery and performance of the
Stock Purchase Agreement and the Transaction Documents by Sellers do not violate
any law applicable to Sellers, the Company or the Assets.
5. Except as described in the Stock Purchase Agreement, to our
knowledge the Assets are free and clear of restrictions on or conditions to
transfer or assignment, and free and clear of all mortgages, conditional sales
agreements, liens, pledges, charges, encumbrances, claims, security interests,
easements, covenants, conditions or restrictions.
6. To our knowledge, except as described in the Stock Purchase
Agreement, no consent, license, approval, or authorization of any governmental
authority or regulatory body, or of any other person or entity, is required to
be obtained by Seller in connection with the due execution, delivery and
performance of the Stock Purchase Agreement or the Transaction Documents by
Sellers.
7. To our knowledge, except as described in the Stock Purchase
Agreement, the Company is the owner, licensee or otherwise the authorized user
of all patents, trademarks, service marks, trade names and copyrights of all
such items used in connection with the Assets and we have no knowledge of any
claim that the Company's use of such items infringes upon or conflicts with any
patent, trademark, service mark, trade name or copyright of others.
8. To our knowledge, except as described in the Stock Purchase
Agreement, no suit, action, decree, arbitration or legal, administrative or
other proceeding, controversy or investigation is pending or threatened against
any Seller or the Company which could adversely affect the business or financial
condition of the Company or the Assets, or could adversely affect any Seller's
right to transfer the same, the Transactions contemplated by the Stock Purchase
Agreement, or the possession and use of the Assets, or the operation by Buyer of
a business similar to the business of the Company, as heretofore conducted by
the Company, subsequent to the Closing.
9. The authorized capital stock of the Company consists of 100 shares
of common stock, no par value, of which, 100 shares are outstanding. Sellers own
all the outstanding Shares of record, and to our knowledge, beneficially and
free and clear of all adverse claims. As a result of the delivery of
certificates to Buyer and payment to Sellers being made at the Closing, Buyer
will acquire all the rights of Sellers to all of the Shares, free and clear of
all adverse claims.
With respect to the opinions expressed herein, we advise you that we
express no opinion as to (i) conflicts of law or choice of law provisions; and
(ii) the availability of equitable remedies because such remedies are subject to
the discretion of the court before which a proceeding therefor may be brought.
In addition, the terms of the Stock Purchase Agreement and the Transaction
Documents may be limited by the United States Bankruptcy Code, or other
bankruptcy, insolvency, fraudulent conveyance, moratorium, or similar laws
affecting creditors' rights or the relief of debtors generally, as may be in
effect from time to time.
This opinion is addressed to the Buyer and is solely for the Buyer's
use. Accordingly, it may not be relied upon by or disclosed to any other person,
or for any other purpose, other than in connection with the transaction and
documents referred to herein and is not to be used, circulated, quoted, or
otherwise referred to for any other purpose without the prior written consent of
this firm. We assume no obligation to advise Purchaser of any changes concerning
the above which may hereafter come or be brought to our attention.
Very truly yours,
SCHEDULE 7.07
SELLERS' CERTIFICATE
Pursuant to Section 7.07 of that certain Stock Purchase Agreement dated
December 12 , 2000 (the "Stock Purchase Agreement") between the undersigned
("Sellers"), and Siboney Learning Group, Inc. ("Buyer"), the undersigned, being
the Sellers under the Stock Purchase Agreement, do hereby jointly and severally
certify that the representations, warranties, covenants and agreements of
Sellers included in the Stock Purchase Agreement and in any schedule or other
instrument or document delivered pursuant thereto are true and not breached as
of the date hereof, with the same effect as though such representations,
warranties, covenants and agreements had been repeated as of this date, and all
of the obligations of Sellers thereunder have been duly performed.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of the 1st day of January, 2001.
------------------------------------------
Name:
------------------------------------------
Name:
Being all the Sellers
SCHEDULE 7.10
[Separate Agreements to be signed by
Alfred S. Harris, Adele N. Harris,
Carol Stern and Alan Stern]
NON-COMPETITION AGREEMENT
This Non-Competition Agreement is entered into as of January 1, 2001,
by the undersigned ("Undersigned") and Siboney Learning Group, Inc., a Missouri
corporation ("Buyer") and Activity Records, Inc., a New York corporation (the
"Company") in connection with the execution, delivery and consummation of the
transactions contemplated by certain Stock Purchase Agreement ("Stock Purchase
Agreement"), dated as of December 12, 2000 between the shareholders ("Sellers")
of the Company and Buyer.
RECITALS
A. The Undersigned has occupied a position of trust and confidence with
the Company prior to the date hereof and has become familiar with the assets of
the Company, including the intellectual property assets and other assets being
sold by the Company to Buyer.
B. Among the conditions to the obligation of Buyer to close purchase of
the stock of the Company from Sellers under the Stock Purchase Agreement is the
requirement that the Undersigned and others execute a Non-Competition Agreement
on the terms hereinafter set forth for the benefit of Buyer and the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the undersigned, the undersigned
hereby agrees as follows:
1. For a period of two (2) years after the Closing Date (as defined in
the Stock Purchase Agreement), the Undersigned agrees that the Undersigned will
not, directly or indirectly, engage, anywhere within the United States of
America, in the educational software business, including without limitation, the
licensing or selling of (a) any software to third parties which has the look or
feel of any of the Assets (as defined in the Stock Purchase Agreement) or (b)
any software that utilizes the source code, content or instructional design of
any of the Assets.
2. If the Undersigned breaches any of the covenants set forth in this
Agreement, Buyer will be entitled to obtain injunctive or other equitable relief
to restrain any breach or threatened breach or otherwise to specifically enforce
the provisions of Section 1 of this Agreement, it being agreed that money
damages alone would be inadequate to compensate Buyer and would be an inadequate
remedy for such breach. In addition, Buyer will be entitled to such damages as
it may demonstrate from any such breach.
3. This Agreement is binding upon and inures to the benefit of the
Undersigned, Buyer, the Company and their respective affiliates, successors and
assigns.
4. The rights and remedies under this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power or privilege under this Agreement will operate as a waiver of such
right, power or privilege, and no single or partial exercise of any such right,
power or privilege will preclude any other or further exercise of such right,
power or privilege, or the exercise of any other right, power or privilege. To
the maximum extent permitted by applicable law: (a) no claim or right arising
out of this Agreement can be discharged by one party, in whole or in part, by a
waiver or renunciation unless in writing signed by the other party; and (b) no
waiver that may be given by a party will be applicable except in the specific
instance for which it is given.
5. This Agreement will be governed by the internal substantive laws of
the State of Missouri, without regard to conflicts-of-laws principles.
6. Whenever possible, each provision and term of this Agreement will be
interpreted in a manner to be effective and valid, but if any provision or term
of this Agreement is held to be invalid, then such provision or term will be
ineffective only to the extent of such invalidity, without invalidating or
affecting in any manner whatsoever the remainder of such provision or term or
the remaining provisions or terms of this Agreement. If any of the covenants set
forth in Section 1 of this Agreement are held to be unreasonable, arbitrary or
against public policy, such covenants shall be considered divisible with respect
to scope, time and geographic area, and in such lesser scope, time and
geographic area will be effective, binding and enforceable against the
undersigned.
7. Any notices under this agreement must be in writing and will be
deemed to have been given when (a) delivered in person, (b) sent by facsimile
(with written confirmation of receipt), or (c) when received by addressee if
sent by nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and facsimile numbers set forth below (or
to such other addresses and facsimiles as a party may designate by notice to the
other parties):
Buyer or the Company:
Siboney Learning Group, Inc.
325 N. Kirkwood Road, Suite 200
St. Louis, Missouri 63122
Attention: Ernest R. Marx, President
Facsimile No. (314) 984-8063
The Undersigned:
------------------------------------------
------------------------------------------
------------------------------------------
Facsimile No.: --------------------------
---------------------
IN WITNESS WHEREOF, the Undersigned, Buyer and the Company have
executed this Agreement as of the date first above written.
--------------------------------------------
Name:
---------------------------------------
Buyer:
SIBONEY LEARNING GROUP, INC., a
Missouri corporation
By
------------------------------------------
Ernest R. Marx, President
Company:
ACTIVITY RECORDS, INC., a New York
corporation
By:
-----------------------------------------
Ernest R. Marx, President
Schedule 8.02
January 1, 2001
Activity Records, Inc.
1937 Grand Avenue
Baldwin, New York 11021
Gentlemen:
We have acted as counsel for Siboney Learning Group, Inc., a Missouri
corporation ("Buyer"), in connection with that certain Stock Purchase Agreement
(including the Schedules and Exhibits thereto, the "Stock Purchase Agreement"),
dated as of December 12, 2000 by and between the shareholders listed therein
("Sellers") of Activity Records, Inc., a New York corporation (the "Company")
and Buyer. Capitalized terms used in this opinion and not otherwise defined
herein shall have the meanings given them in the Stock Purchase Agreement. This
opinion is furnished to you pursuant to Section 8.02 of the Stock Purchase
Agreement.
In preparation of this opinion, we have reviewed and we rely upon:
1. The Stock Purchase Agreement, the Security Agreement and the
Non-Competition Agreements;
2. Written Consent of the Board of Directors of Buyer, authorizing the
execution and delivery of the Stock Purchase Agreement and execution and
delivery of the Assignment and Assumption and consummation of the transactions
contemplated by the Stock Purchase Agreement and the Assignment and Assumption,
as certified to us by an officer of Buyer;
3. Such other agreements, instruments and documents as are required to
be executed and performed under or in connection with the Closing of the Stock
Purchase Agreement (together with the agreements referred to in Item 1 above,
being referred to as the "Transaction Documents"), as delivered by or on behalf
of Buyer or Sellers at the Closing;
4. A Certificate of Good Standing delivered to us by the Secretary of
State of the State of Missouri, evidencing the good standing of Buyer under the
laws of the State of Missouri;
5. The factual representations and warranties of Buyer in the Stock
Purchase Agreement and the Transaction Documents;
6. A copy of the Articles of Incorporation of Buyer, as certified by
the Secretary of State of the State of Missouri; and
7. A copy of the Bylaws of Buyer, as certified to us by an officer of
Buyer.
In the examination of such documents, we have assumed the genuineness
of all signatures, whether original or photostatic, except that the officers of
Buyer, respectively, the authenticity of all documents submitted to us as
originals and the conformity to the original documents of all documents
submitted to us as certified, photostatic or conformed copies, the authenticity
of the originals of all such latter documents, and the truth and correctness of
statements made by Buyer, including, without limitation, the representations and
warranties of Buyer contained in the Stock Purchase Agreement and the
Transaction Documents, and we have relied upon the accuracy of material factual
matters contained therein. We have also assumed the due authorization, execution
and delivery by the Company of the Stock Purchase Agreement and any Transaction
Documents to which the Company is a party.
The opinions expressed by us herein are expressly limited to the laws
of the State of Missouri, and federal law, where applicable.
In addition, we have reviewed such matters of law and fact as we have
considered necessary for purposes of rendering the following opinions and have
examined and relied without independent investigation as to matters of fact upon
such certificates of public officials, such statements and certificates of
officers of Seller and that such other corporate records, documents,
certificates and instruments as we have deemed necessary or appropriate in order
to enable us to render the opinions expressed herein.
Whenever our opinion herein with respect to the existence or absence of
facts is indicated to be based on our knowledge, it is intended to signify only
that no information has come to the attention of our present partners or
associates who have devoted substantive attention to the Stock Purchase
Agreement or Transaction Documents and the attorney primarily responsible for
the representation of the Buyer that would give us actual knowledge of the
existence or absence of such facts. Except to the extent expressly set forth
herein, however, we have not undertaken any independent investigation to
determine the existence or the absence of such facts, and no inference as to our
knowledge of the existence or absence of such facts should be drawn from our
representation of Buyer.
Based solely upon the foregoing and subject to the qualifications set
forth herein, we are of the opinion that as of the date hereof:
1. Buyer is a Missouri corporation validly existing and in good
standing under the laws of the State of Missouri and has all of the necessary
power and authority to carry on its business as presently conducted.
2. Buyer has full corporate power and legal authority to enter into the
Stock Purchase Agreement and to consummate the Transactions contemplated
thereby, which have been duly authorized by all proper and necessary corporate
and other action on the part of Buyer, and when executed and delivered by Buyer
the Transaction Documents will constitute the valid and binding obligations of
Buyer, enforceable against Buyer in accordance with its terms.
3. To our knowledge, the execution, delivery and performance of the
Transaction Documents by Buyer do not violate any law which in the exercise of
customary professional diligence would reasonably be recognized as being
directly applicable to Buyer.
4. To our knowledge, except as described in the Stock Purchase
Agreement, no consent, license, approval, or authorization of any governmental
authority or regulatory body, or of any other person or entity, is required to
be obtained by Buyer in connection with the due execution, delivery and
performance of the Stock Purchase Agreement or the Transaction Documents by
Buyer.
With respect to the opinions expressed herein, we advise you that we
express no opinion as to: (i) conflicts-of-law or choice-of-law provisions; and
(ii) the availability of equitable remedies because such remedies are subject to
the discretion of the court before which a proceeding therefor may be brought.
In addition, the terms of the Stock Purchase Agreement and the Transaction
Documents may be limited by Title 11 of the United States Code, or other
bankruptcy, insolvency, fraudulent conveyance, moratorium, or similar laws
affecting creditors' rights or the relief of debtors generally, as may be in
effect from time to time.
To our knowledge [except as described in the Stock Purchase Agreement],
we hereby confirm to you that no suit, action, decree, arbitration or legal,
administrative or other proceeding, controversy or investigation is pending or
threatened against Buyer.
This opinion is addressed to the Sellers and is solely for Sellers'
use. Accordingly, it may not be relied upon by or disclosed to any other person,
or for any other purpose, other than in connection with the transaction and
documents referred to herein and is not to be used, circulated, quoted, or
otherwise referred to for any other purpose without the prior written consent of
this firm. We assume no obligation to advise Sellers of any changes concerning
the above which may hereafter come or be brought to our attention.
Very truly yours,
GALLOP, JOHNSON & NEUMAN, L.C.
SCHEDULE 8.04
OFFICERS' CERTIFICATE
Pursuant to Section 8.05 of that certain Stock Purchase Agreement dated
as of December 12, 2000 (the "Stock Purchase Agreement") between the
shareholders ("Sellers") of Activity Records, Inc., a New York corporation (the
"Company") and Siboney Learning Group, Inc. ("Buyer"), the undersigned, being
the President of Buyer, does hereby certify that the representations,
warranties, covenants and agreements of Buyer included in the Stock Purchase
Agreement and in any schedule or other instrument or document delivered pursuant
thereto are true and not breached as of the date hereof, with the same effect as
though such representations, warranties, covenants and agreements had been
repeated as of this date, and all of the obligations of Buyer thereunder have
been duly performed.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of the 1st day of January, 2001.
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Ernest R. Marx, President of Buyer
