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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) FEBRUARY 26, 1999
THE SOURCE INFORMATION MANAGEMENT COMPANY
(Exact name of Registrant as specified in its charter)
MISSOURI
(State or Other Jurisdiction of Incorporation)
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0-26238 43-1710906
(Commission File Number) (IRS Employer Identification No.)
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<S> <C>
11644 LILBURN PARK ROAD, ST. LOUIS, MISSOURI 63146
(Address of principal executive offices) (Zip Code)
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(314) 995-9040
(Registrant's telephone number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 26, 1999, Registrant, through a wholly-owned subsidiary,
acquired substantially all of the assets and assumed certain liabilities of
Chestnut Display Systems, Inc., a Pennsylvania corporation, and Chestnut Display
Systems (North), Inc., a Pennsylvania corporation (collectively, "Chestnut"),
for approximately $3,644,529 in cash and 285,714 shares of Registrant's Common
Stock pursuant to an Asset Purchase Agreement. The purchase consideration may be
increased based upon the performance of Chestnut in each of the fiscal years
ending January 31, 2000 and January 31, 2001. Any such increase shall be payable
50% in shares of Registrant's Common Stock and 50% in cash. In no event shall
the total purchase consideration exceed $9,500,000. The purchase price was
determined by arm's length negotiations between the parties. All shares of
Common Stock issued pursuant to the Chestnut acquisition are subject to a
one-year lock-up agreement with the Registrant. Funds for the Chestnut
acquisition were provided by Registrant's existing $25 million credit facility
with Wachovia Bank, N.A. Chestnut designs and manufactures in-store
merchandising units and point-of-purchase displays for retail store chains.
Registrant presently intends to continue operating the Chestnut business. Other
than in connection with the acquisition, Chestnut has not had any material
relationship with Registrant or any of its affiliates, any director or officer
of Registrant or any associate of any such director or officer.
Also on February 26, 1999, Registrant, through a wholly-owned
subsidiary, acquired substantially all the assets and assumed certain
liabilities of MYCO, Inc., an Illinois corporation and RY, Inc., an Illinois
corporation (collectively, "MYCO"), for $12,000,000 in cash and 134,615 shares
of Registrant's Common Stock. In addition, Registrant repaid approximately
$1,500,000 of MYCO debt at closing and assumed MYCO's obligations with respect
to the outstanding $4,000,000 principal amount of City of Rockland, Illinois
Industrial Project Revenue Bonds, Series 1995. The wholly-owned subsidiary
through which Registrant acquired MYCO entered into a Reimbursement Agreement
with Wachovia Bank, N.A. pursuant to which the Bank issued its Letter of Credit
to secure the Bonds. The Common Stock portion of the consideration may be
increased by an aggregate of not more than 250,000 shares based upon the
performance of MYCO in the 12 month period following the closing. The purchase
price was determined by arm's length negotiations between the parties. Funds
for the acquisition were provided by Registrant's existing $25 million credit
facility with Wachovia Bank, N.A. MYCO designs and manufactures in-store
merchandising units and point- of-purchase displays for retail store chains.
Registrant presently intends to continue operating the MYCO business. Other
than in connection with the acquisition, MYCO has not had any material
relationship with Registrant or any of its affiliates, any director or officer
of Registrant or any associate of any such director or officer.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
At present, it is impractical for Registrant to provide required
financial statements for the Chestnut and MYCO businesses, but such financial
statements will be filed by an amendment to this report within 60 days after the
required time for filing for this report.
(b) Pro forma financial information.
At present, it is impractical for Registrant to provide required pro
forma financial information for the Chestnut and MYCO businesses, but such
financial information will be filed by an amendment to this report within 60
days after the required time for filing for this report.
(c) Exhibits.
See Exhibit Index attached hereto and incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE SOURCE INFORMATION
MANAGEMENT COMPANY
Date: March 11, 1999 By: /s/ W. Brian Rodgers
_______________________________ ____________________________.
W. Brian Rodgers
Chief Financial Officer
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EXHIBIT INDEX
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EXHIBIT NO. EXHIBIT
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1. Omitted - inapplicable
2.1 Asset Purchase Agreement, dated as of February 1, 1999, by and
among Registrant, Chestnut Display Systems, Inc. and Chestnut
Display Systems (North), Inc., plus identification of omitted
schedules and exhibits and agreement to furnish supplementally
a copy of any omitted schedule or exhibit to the Securities
and Exchange Commission upon request.
2.2 Asset Purchase Agreement, dated as of February 26, 1999, by
and among Registrant, MYCO, Inc. and RY, Inc., plus
identification of omitted schedules and exhibits and agreement
to furnish supplementally a copy of any omitted schedule or
exhibit to the Securities and Exchange Commission upon
request.
2.3 Amendment to Asset Purchase Agreement, dated as of February 26, 1999, by and
among Registrant, MYCO, Inc. and RY, Inc.
4. Omitted - inapplicable.
16. Omitted - inapplicable.
17. Omitted - inapplicable.
20. Omitted - inapplicable.
23. Omitted - inapplicable.
24. Omitted - inapplicable.
27. Omitted - inapplicable.
99. Omitted - inapplicable.
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=================================================
ASSET PURCHASE AGREEMENT
AMONG
THE SOURCE INFORMATION MANAGEMENT COMPANY,
CHESTNUT DISPLAY SYSTEMS, INC.
AND
CHESTNUT DISPLAY SYSTEMS (NORTH), INC.
FEBRUARY 1, 1999
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TABLE OF CONTENTS
Page
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1. Definitions.............................................................................1
2. Basic Transaction.......................................................................9
(a) Purchase and Sale of Assets....................................................9
(b) Assumption of Liabilities......................................................9
(c) Initial Purchase Price.........................................................9
(d) The Closing...................................................................10
(e) Deliveries at the Closing.....................................................10
(f) Adjusted Purchase Price.......................................................10
(g) Additional Purchase Price.....................................................10
(h) Maximum Aggregate Purchase Price..............................................12
(i) Allocation....................................................................12
3. Representations and Warranties of the Sellers..........................................12
(a) Organization of the Sellers...................................................12
(b) Authorization of Transaction..................................................13
(c) Noncontravention..............................................................13
(d) Brokers' Fees.................................................................13
(e) Title to Assets...............................................................13
(f) Subsidiaries..................................................................14
(g) Financial Statements..........................................................14
(h) Events Subsequent to Most Recent Fiscal Year End..............................14
(i) Undisclosed Liabilities.......................................................17
(j) Legal Compliance..............................................................17
(k) Tax Matters...................................................................18
(l) Real Property.................................................................20
(m) Intellectual Property.........................................................23
(n) Tangible Assets...............................................................26
(o) Inventory.....................................................................27
(p) Contracts.....................................................................27
(q) Notes and Accounts Receivable.................................................29
(r) Powers of Attorney............................................................29
(s) Insurance.....................................................................29
(t) Litigation....................................................................30
(u) Product Warranty..............................................................30
(v) Product Liability.............................................................31
(w) Employees.....................................................................31
(x) Employee Benefits.............................................................32
(y) Guaranties....................................................................35
(z) Environment, Health, and Safety...............................................35
(aa) Certain Business Relationships With the Sellers...............................36
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TABLE OF CONTENTS
Page
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(ab) Disclosure....................................................................36
(ac) Investment....................................................................36
4. Representations and Warranties of the Buyer............................................36
(a) Organization of the Buyer.....................................................37
(b) Authorization of Transaction..................................................37
(c) Noncontravention..............................................................37
(d) Brokers' Fees.................................................................37
5. Pre-Closing Covenants..................................................................38
(a) General.......................................................................38
(b) Notices and Consents..........................................................38
(c) Operation of Business.........................................................38
(d) Preservation of Business......................................................39
(e) Full Access...................................................................39
(f) Notice of Developments........................................................39
(g) Exclusivity...................................................................39
(h) Title Insurance...............................................................39
(i) Surveys.......................................................................40
6. Conditions to Obligation to Close......................................................40
(a) Conditions to Obligation of the Buyer.........................................40
(b) Conditions to Obligation of the Sellers.......................................42
7. Termination............................................................................43
(a) Termination of Agreement......................................................43
(b) Effect of Termination.........................................................44
8. Miscellaneous..........................................................................44
(a) Survival of Representations and Warranties....................................44
(b) Press Releases and Public Announcements.......................................45
(c) No Third Party Beneficiaries..................................................45
(d) Entire Agreement..............................................................45
(e) Succession and Assignment.....................................................45
(f) Counterparts..................................................................45
(g) Headings......................................................................45
(h) Notices.......................................................................46
(i) Governing Law.................................................................47
(j) Amendments and Waivers........................................................47
(k) Severability..................................................................48
(l) Expenses......................................................................48
(m) Incorporation of Exhibits and Schedules.......................................48
(n) Specific Performance..........................................................48
(o) Bulk Transfer Laws............................................................48
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Exhibit A -- Agreement with Seller Stockholders
Exhibit B -- Allocation Schedule
Exhibit C -- Forms of Assignments
Exhibit D -- Form of Assumption
Exhibit E -- EBITDA Schedule
Exhibit F -- Historical Financial Statements
Exhibit G -- Form of Opinion of Counsel to Sellers
Exhibit H -- Form of Opinion of Counsel to Buyer
Disclosure Schedule -- Exceptions to Representations and Warranties
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of February 1,1999, by and among THE SOURCE INFORMATION MANAGEMENT
COMPANY, a Missouri corporation (the "Buyer"), CHESTNUT DISPLAY SYSTEMS, INC., a
Pennsylvania corporation ("Chestnut"), and CHESTNUT DISPLAY SYSTEMS (NORTH),
INC., a Pennsylvania corporation ("Chestnut (North)") (Chestnut and Chestnut
(North) are hereinafter referred to collectively as "Sellers" and individually
as a "Seller"). The Buyer and the Sellers are referred to collectively herein as
the "Parties."
This Agreement contemplates a transaction in which the Buyer will
purchase certain of the assets and assume certain of the liabilities of the
Sellers in return for cash and stock.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Sellers, including all of their (a) financial assets as set
forth in Schedule 1.1 hereof, (b) tangible personal property (such as machinery,
equipment, inventories of raw materials and supplies, manufactured and purchased
parts, goods in process and finished goods, furniture, tools, jigs and dies),
(c) automobiles, trucks (subject to one lease as listed), tractors and trailers
as enumerated in Schedule 1.2 hereof, (d) Intellectual Property and all rights
associated with it that in as much as it may exist, (e) leases, subleases,
agreements, contracts, indentures, mortgages, instruments, Security Interests,
guaranties, other similar arrangements, and rights thereunder, (f) claims,
causes of action, choses in
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action, rights of recovery, rights of set off, and rights of recoupment
(including any such item relating to the payment of Taxes), (g) franchises,
approvals, permits, licenses, orders, registrations, certificates, variances,
and similar rights obtained from governments and governmental agencies, (j)
books, records, ledgers, files, documents, correspondence, lists, plats,
architectural plans, drawings, and specifications, creative materials,
advertising and promotional materials, studies, reports, and other printed or
written materials, (i) rights in and with respect to the names "Chestnut Display
Systems, Inc." and "Chestnut Display Systems (North), Inc."; provided, however,
that the Acquired assets shall not include (i) the corporate charters,
qualifications to conduct business as a foreign corporation, arrangements with
registered agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization, maintenance, and
existence of the Sellers as corporations; (ii) any of the rights of the Sellers
under this Agreement (or under any side agreement between the Sellers on the one
hand and the Buyer on the other hand entered into on or after the date of this
Agreement); (iii) any accounts receivables for debts or other obligations owed
to the Sellers by directors, officers or employees of Sellers or Chestnut Group
Incorporated; or (iv) Employee Benefit Plan, Employee Pension Benefit Plan,
Employee Welfare Benefit Plan or Multiemployer Plan.
"Adjusted EBITDA" has the meaning set forth on Exhibit E hereto.
"Adjusted Purchase Price" has the meaning set forth in ss.2(f) below.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code ss.1504(a).
"Agreement with Seller Stockholders" means the Agreement with Seller
Stockholders entered into concurrently herewith and attached hereto as Exhibit
A.
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"Assumed Liabilities" means (a) all Liabilities of the Sellers set
forth on Schedule 1.1 hereof, (b) all obligations of the Sellers under the
agreements, contracts, leases, licenses, and other arrangements referred to in
the definition of Acquired Assets either (i) to furnish goods, services, and
other non-Cash benefits to another party after the Closing or (ii) to pay for
goods, services, and other non-Cash benefits that another party will furnish to
it after the Closing, and (c) all other Liabilities and obligations of the
Sellers set forth in an appendix to the Disclosure Schedule under an express
statement (that the Buyer has initialed) to the effect that the definition of
Assumed Liabilities will include the Liabilities and obligations so disclosed;
provided, however, that the Assumed Liabilities shall not include (i) any
Liability of the Sellers for income, transfer, sales, use, and other Taxes
arising in connection with the consummation of the transactions contemplated
hereby (including any income Taxes arising because the Sellers are transferring
the Acquired Assets, or because the Sellers have deferred gain on any Deferred
Intercompany Transaction), (ii) any Liability of the Sellers for the unpaid
Taxes of any Person (other than either Seller) under Treas. Reg. ss.1.1502-6 (or
any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise, (iii) any obligation of the Sellers to
indemnify any Person (including any of the Seller Stockholders) by reason of the
fact that such Person was a director, officer, employee, or agent of either
Seller or was serving at the request of any such entity as a partner, trustee,
director, officer, employee, or agent of another entity (whether such
indemnification is for judgments, damages, penalties, fines, costs, amounts paid
in settlement, losses, expenses, or otherwise and whether such indemnification
is pursuant to any statute, charter document, bylaw, agreement, or otherwise)
(iv) any Liability of the Sellers for costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby, (v) any Liability
or obligation of the Sellers under this Agreement (or under any side agreement
between the Sellers on the one hand and the Buyer on the other hand entered into
on or after the date of this Agreement), or (vi) and Liability or obligation of
the Sellers under any Employee Benefit Plan, Employee Pension Benefit Plan,
Employee Welfare Benefit Plan, Multiemployer Plan or pursuant to any unpaid
wages, commissions, bonuses or any other unpaid employee compensation accrued or
incurred prior to the Closing Date.
"Auditor" has the meaning set forth in ss.2(f) below.
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"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Buyer has the meaning set forth in the preface above.
"Buyer Stock" means common stock, par value $.01 per share, of the
Buyer.
"Calculation" has the meaning set forth in ss.2(f) below.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in ss.2(d) below.
"Closing Date" has the meaning set forth in ss.2(d) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Controlled Group of Corporations" has the meaning set forth in Code
ss.1563.
"Deferred Intercompany Transaction" has the meaning set forth in Treas.
Reg. ss.1.1502-13.
"Disclosure Schedule" has the meaning set forth in ss.3 below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any
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Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
ss.3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess Loss Account" has the meaning set forth in Treas. Reg.
ss.1.1502-19.
"Extremely Hazardous Substance" has the meaning set forth in ss.302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA ss.3(21).
"Financial Statement" has the meaning set forth in ss.3(g) below.
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"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Initial Purchase Price" has the meaning set forth in ss.2(c) below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
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"Most Recent Financial Statements" has the meaning set forth in ss.3(g)
below.
"Most Recent Fiscal Month End" has the meaning set forth in ss.3(g)
below.
"Most Recent Fiscal Year End" has the meaning set forth in ss.3(g)
below.
"Multiemployer Plan" has the meaning set forth in ERISA ss.3(37).
"Ordinary Course of Business means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA ss.406 and
Code ss.4975.
"Reportable Event" has the meaning set forth in ERISA ss.4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease
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arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Seller" and "Sellers" have the meanings set forth in the preface
above.
"Seller Share" means any share of the Capital Stock of either Seller.
"Seller Stockholder" means any person who or which holds any Seller
Shares.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Survey" has the meaning set forth in ss.5(i) below.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
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2. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Sellers, and
the Sellers agree to sell, transfer, convey, and deliver to the Buyer, all of
the Acquired Assets at the Closing for the consideration specified below in this
ss.2.
(b) Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become responsible
for all of the Assumed Liabilities at the Closing. The Buyer will not assume or
have any responsibility, however, with respect to any other obligation or
Liability of the Sellers not included within the definition of Assumed
Liabilities.
(c) Initial Purchase Price. The Buyer agrees to pay to the Sellers
at the Closing: (i) Three Million One Hundred Seventy-Three Thousand Five
Hundred Thirty-Nine Dollars ($3,173,539.00) in cash, and (ii) shares of Buyer
Stock valued at Two Million Dollars ($2,000,000.00) (the "Initial Shares") (the
cash and the Initial Shares are hereinafter collectively referred to as the
"Initial Purchase Price"). The number of Initial Shares to delivered at the
Closing shall be determined by calculating the average of the closing prices of
the Buyer Stock as quoted on the Nasdaq National Market System for the twenty
(20) trading days prior to the day preceding the Closing Date; provided,
however, that in no event shall the Initial Shares be valued at less than Five
Dollars ($5.00) per share nor more than Seven Dollars ($7.00) per share. The
Initial Purchase Price shall be allocated between Sellers as provided in Exhibit
B attached hereto and incorporated herein. Sellers hereby acknowledge that the
Initial Shares will be subject to certain restrictions on transfer under federal
and state securities laws and hereby agrees that the Initial Shares shall not be
sold, transferred or otherwise disposed of, in whole or in part, following the
Closing; provided, however, that the Sellers may dispose, subject to federal and
state securities laws, of (i) up to sixty-six and six-tenths percent (66.6%) of
the Initial Shares at any time after the expiration of the one (1) year period
following the Closing Date, and (ii) the remainder of the Initial Shares may be
disposed of by the Sellers at any time after the expiration of the two (2) year
period following the Closing Date.
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(d) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Armstrong
Teasdale LLP in St. Louis, Missouri, commencing at 9:00 a.m. Central Standard
Time on February 26, 1999 or such other date as the Parties may mutually
determine (the "Closing Date").
(e) Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in ss.6(a) below; (ii) the Buyer will deliver to the Sellers the
various certificates, instruments, and documents referred to in ss.6(b) below;
(iii) the Sellers will execute, acknowledge (if appropriate), and deliver to the
Buyer (A) assignments (including real property and Intellectual Property
transfer documents) in the forms attached hereto as Exhibit C and (B) such other
instruments of sale, transfer, conveyance, and assignment as the Buyer and its
counsel reasonably may request; (iv) the Buyer will execute, acknowledge (if
appropriate), and deliver to the Sellers (A) an assumption in the form attached
hereto as Exhibit D and (B) such other instruments of assumption as the Sellers
and their counsel reasonably may request; and (v) the Buyer will deliver to the
Sellers the consideration specified in ss.2(c) above.
(f) Adjusted Purchase Price. The Initial Purchase Price shall be
increased or decreased, as the case may be, on a dollar for dollar basis at
Closing for the change in the balances of the Sellers' Progress Bank line of
credit, the Sellers' Progress Bank term loan and accounts payable of Sellers
from their Affiliates from December 31, 1998 to the Closing Date. Any audit and
professional fees related to the sale of Acquired Assets that were incurred and
paid by Sellers after December 31, 1998 will result in a reduction of the
Initial Purchase Price on a dollar for dollar basis. All of the foregoing
adjustments shall be as set forth on Schedule 2(f) hereof and the Initial
Purchase Price, as adjusted, shall be known as the "Adjusted Purchase Price."
(g) Additional Purchase Price. The Sellers will be entitled to
receive as additional consideration hereunder the amount by which the Sellers'
EBITDA for the fiscal year ending January 31, 2000 exceeds One Million One
Hundred Seventy-Eight Thousand Dollars ($1,178,000.00) (the "Year 2000
Earn-Out"). In the event the Year 2000 Earn-Out exceeds Two Million Dollars
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($2,000,000.00), the Sellers shall be entitled to receive as additional
consideration the amount by which EBITDA for the fiscal year ending January 31,
2001 exceeds EBITDA for the fiscal year ending January 31, 2000 (the "Year 2001
Earn-Out"). The Year 2000 Earn-Out and the Year 2001 Earn Out, hereinafter
collectively referred to as the "Additional Purchase Price," shall both be
payable fifty percent (50%) in cash and fifty percent (50%) in shares of Buyer
Stock. For purposes of this Subparagraph 2(g), the shares of Buyer Stock shall
be valued by calculating the average of the closing prices of the Buyer Stock as
quoted on the Nasdaq National Market System for the twenty (20) trading days
prior to the day preceding the Closing Date; provided, however, that in no event
shall the Initial Shares be valued at less than Five Dollars ($5.00) per share
nor more than Seven Dollars ($7.00) per share.
The Buyer shall calculate the Year 2000 Earn-Out on or before April
1, 2000, and shall provide the Sellers with such calculation and supporting
documentation evidencing such calculation on or before April 1, 2000 (the "Year
2000 Calculation"). The Buyer shall calculate the Year 2001 Earn-Out on or
before April 1, 2001, and shall provide the Sellers with such calculation and
supporting documentation evidencing such calculation on or before April 1, 2001
(the "Year 2001 Calculation") (the Year 2000 Calculation and the Year 2001
Calculation are hereinafter individually referred to as an "Earn-Out
Calculation"). If the Sellers notify the Buyer in writing that they accept an
Earn-Out Calculation, or if the Sellers fail to object thereto in writing on or
prior to the 15th day after the date on which such Earn-Out Calculation is
delivered to them, such Earn-Out Calculation shall be deemed to have been
accepted by the Sellers, and the Buyer shall deliver to the Sellers the Year
2000 Earn-Out or the Year 2001 Earn-Out, as the case may be, on or prior to the
15th day after written notice from the Buyer or expiration of the 15-day period
set forth above, as the case may be.
If the Sellers, prior to the 15th day after delivery to it of an
Earn-Out Calculation, deliver a written objection thereto to the Buyer and if
the Parties are unable to agree to such Earn- Out Calculation within fifteen
(15) days after such written objection, the Parties shall retain the services of
an independent accounting firm of national reputation (the "Earn-Out Auditor")
to determine the amount of the Year 2000 Earn-Out or the Year 2001 Earn-Out, as
the case may be.
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In any event, the Buyer shall deliver to the Sellers the undisputed portion of
the Year 2000 Earn-Out or the Year 2001 Earn-Out, as the case may be, within
fifteen (15) days after the retention of the Earn-Out Auditor. the Buyer and the
Sellers shall each bear 50% of the fees and other expenses of the Earn-Out
Auditor. All Parties shall cooperate with the Earn-Out Auditor and provide it
with all records and documentation the Earn-Out Auditor may reasonably request
in order to determine the amount of the Year 2000 Earn-Out or the Year 2001
Earn-Out, as the case may be. The determination of the Earn-Out Auditor shall be
final and binding on all Parties.
(h) Maximum Aggregate Purchase Price. In no event shall the
aggregate Purchase Price hereunder, including amounts paid at Closing and
following the adjustments pursuant to Subparagraphs 2(f) and 2(g) hereof, exceed
Nine Million Five Hundred Thousand Dollars ($9,500,000.00).
(i) Allocation. The Parties agree to allocate the Initial Purchase
Price and the Additional Purchase Price (and all other capitalizable costs)
among the Acquired Assets for all purposes (including financial accounting and
tax purposes) in accordance with the allocation schedule attached hereto as
Exhibit B.
3. Representations and Warranties of the Sellers. The Sellers jointly
and severally represent and warrant to the Buyer that the statements contained
in this ss.3 are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this ss.3), except as set forth in the disclosure schedule
accompanying this Agreement and initialed by the Parties (the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this ss.3.
(a) Organization of the Sellers. Each Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
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(b) Authorization of Transaction. Each Seller has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors of each Seller and the
Seller Stockholders of each Seller have duly authorized the execution, delivery,
and performance of this Agreement by such Seller. This Agreement constitutes the
valid and legally binding obligation of each Seller, enforceable in accordance
with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which either of the Sellers is subject or any
provision of the charter or bylaws of either of the Sellers or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which either of the Sellers is a party or by
which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets). Neither of the
Sellers needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement (including the assignments and assumptions referred to in ss.2 above).
(d) Brokers' Fees. Neither Seller has any Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(e) Title to Assets. Each Seller has good and marketable title to,
or a valid leasehold interest in, the properties and assets used by it, located
on its premises, or shown on its Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of such
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Most Recent Balance Sheet. Without limiting the generality of the foregoing,
each Seller has good and marketable title to all of its Acquired Assets, free
and clear of any Security Interest or restriction on transfer.
(f) Subsidiaries. Neither Seller has any Subsidiaries.
(g) Financial Statements. Attached hereto as Exhibit F are the
following financial statements (collectively the "Financial Statements"): (i)
reviewed balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended December 31, 1996,
1997 and 1998 (the "Most Recent Fiscal Year End") for each Seller; and (ii)
unaudited balance sheets and statements of income, changes in stockholders'
equity, and cash flow (the "Most Recent Financial Statements") as of and for the
month ended January 31, 1999 (the "Most Recent Fiscal Month End") for each
Seller. The Financial Statements (including the Notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of each Seller
as of such dates and the results of operations of each Seller for such periods,
are correct and complete, and are consistent with the books and records of each
Seller (which books and records are correct and complete).
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of either Seller. Without limiting the generality of the foregoing,
since that date:
(i) neither Seller has sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than for a
fair consideration in the Ordinary Course of Business;
(ii) neither Seller has entered into any agreement,
contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) either involving more than $10,000
or outside the Ordinary Course of Business;
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(iii) no party (including either Seller) has
accelerated, terminated, modified, or canceled any agreement,
contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) involving more than $10,000 to
which either Seller is a party or by which either of them is bound;
(iv) neither Seller has imposed any Security Interest
upon any of its assets, tangible or intangible;
(v) neither Seller has made any capital expenditure (or
series of related capital expenditures) either involving more than
$10,000 or outside the Ordinary Course of Business;
(vi) neither Seller has made any capital investment in,
any loan to, or any acquisition of the securities or assets of, any
other Person (or series of related capital investments, loans, and
acquisitions) either involving more than $10,000 or outside the
Ordinary Course of Business;
(vii) neither Seller has issued any note, bond, or other
debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation
either involving more than $10,000;
(viii) neither Seller has delayed or postponed the
payment of accounts payable and other Liabilities outside the
Ordinary Course of Business;
(ix) neither Seller has canceled, compromised, waived,
or released any right or claim (or series of related rights and
claims) either involving more than $10,000 or outside the Ordinary
Course of Business;
(x) neither Seller has granted any license or sublicense
of any rights under or with respect to any Intellectual Property;
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(xi) there has been no change made or authorized in the
charter or bylaws of either Seller;
(xii) neither Seller has declared, set aside, or paid
any dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(xiii) neither Seller has experienced any damage,
destruction, or loss (whether or not covered by insurance) to its
property;
(xiv) neither Seller has made any loan to, or entered
into any other transaction with, any of its directors, officers, and
employees outside the Ordinary Course of Business;
(xv) neither Seller has entered into any employment
contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
(xvi) neither Seller has granted any increase in the
base compensation of any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xvii) neither Seller has adopted, amended, modified or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with
respect to any other Employee Benefit Plan);
(xviii) neither Seller has made any other change in
employment terms for any of its directors, officers, and employees
outside the Ordinary Course of Business;
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(xix) neither Seller has made or pledged to make any
charitable or other capital contribution outside the Ordinary Course
of Business;
(xx) neither Seller has paid any amount to any third
party with respect to any Liability or obligation (including any
costs and expenses such Seller has incurred or may incur in
connection with this Agreement and the transactions contemplated
hereby) which would not constitute an Assumed Liability if in
existence as of the Closing;
(xxi) there has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving either Seller; and
(xxii) neither Seller has committed to any of the
foregoing.
(i) Undisclosed Liabilities. Neither Seller has any Liability (and
there is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against either of them giving
rise to any Liability), except for (i) Liabilities set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (ii)
Liabilities which have arisen after the Most Recent Fiscal Month End in the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law).
(j) Legal Compliance. Each Seller has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against either of them alleging any failure so to comply.
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(k) Tax Matters.
(i) Each Seller has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in
all respects. All Taxes owed by each Seller (whether or not shown on
any Tax Return) have been paid. Neither Seller currently is the
beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a
jurisdiction where each Seller does not file Tax Returns that it is
or may be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of each Seller that arose in
connection with any failure (or alleged failure) to pay any Tax.
(ii) Each Seller has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) Neither Seller, or any director or officer (or
employee responsible for Tax matters) of each Seller, expects any
authority to assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning
any Tax Liability of each Seller either (A) claimed or raised by any
authority in writing or (B) as to which any of the Seller
Stockholders and the directors and officers (and employees
responsible for Tax matters) of such Seller has Knowledge based upon
personal contact with any agent of such authority. ss.3(k) of the
Disclosure Schedule lists all federal, state, local, and foreign
income Tax Returns filed with respect to any of each Seller for
taxable periods ended on or after December 31, 1993, indicates those
Tax Returns that have been audited, and indicates those Tax Returns
that currently are the subject of audit. Each Seller has delivered
to the Buyer correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies
assessed against or agreed to by such Seller since January 1, 1994.
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(iv) Neither Seller has waived any statute of
limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(v) The unpaid Taxes of each Seller (A) did not, as of
the Most Recent Fiscal Month End, exceed the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on
the face of the Most Recent Balance Sheet (rather than in any notes
thereto) and (B) do not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with the past
custom and practice of such Seller in filing its Tax Returns.
(vi) None of the Assumed Liabilities is an obligation to
make a payment that will not be deductible under Code ss.280G.
Neither Seller is a party to any Tax allocation or sharing
agreement. Neither Seller (A) has been a member of an Affiliated
Group filing a consolidated federal income Tax Return (other than a
group the common parent of which was such Seller) or (B) has any
Liability for the Taxes of any Person (other than such Seller) under
Treas. Reg. ss.1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract, or
otherwise.
(vii) ss.3(k) of the Disclosure Schedule sets forth the
following information with respect to each Seller as of the most
recent practicable date: (A) the basis of such Seller in its assets;
and (B) the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to such Seller.
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(l) Real Property.
(i) ss.3(l)(i) of the Disclosure Schedule lists and
describes briefly all real property that either Seller owns. With
respect to each such parcel of owned real property:
(A) the identified owner has good and
marketable title to the parcel of real property, free
and clear of any Security Interest, easement, covenant,
or other restriction, except for installments of special
assessments not yet delinquent and recorded easements,
covenants, and other restrictions which do not impair
the current use, occupancy, or value, or the
marketability of title, of the property subject thereto;
(B) there are no pending or, to the
Knowledge of any of the Seller Stockholders and the
directors and officers (and employees with
responsibility for real estate matters) of the Sellers,
threatened condemnation proceedings, lawsuits, or
administrative actions relating to the property or other
matters affecting adversely the current use, occupancy,
or value thereof;
(C) the legal description for the parcel
contained in the deed thereof describes such parcel
fully and adequately, the buildings and improvements are
located within the boundary lines of the described
parcels of land, are not in violation of applicable
setback requirements, zoning laws, and ordinances (and
none of the properties or buildings or improvements
thereon are subject to "permitted non-conforming use" or
"permitted non-conforming structure" classifications),
and do not encroach on any easement which may burden the
land, and the land does not serve any adjoining property
for any purpose inconsistent with the use of the land,
and the property is not located within any flood plain
or subject to any similar type
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restriction for which any permits or
licenses necessary to the use thereof have not been
obtained;
(D) all facilities have received all
approvals of governmental authorities (including
licenses and permits) required in connection with the
ownership or operation thereof and have been operated
and maintained in accordance with applicable laws,
rules, and regulations;
(E) there are no leases, subleases,
licenses, concessions, or other agreements, written or
oral, granting to any party or parties the right of use
or occupancy of any portion of the parcel of real or
leased property;
(F) there are no outstanding options or
rights of first refusal to purchase the parcel of real
property, or any portion thereof or interest therein;
(G) there are no parties (other than a
Seller) in possession of the parcel of real property,
other than tenants under any leases disclosed in
ss.3(l)(i) of the Disclosure Schedule who are in
possession of space to which they are entitled;
(H) all facilities located on the parcel of
real property are supplied with utilities and other
services necessary for the operation of such facilities,
including gas, electricity, water, telephone, sanitary
sewer, and storm sewer, all of which services are
adequate in accordance with all applicable laws,
ordinances, rules, and regulations and are provided via
public roads or via permanent, irrevocable, appurtenant
easements benefitting the parcel of real property; and
(I) each parcel of real property abuts on
and has direct vehicular access to a public road, or has
access to a public road via a permanent,
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irrevocable, appurtenant easement
benefitting the parcel of real property, and access to
the property is provided by paved public right-of-way
with adequate curb cuts available.
(ii) ss.3(l)(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to each
Seller. The Sellers have delivered to the Buyer correct and complete
copies of the leases and subleases listed in ss.3(l)(ii) of the
Disclosure Schedule (as amended to date). With respect to each lease
and sublease listed in ss.3(l)(ii) of the Disclosure Schedule:
(A) the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect;
(B) the lease or sublease will continue to
be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation
of the transactions contemplated hereby (including the
assignments and assumptions referred to in ss.2 above);
(C) no party to the lease or sublease is in
breach or default, and no event has occurred which, with
notice or lapse of time, would constitute a breach or
default or permit termination, modification, or
acceleration thereunder;
(D) no party to the lease or sublease has
repudiated any provision thereof;
(E) there are no disputes, oral agreements,
or forbearance programs in effect as to the lease or
sublease;
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(F) with respect to each sublease, the
representations and warranties set forth in subsections
(A) through (E) above are true and correct with respect
to the underlying lease;
(G) neither Seller has assigned,
transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or
subleasehold;
(H) all facilities leased or subleased
thereunder have received all approvals of governmental
authorities (including licenses and permits) required in
connection with the operation thereof and have been
operated and maintained in accordance with applicable
laws, rules, and regulations; and
(I) all facilities leased or subleased
thereunder are supplied with utilities and other
services necessary for the operation of said facilities.
(m) Intellectual Property.
(i) Each Seller owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation of the businesses of such
Seller as presently conducted. Each item of Intellectual Property
owned or used by each Seller immediately prior to the Closing
hereunder will be owned or available for use by the Buyer on
identical terms and conditions immediately subsequent to the Closing
hereunder. Each Seller has taken all necessary action to maintain
and protect each item of Intellectual Property that it owns or uses.
(ii) Neither Seller has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and none of the
Seller Stockholders and the directors and officers (and employees
with responsibility for Intellectual Property matters) of either
Seller has ever received
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any charge, complaint, claim, demand, or notice alleging
any such interference, infringement, misappropriation, or violation
(including any claim that either Seller must license or refrain from
using any Intellectual Property rights of any third party). To the
Knowledge of any of the Seller Stockholders and the directors and
officers (and employees with responsibility for Intellectual
Property matters) of such Seller, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of such Seller.
(iii) ss.3(m)(iii) of the Disclosure Schedule identifies
each patent or registration which has been issued to either Seller
with respect to any of its Intellectual Property, identifies each
pending patent application or application for registration which
either Seller has made with respect to any of its Intellectual
Property, and identifies each license, agreement, or other
permission which either Seller has granted to any third party with
respect to any of its Intellectual Property (together with any
exceptions). Each Seller delivered to the Buyer correct and complete
copies of all such patents, registrations, applications, licenses,
agreements, and permissions (as amended to date). ss.3(m)(iii) of
the Disclosure Schedule also identifies each trade name or
unregistered trademark used by either Seller in connection with any
of its businesses. With respect to each item of Intellectual
Property required to be identified in ss.3(m)(iii) of the Disclosure
Schedule:
(A) the appropriate Seller possesses all
right, title, and interest in and to the item, free and
clear of any Security Interest, license, or other
restriction;
(B) the item is not subject to any
outstanding injunction, judgment, order, decree, ruling,
or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is
pending or, to the Knowledge of any of the
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Seller Stockholders and the directors and
officers (and employees with responsibility for
Intellectual Property matters) of the Sellers, is
threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) neither Seller has ever agreed to
indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with
respect to the item.
(iv) ss.3(m)(iv) of the Disclosure Schedule identifies
each item of Intellectual Property that any third party owns and
that either Seller uses pursuant to license, sublicense, agreement,
or permission. The Sellers have delivered to the Buyer correct and
complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). With respect to each item of
Intellectual Property required to be identified in ss.3(m)(iv) of
the Disclosure Schedule:
(A) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(B) the license, sublicense, agreement, or
permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical
terms following the consummation of the transactions
contemplated hereby (including the assignments and
assumptions referred to in ss.2 above);
(C) no party to the license, sublicense,
agreement, or permission is in breach or default, and no
event has occurred which with notice or lapse of time
would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
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(D) no party to the license, sublicense,
agreement, or permission has repudiated any provision
thereof;
(E) with respect to each sublicense, the
representations and warranties set forth in subsections
(A) through (D) above are true and correct with respect
to the underlying license;
(F) the underlying item of Intellectual
Property is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is
pending or is threatened which challenges the legality,
validity, or enforceability of the underlying item of
Intellectual Property; and
(H) neither Seller has granted any
sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
(v) To the Knowledge of the Seller Stockholders and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of the Sellers, neither Seller will
interfere with, infringe upon, misappropriate, or otherwise come
into conflict with, any Intellectual Property rights of third
parties as a result of the continued operation of its businesses as
presently conducted.
(n) Tangible Assets. Each Seller owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of its
business as presently conducted. Each such tangible asset is free from defects
(patent and latent), has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used.
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(o) Inventory. The inventory of each Seller consists of raw
materials and supplies, manufactured and purchased parts, goods in process, and
finished goods, all of which is merchantable and fit for the purpose for which
it was procured or manufactured, and none of which is slow-moving, obsolete,
damaged, or defective, subject only to the reserve for inventory write-down set
forth on the face of the Most Recent Balance Sheet (rather than in any Notes
thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of such Seller.
(p) Contracts. ss.3(p) of the Disclosure Schedule lists the
following contracts and other agreements to which either Seller is a party:
(i) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for
lease payments in excess of $10,000 per annum;
(ii) any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or
receipt of services, the performance of which will extend over a
period of more than one year, result in a loss to either Seller, or
involve consideration in excess of $10,000;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements)
under which it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease
obligation, in excess of $10,000 or under which it has imposed a
Security Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
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(vi) any agreement involving any of the Seller
Stockholders and their Affiliates (other than the Sellers);
(vii) any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, or other plan
or arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual
on a full-time, part-time, consulting, or other basis providing
annual compensation in excess of $20,000 or providing severance
benefits;
(x) any agreement under which it has advanced or loaned
any amount to any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xi) any agreement under which the consequences of a
default or termination could have an adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of either Seller; or
(xii) any other agreement (or group of related
agreements) the performance of which involves consideration in
excess of $10,000.
The Sellers have delivered to the Buyer a correct and complete copy of each
written agreement listed in ss.3(p) of the Disclosure Schedule (as amended to
date) and a written summary setting forth the terms and conditions of each oral
agreement referred to in ss.3(p) of the Disclosure Schedule. With respect to
each such agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (B) the agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby (including
the assignments and assumptions referred to in ss.2 above); (C) no party is in
breach
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or default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (D) no party has repudiated any provision
of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts receivable
of each Seller are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with their terms at their recorded amounts,
subject only to appropriate profit center and commission offsets, normal
marketing remedies and the reserve for bad debts set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of such Seller.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of either Seller.
(s) Insurance. ss.3(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which either Seller has been a party, a named
insured, or otherwise the beneficiary of coverage at any time within the past
three (3) years:
(i) the name, address, and telephone number of the
agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
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(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and
amount (including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments
or other loss- sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in ss.2 above);
(C) neither Seller nor any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof. Each Seller has been covered during the past ten (10)
years by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. ss.3(s) of
the Disclosure Schedule describes any self-insurance arrangements affecting
either Seller.
(t) Litigation. ss.3(t) of the Disclosure Schedule sets forth each
instance in which either Seller (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or is threatened
to be made a party to any action, suit, proceeding, hearing, or investigation
of, in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator. None of
the actions, suits, proceedings, hearings, and investigations set forth in
ss.3(t) of the Disclosure Schedule could result in any material adverse change
in the business, financial condition, operations, results of operations, or
future prospects of either Seller.
(u) Product Warranty. Each product manufactured, sold, leased, or
delivered by either Seller has been in conformity with all applicable
contractual commitments and all express and
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implied warranties, and neither Seller has any Liability (and there is no Basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise to any
Liability) for replacement or repair thereof or other damages in connection
therewith, subject only to the reserve for product warranty claims set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of such Seller. No product manufactured, sold, leased,
or delivered by either Seller is subject to any guaranty, warranty, or other
indemnity beyond the applicable standard terms and conditions of sale or lease.
ss.3(u) of the Disclosure Schedule includes copies of the standard terms and
conditions of sale or lease for each Seller (containing applicable guaranty,
warranty, and indemnity provisions).
(v) Product Liability. Neither Seller has any Liability (and there
is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against such Seller giving
rise to any Liability) arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product manufactured, sold,
leased, or delivered by either Seller.
(w) Employees. To the Knowledge of the Seller Stockholders and the
directors and officers (and employees with responsibility for employment
matters) of the Sellers, no executive, key employee, or group of employees has
any plans to terminate employment with either Seller. Neither Seller is a party
to or bound by any collective bargaining agreement, nor has either of them
experienced any strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes. Neither Seller has committed any unfair labor
practice. None of the Seller Stockholders and the directors and officers (and
employees with responsibility for employment matters) of either Seller has any
Knowledge of any organizational effort presently being made or threatened by or
on behalf of any labor union with respect to employees of either Seller.
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(x) Employee Benefits.
(i) ss.3(x) of the Disclosure Schedule lists each
Employee Benefit Plan that either Seller maintains or to which
either Seller contributes.
(A) Each such Employee Benefit Plan (and
each related trust, insurance contract, or fund)
complies in form and in operation in all respects with
the applicable requirements of ERISA, the Code, and
other applicable laws.
(B) All required reports and descriptions
(including Form 5500 Annual Reports, Summary Annual
Reports, PBGC-1's, and Summary Plan Descriptions) have
been filed or distributed appropriately with respect to
each such Employee Benefit Plan. The requirements of
Part 6 of Subtitle B of Title I of ERISA and of Code
ss.4980B have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare
Benefit Plan.
(C) All contributions (including all
employer contributions and employee salary reduction
contributions) which are due have been paid to each such
Employee Benefit Plan which is an Employee Pension
Benefit Plan and all contributions for any period ending
on or before the Closing Date which are not yet due have
been paid to each such Employee Pension Benefit Plan or
accrued in accordance with the past custom and practice
of the Sellers. All premiums or other payments for all
periods ending on or before the Closing Date have been
paid with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is
an Employee Pension Benefit Plan meets the requirements
of a "qualified plan" under Code
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ss.401(a) and has received, within the last
two years, a favorable determination letter from the
Internal Revenue Service.
(E) The market value of assets under each
such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan) equals
or exceeds the present value of all vested and nonvested
Liabilities thereunder determined in accordance with
PBGC methods, factors, and assumptions applicable to an
Employee Pension Benefit Plan terminating on the date
for determination.
(F) The Sellers have delivered to the Buyer
correct and complete copies of the plan documents and
summary plan descriptions, the most recent determination
letter received from the Internal Revenue Service, the
most recent Form 5500 Annual Report, and all related
trust agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit
Plan.
(ii) With respect to each Employee Benefit Plan that
either Seller maintains or ever has maintained or to which either of
them contributes, ever has contributed, or ever has been required to
contribute:
(A) No such Employee Benefit Plan which is
an Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been completely or partially
terminated or been the subject of a Reportable Event as
to which notices would be required to be filed with the
PBGC. No proceeding by the PBGC to terminate any such
Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted or, to the
Knowledge of any of the Seller Stockholders and the
directors and officers (and employees with
responsibility for employee benefits matters) of the
Sellers threatened.
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(B) There have been no Prohibited
Transactions with respect to any such Employee Benefit
Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the
assets of any such Employee Benefit Plan. No action,
suit, proceeding, hearing, or investigation with respect
to the administration or the investment of the assets of
any such Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the Knowledge of
any of the Seller Stockholders and the directors and
officers (and employees with responsibility for employee
benefits matters) of the Sellers threatened. None of the
Seller Stockholders and the directors and officers (and
employees with responsibility for employee benefits
matters) of Sellers has any Knowledge of any Basis for
any such action, suit, proceeding, hearing, or
investigation.
(C) Neither Seller has incurred, and none of
the Seller Stockholders and the directors and officers
(and employees with responsibility for employee benefits
matters) of the Sellers has any reason to expect that
either Seller will incur; any Liability to the PBGC
(other than PBGC premium payments) or otherwise under
Title IV of ERISA (including any withdrawal Liability)
or under the Code with respect to any such Employee
Benefit Plan which is an Employee Pension Benefit Plan.
(iii) Neither Seller contributes to, ever has
contributed to, or ever has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal
Liability) under any Multiemployer Plan.
(iv) Neither Seller maintains or ever has maintained or
contributes, ever has contributed, or ever has been required to
contribute to any Employee Welfare Benefit Plan providing medical,
health, or life insurance or other welfare-type
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benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in
accordance with Code ss.4980B).
(y) Guaranties. Neither Seller is a guarantor or otherwise is liable
for any Liability or obligation (including indebtedness) of any other Person.
(z) Environment, Health, and Safety.
(i) Each of the Sellers and its predecessors has
complied with all Environmental, Health, and Safety Laws, and no
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply. Without limiting the
generality of the preceding sentence, each of the Sellers and its
predecessors has obtained and been in compliance with all of the
terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all
other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables
which are contained in, all Environmental, Health, and Safety Laws.
(ii) Neither Seller has any Liability (and neither
Seller nor its predecessors has handled or disposed of any
substance, arranged for the disposal of any substance, exposed any
employee or other individual to any substance or condition, or owned
or operated any property or facility in any manner that could form
the Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against
either Seller giving rise to any Liability) for damage to any site,
location, or body of water (surface or subsurface), for any illness
of or personal injury to any employee or other individual, or for
any reason under any Environmental, Health, and Safety Law.
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(iii) All properties and equipment used in the business
of the Sellers and their respective predecessors have been free of
asbestos, PCB's, methylene chloride, trichloroethylene,
1,2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely
Hazardous Substances.
(aa) Certain Business Relationships With the Sellers. None of the
Seller Stockholders and their Affiliates has been involved in any business
arrangement or relationship with either of the Sellers within the past twelve
(12) months, and none of the Seller Stockholders and their Affiliates owns any
asset, tangible or intangible, which is used in the business of either of the
Sellers.
(ab) Disclosure. The representations and warranties contained in
this ss.3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this ss.3 not misleading.
(ac) Investment. Each Seller (i) understands that the shares of
Buyer Stock to be delivered to Sellers hereunder have not been, and will not be,
registered under the Securities Act, or under any state securities laws, and are
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (ii) is acquiring the Buyer
Stock solely for its own account for investment purposes, and not with a view to
the distribution thereof (except to the Seller Stockholders), (iii) is a
sophisticated investor with knowledge and experience in business and financial
matters, (iv) has received certain information concerning the Buyer and has had
the opportunity to obtain additional information as desired in order to evaluate
the merits and the risks inherent in holding the Buyer Stock, (v) is able to
bear the economic risk and lack of liquidity inherent in holding the Buyer
Stock, and (vi) is an Accredited Investor for the reasons set forth in ss.3(ac)
of the Disclosure Schedule.
4. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Sellers that the statements contained in this ss.4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this ss.4),
except
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as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this ss.4.
(a) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Buyer is a party or by which it is bound or to which any of its assets is
subject. The Buyer does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement (including the assignments and assumptions referred to in ss.2
above).
(d) Brokers' Fees. The Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Sellers could become
liable or obligated.
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5. Pre-Closing Covenants. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary in order to consummate
and make effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in ss.7
below).
(b) Notices and Consents. Each Seller will give any notices to third
parties, and each Seller will use its reasonable best efforts to obtain any
third party consents, that the Buyer may request in connection with the matters
referred to in ss.3(c) above. Each of the Parties will give any notices to, make
any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in ss.3(c) and ss.4(c) above. Without
limiting the generality of the foregoing, each of the Parties will file any
Notification and Report Forms and related material that it may be required to
file with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the Hart-Scott-Rodino Act, will use its
reasonable best efforts to obtain an early termination of the applicable waiting
period, and will make any further filings pursuant thereto that may be necessary
in connection therewith.
(c) Operation of Business. Neither Seller will engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing, neither or
the Sellers will (i) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or otherwise
acquire any of its capital stock, (ii) pay any amount to any third party with
respect to any Liability or obligation (including any costs and expenses such
Seller have incurred or may incur in connection with this Agreement and the
transactions contemplated hereby) which would not constitute an Assumed
Liability if in existence as of the Closing, and (iii) otherwise engage in any
practice, take any action, or enter into any transaction of the sort described
in ss.3(h) above.
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(d) Preservation of Business. Each Seller will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
(e) Full Access. Each Seller will permit representatives of the
Buyer to have full access to all premises, properties, personnel, books, records
(including Tax records), contracts, and documents of or pertaining to such
Seller.
(f) Notice of Developments. Each Party will give prompt written
notice to the other Parties of any material adverse development causing a breach
of any of its own representations and warranties in ss.3 and ss.4 above. No
disclosure by any Party pursuant to this ss.5(f), however, shall be deemed to
amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(g) Exclusivity. Neither Seller will (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets, of either Seller (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. Each Seller will
notify the Buyer immediately if any Person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing.
(h) Title Insurance. The Sellers will obtain in preparation for the
Closing an ALTA Owner's Policy of Title Insurance Form B-1987 (or equivalent
policy reasonably acceptable to the Buyer if the real property is located in a
state in which an ALTA Owner's Policy of Title Insurance Form B-1987 is not
available) issued by a title insurer reasonably satisfactory to the Buyer, in
such amount as the Buyer reasonably may determine to be the fair market value of
such real property (including all improvements located thereon), insuring title
to such real property to be in the Buyer as of the Closing (subject only to the
title exceptions described above in ss.3(l)(i) and
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in ss.3(l)(i) of the Disclosure Schedule). Each title insurance policy delivered
under ss.5(h) shall (A) insure title to the real property and all recorded
easements benefitting such real property, (B) contain an "extended coverage
endorsement" insuring over the general exceptions contained customarily in such
policies, (C) contain an ALTA Zoning Endorsement 3.1 (or equivalent), (D)
contain an endorsement insuring that the real property described in the title
insurance policy is the same real estate as shown on the Survey delivered with
respect to such property, (E) contain an endorsement insuring that each street
adjacent to the real property is a public street and that there is direct and
unencumbered pedestrian and vehicular access to such street from the real
property, and (F) contain a "non-imputation" endorsement to the effect that
title defects known to the officers, directors, and stockholders of the owner
prior to the Closing shall not be deemed "facts known to the insured" for
purposes of the policy.
(i) Surveys. With respect to each parcel of real property that
either Seller owns and as to which a title insurance policy is to be procured
pursuant to ss.5(h) above, the Sellers will procure in preparation for the
Closing a current survey of the real property certified to the Buyer, prepared
by a licensed surveyor and conforming to current ALTA Minimum Detail
Requirements for Land Title Surveys, disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility lines, and
other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Survey"). The Survey shall not
disclose any survey defect or encroachment from or onto the real property which
has not been cured or insured over prior to the Closing.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.3
above shall be true and correct in all material respects at and as
of the Closing Date;
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(ii) each Seller shall have performed and complied with
all of its covenants hereunder in all material respects through the
Closing;
(iii) each Seller shall have procured all of the third
party consents specified in ss.5(b) above, all of the title
insurance commitments, policies, and riders specified in ss.5(h)
above, and all of the surveys specified in ss.5(i) above;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A) prevent consummation of
any of the transactions contemplated by this Agreement, (B) cause
any of the transactions contemplated by this Agreement to be
rescinded following consummation or (C) affect adversely the right
of the Buyer to own the Acquired Assets, to operate the former
businesses of the Sellers (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(v) each Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified
above in ss.6(a)(i)-(iv) is satisfied in all respects;
(vi) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated and the Sellers and the Buyer shall have
received all other authorizations, consents, and approvals of
governments and governmental agencies referred to in ss.3(c) and
ss.4(c) above;
(vii) the Buyer shall have received from counsel to the
Sellers an opinion in form and substance as set forth in Exhibit G
attached hereto, addressed to the Buyer, and dated as of the Closing
Date;
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(viii) all actions to be taken by the Sellers in
connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this ss.6(a) if it executes a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.4
above shall be true and correct in all material respects at and as
of the Closing Date;
(ii) the Buyer shall have performed and complied with
all of its covenants hereunder in all material respects through the
Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A) prevent consummation of
any of the transactions contemplated by this Agreement or (B) cause
any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Sellers a
certificate to the effect that each of the conditions specified
above in ss.6(b)(i)-(iii) is satisfied in all respects;
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(v) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated and the Sellers and the Buyer shall have
received all other authorizations, consents, and approvals of
governments and governmental agencies referred to in ss.3(c) and
ss.4(c) above;
(vi) the Sellers shall have received from counsel to the
Buyer an opinion in form and substance as set forth in Exhibit H
attached hereto, addressed to the Sellers, and dated as of the
Closing Date; and
(vii) all actions to be taken by the Buyer in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Sellers.
The Sellers may waive any condition specified in this ss.6(b) if they execute a
writing so stating at or prior to the Closing.
7. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Buyer and the Sellers may terminate this
Agreement by mutual written consent at any time prior to the
Closing;
(ii) the Buyer may terminate this Agreement by giving
written notice to the Sellers on or before February 26, 1999 if the
Buyer is not satisfied with the results of its continuing business,
legal, and accounting due diligence regarding the Sellers;
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(iii) the Buyer may terminate this Agreement by giving
written notice to the Sellers at any time prior to the Closing (A)
in the event either Seller has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, the Buyer has notified the Sellers of the breach, and the
breach has continued without cure for a period of fifteen (15) days
after the notice of breach or (B) if the Closing shall not have
occurred on or before March 1, 1999, by reason of the failure of any
condition precedent under ss.6(a) hereof (unless the failure results
primarily from the Buyer itself breaching any representation,
warranty, or covenant contained in this Agreement); and
(iv) the Sellers may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (A) in
the event the Buyer has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, the Sellers have notified the Buyer of the breach, and the
breach has continued without cure for a period of fifteen (15) days
after the notice of breach or (B) if the Closing shall not have
occurred on or before March 1, 1999, by reason of the failure of any
condition precedent under ss.6(b) hereof (unless the failure results
primarily from a Sellers breaching any representation, warranty, or
covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to ss.7(a) above, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party (except
for any Liability of any Party then in breach).
8. Miscellaneous.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder as and to the extent provided in the Agreement
With Seller Stockholders.
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(b) Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that Buyer may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the Buyer
will use its reasonable best efforts to advise the Sellers prior to making the
disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that the Buyer may (i) assign
any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
45
<PAGE> 50
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Sellers:
-----------------
Chestnut Group, Inc.
115 Bloomingdale Avenue
Wayne, Pennsylvania 19087
Attn: M. Parker Blatchford, President
Copy to:
-------
Hepburn, Willcox, Hamilton & Putnam
1100 Penn Center
1617 JFK Boulevard
Philadelphia, Pennsylvania 19103
Attn: Brooks Keffer, Esq.
If to Buyer:
-----------
The Source Information Management Company
11644 Lilburn Park Road
St. Louis, Missouri 63146
Attn: S. Leslie Flegel, Chairman & CEO
46
<PAGE> 51
Copy to:
-------
Armstrong Teasdale LLP
One Metropolitan Square
St. Louis, Missouri 63102
Attn: John L. Gillis, Jr., Esq.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Missouri without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Missouri or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Missouri.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Sellers. The Sellers may consent to any such amendment at any time
prior to the Closing with the prior authorization of their respective boards of
directors; provided, however, that any amendment effected after the Seller
Stockholders have approved this Agreement will be subject to the restrictions
contained in Pennsylvania or other applicable law. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
47
<PAGE> 52
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Buyer, the Sellers, and the Seller
Stockholders will bear his or its own costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby. Each Seller also agrees that it has not paid any amount to
any third party, and will not pay any amount to any third party until after the
Closing, with respect to any of the costs and expenses of the Sellers and the
Seller Stockholders (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
(m) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Party shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction over the
Parties and the matte, in addition to any other remedy to which it may be
entitled, at law or in equity.
(o) Bulk Transfer Laws. The Buyer acknowledges that the Sellers will
not comply with the provisions of any bulk transfer laws of any jurisdiction in
connection with the transactions contemplated by this Agreement.
48
<PAGE> 53
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
on as of the date first above written.
THE SOURCE INFORMATION MANAGEMENT COMPANY
/s/ W. Brian Rodgers
By:______________________________________________
W. Brian Rodgers
Secretary and Chief Financial Officer
CHESTNUT DISPLAY SYSTEMS, INC.
/s/ M. Parker Blatchford
By:______________________________________________
M. Parker Blatchford
President
CHESTNUT DISPLAY SYSTEMS (NORTH), INC.
/s/ M. Parker Blatchford
By:______________________________________________
M. Parker Blatchford
President
49
<PAGE> 54
A list briefly identifying the contents of all omitted schedules and exhibits to
the Asset Purchase Agreement (the "Agreement") dated as of February 1, 1999 by
and among The Source Information Management Company ("Registrant"), Chestnut
Diplay Systems, Inc. and Chestnut Display Systems (North), Inc. appears in the
Table of Contents to the Agreement. Registrant will furnish supplementally a
copy of any omitted schedule or exhibit to the Securities and Exchange
Commission upon request.
<PAGE> 1
=================================================
ASSET PURCHASE AGREEMENT
AMONG
THE SOURCE INFORMATION MANAGEMENT COMPANY,
MYCO, INC.
AND
RY, INC.
February 26, 1999
=================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C> <C>
1. Definitions.............................................................................1
2. Basic Transaction.......................................................................9
(a) Purchase and Sale of Assets....................................................9
(b) Assumption of Liabilities......................................................9
(c) Initial Purchase Price.........................................................9
(d) The Closing....................................................................9
(e) Deliveries at the Closing......................................................9
(f) Additional Purchase Price.....................................................10
(g) Allocation....................................................................11
3. Representations and Warranties of the Sellers..........................................11
(a) Organization of the Sellers...................................................11
(b) Authorization of Transaction..................................................11
(c) Noncontravention..............................................................11
(d) Brokers' Fees.................................................................12
(e) Title to Assets...............................................................12
(f) Subsidiaries..................................................................12
(g) Financial Statements..........................................................12
(h) Events Subsequent to Most Recent Fiscal Year End..............................13
(i) Undisclosed Liabilities.......................................................16
(j) Legal Compliance..............................................................16
(k) Tax Matters...................................................................16
(l) Real Property.................................................................18
(m) Intellectual Property.........................................................20
(n) Tangible Assets...............................................................24
(o) Inventory.....................................................................24
(p) Contracts.....................................................................24
(q) Notes and Accounts Receivable.................................................26
(r) Powers of Attorney............................................................26
(s) Insurance.....................................................................26
(t) Litigation....................................................................27
(u) Product Warranty..............................................................27
(v) Product Liability.............................................................27
(w) Employees.....................................................................28
(x) Employee Benefits.............................................................28
(y) Guaranties....................................................................31
(z) Environment, Health, and Safety...............................................31
(aa) Certain Business Relationships With the Sellers...............................32
(ab) Disclosure....................................................................32
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C> <C>
4. Representations and Warranties of the Buyer............................................32
(a) Organization of the Buyer.....................................................33
(b) Authorization of Transaction..................................................33
(c) Noncontravention..............................................................33
(d) Brokers' Fees.................................................................33
5. Pre-Closing Covenants..................................................................34
(a) General.......................................................................34
(b) Notices and Consents..........................................................34
(c) Operation of Business.........................................................34
(d) Preservation of Business......................................................35
(e) Reasonable Access.............................................................35
(f) Notice of Developments........................................................35
(g) Exclusivity...................................................................35
(h) Title Insurance...............................................................35
(i) Surveys.......................................................................36
6. Conditions to Obligation to Close......................................................36
(a) Conditions to Obligation of the Buyer.........................................36
(b) Conditions to Obligation of the Sellers.......................................38
7. Termination............................................................................39
(a) Termination of Agreement......................................................39
(b) Effect of Termination.........................................................41
8. Miscellaneous..........................................................................41
(a) Survival of Representations and Warranties....................................41
(b) Press Releases and Public Announcements.......................................41
(c) No Third Party Beneficiaries..................................................41
(d) Entire Agreement..............................................................41
(e) Succession and Assignment.....................................................41
(f) Counterparts..................................................................42
(g) Headings......................................................................42
(h) Notices.......................................................................42
(j) Amendments and Waivers........................................................44
(k) Severability..................................................................44
(l) Expenses......................................................................44
(m) Incorporation of Exhibits and Schedules.......................................45
(n) Specific Performance..........................................................45
(o) Bulk Transfer Laws............................................................45
</TABLE>
ii
<PAGE> 4
Exhibit A -- Agreement with Seller Stockholders
Exhibit B -- Allocation Schedule
Exhibit C -- Forms of Assignments
Exhibit D -- Form of Assumption
Exhibit E -- EBITDA Schedule
Exhibit F -- Historical Financial Statements
Exhibit G-1 -- Form of Employment and Noncompetition Agreement (Robert Yedor)
Exhibit G-2 -- Form of Employment and Noncompetition Agreement (Hugh Shannon)
Exhibit G-3 -- Form of Employment and Noncompetition Agreement (Jack Quinn)
Exhibit H -- Form of Opinion of Counsel to Sellers
Exhibit I -- Form of Opinion of Counsel to Buyer
Exhibit J -- Certified Copy of Land Trust
Exhibit K -- Industrial Revenue Bonds Assumption Agreement
Disclosure Schedule -- Exceptions to Representations and Warranties
iii
c
<PAGE> 5
ASSET PURCHASE AGREEMENT
AGREEMENT entered into on February 26, 1999, by and among THE SOURCE
INFORMATION MANAGEMENT COMPANY, a Missouri corporation (the "Buyer"), MYCO,
INC., an Illinois corporation, and RY, INC., an Illinois corporation (MYCO, Inc.
and RY, Inc. referred to collectively as "Sellers" and individually as a
"Seller"). The Buyer and the Sellers are referred to collectively herein as the
"Parties."
This Agreement contemplates a transaction in which the Buyer will
purchase all of the assets (and assume certain of the liabilities) of the
Sellers in return for cash and stock.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Sellers, including all of their (a) real property, leaseholds
and subleaseholds therein, improvements, fixtures, and fittings thereon, and
easements, rights-of-way, and other appurtenants thereto (such as appurtenant
rights in and to public streets), (b) tangible personal property (such as
machinery, equipment, inventories of raw materials and supplies, manufactured
and purchased parts, goods in process and finished goods, furniture,
automobiles, trucks, tractors, trailers, tools, jigs, and dies), (c)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions, (d) leases, subleases, and rights
thereunder, (e) agreements, contracts, indentures, mortgages, instruments,
1
<PAGE> 6
Security Interests, guaranties, other similar arrangements, and rights
thereunder, (f) accounts, notes, and other receivables, (g) securities, (h)
claims, deposits, prepayments, refunds, causes of action, choses in action,
rights of recovery, rights of set off, and rights of recoupment (including any
such item relating to the payment of Taxes), (i) franchises, approvals, permits,
licenses, orders, registrations, certificates, variances, and similar rights
obtained from governments and governmental agencies, (j) books, records,
ledgers, files, documents, correspondence, lists, plats, architectural plans,
drawings, and specifications, creative materials, advertising and promotional
materials, studies, reports, and other printed or written materials, and (k)
Cash, which are assumed by Buyer pursuant to this Agreement and (in) the name
"MYCO, Inc."; provided, however, that the Acquired Assets shall not include (i)
the corporate charters, qualifications to conduct business as a foreign
corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of the Sellers as corporations or
(ii) any of the rights of the Sellers under this Agreement (or under any side
agreement between the Sellers on the one hand and the Buyer on the other hand
entered into on or after the date of this Agreement).
"Additional Purchase Price" has the meaning set forth in ss.2(f) below.
"Adjusted EBITDA" has the meaning set forth on Exhibit E hereto.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code ss.1504(a).
"Agreement with Seller Stockholder" means the Agreement with Seller
Stockholder entered into concurrently herewith and attached hereto as Exhibit A.
2
<PAGE> 7
"Assumed Liabilities" means (a) all Liabilities of the Sellers set
forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto), (b) all Liabilities of the Sellers which have arisen after the Most
Recent Fiscal Month End in the Ordinary Course of Business (other than any
Liability resulting from, arising out of, relating to, in the nature of, or
caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law), (c) all Liabilities of the Sellers for unpaid Taxes with
respect to periods prior to the Closing for which the return is due after the
Closing up to an amount computed in accordance with the past custom and practice
of the Sellers in filing their Tax Returns, (d) all obligations of the Sellers
under the agreements, contracts, leases, licenses, and other arrangements
referred to in the definition of Acquired Assets either (i) to furnish goods,
services, and other non-Cash benefits to another party after the Closing or (ii)
to pay for goods, services, and other non-Cash benefits that another party will
furnish to it after the Closing, and (e) all other Liabilities and obligations
of the Sellers set forth in an appendix to the Disclosure Schedule under an
express statement (that the Buyer has initialed) to the effect that the
definition of Assumed Liabilities will include the Liabilities and obligations
so disclosed; provided, however, that the Assumed Liabilities shall not include
(i) any Liability of the Sellers for income, transfer, sales, use, and other
Taxes arising in connection with the consummation of the transactions
contemplated hereby (including any income Taxes arising because the Sellers are
transferring the Acquired Assets, or because the Sellers have deferred gain on
any Deferred Intercompany Transaction), (ii) any Liability of the Sellers for
the unpaid Taxes of any Person (other than either Seller) under Treas. Reg.
ss.1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise, (iii) any obligation of the
Sellers to indemnify any Person (including any of the Seller Stockholders) by
reason of the fact that such Person was a director, officer, employee, or agent
of either Seller or was serving at the request of any such entity as a partner,
trustee, director, officer, employee, or agent of another entity (whether such
indemnification is for judgments, damages, penalties, fines, costs, amounts paid
in settlement, losses, expenses, or otherwise and whether such indemnification
is pursuant to any statute, charter document, bylaw, agreement, or otherwise),
(iv) any Liability of the Sellers for costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby (except for
Sellers' 1997 and 1998 audit costs upon Closing of this transaction or failure
to close because of breach of this Agreement by Buyer) or (v) any
3
<PAGE> 8
Liability or obligation of the Sellers under this Agreement (or under any side
agreement between the Sellers on the one hand and the Buyer on the other hand
entered into on or after the date of this Agreement).
"Auditor" has the meaning set forth in ss.2(f) below.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Buyer Plan" means The Source Company 401(k) Plan sponsored by the
Buyer.
"Buyer Stock" means common stock, par value $.01 per share, of the
Buyer.
"Calculation" has the meaning set forth in ss.2(f) below.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in ss.2(d) below.
"Closing Date" has the meaning set forth in ss.2(d) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Controlled Group of Corporations" has the meaning set forth in Code
ss.1563.
4
<PAGE> 9
"Deferred Intercompany Transaction" has the meaning set forth in Treas.
Reg. ss.1.1502- 13.
"Disclosure Schedule" has the meaning set forth in ss.3 below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
ss.3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
5
<PAGE> 10
"ERISA Affiliate" means any corporation, entity or individual which has
ever been (i) a member of the same controlled group (within the meaning of Code
Section 414(b) or Section 4001 of Title IV of ERISA) as either Seller, under
common control (within the meaning of Code Section 414(c)) with either Seller,
(iii) a member with either Seller of an affiliated service group (within the
meaning of Code Section 414(m)) or (iv) required to be aggregated with either
Seller pursuant to Code Section 404(o) or regulations promulgated thereunder.
"Excess Loss Account" has the meaning set forth in Treas. Reg.
ss.1.1502-19.
"Extremely Hazardous Substance" has the meaning set forth in ss.302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA ss.3(21).
"Financial Statement" has the meaning set forth in ss.3(g) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Hired Employees" means those employees of the Seller hired by the
Buyer no later than the first day immediately following the Closing Date.
"Initial Purchase Price" has the meaning set forth in ss.2(c) below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications,
6
<PAGE> 11
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including data and related documentation), (g) all
other proprietary rights, and (h) all copies and tangible embodiments thereof
(in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in ss.3(g)
below.
"Most Recent Fiscal Month End" has the meaning set forth in ss.3(g)
below.
"Most Recent Fiscal Year End" has the meaning set forth in ss.3(g)
below.
"Multiemployer Plan" has the meaning set forth in ERISA ss.3(37).
"Ordinary Course of Business means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
7
<PAGE> 12
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA ss.406 and
Code ss.4975.
"Reportable Event" has the meaning set forth in ERISA ss.4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"Seller" and "Sellers" have the meanings set forth in the preface
above.
"Seller Plan" means the MYCO Savings and Investment Plan sponsored by
MYCO, Inc.
"Seller Share" means any share of the Capital Stock of either Seller.
"Seller Stockholder" means any person who or which holds any Seller
Shares.
8
<PAGE> 13
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Survey" has the meaning set forth in ss.5(i) below.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
2. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Sellers, and
the Sellers agree to sell, transfer, convey, and deliver to the Buyer, all of
the Acquired Assets at the Closing for the consideration specified below in this
ss.2.
(b) Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become responsible
for all of the Assumed Liabilities at the Closing. The Buyer will not assume or
have any responsibility, however, with respect to any other obligation or
Liability of the Sellers not included within the definition of Assumed
Liabilities.
9
<PAGE> 14
(c) Initial Purchase Price. The Buyer agrees to pay to the Sellers at
the Closing $12 million in cash and 230,770 shares of Buyer Stock (the "Initial
Purchase Price"). The Initial Purchase Price shall be allocated between Sellers
as provided in Exhibit B.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Armstrong,
Teasdale, Schlafly & Davis in St. Louis, Missouri, commencing at 9:00 a.m. local
time on January ___, 1999 or such other date as the Parties may mutually
determine (the "Closing Date").
(e) Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in ss.6(a) below; (ii) the Buyer will deliver to the Sellers the
various certificates, instruments, and documents referred to in ss.6(b) below;
(iii) the Sellers will execute, acknowledge (if appropriate), and deliver to the
Buyer (A) assignments (including real property and Intellectual Property
transfer documents) in the forms attached hereto as Exhibit C and (B) such other
instruments of sale, transfer, conveyance, and assignment as the Buyer and its
counsel reasonably may request; (iv) the Buyer will execute, acknowledge (if
appropriate), and deliver to the Sellers (A) an assumption in the form attached
hereto as Exhibit D and (B) such other instruments of assumption as the Sellers
and their counsel reasonably may request; and (v) the Buyer will deliver to the
Sellers the consideration specified in ss.2(c) above.
(f) Additional Purchase Price. MYCO will be entitled to receive as
additional consideration hereunder (the "Additional Purchase Price") 153,845
shares of Buyer Stock reduced, however, by six times the amount (if any) by
which MYCO's Adjusted EBITDA (excluding Transaction costs and expenses and the
$50,000 accrued liability relating to the Sales and Use Tax Audit) for its year
ending December 31, 1998 is less than $2,757,000. For purposes of such
reduction, the Shares will be valued at $6.50 per Share. MYCO shall provide
Buyer, within forty-five days after Closing, with a copy of MYCO's audited
financial statements as of and for the years ended December 31, 1997 and 1998
10
<PAGE> 15
and a calculation of Adjusted EBITDA for the year ended December 31, 1998 (the
"Calculation"). If Buyer notifies MYCO in writing that it accepts the
Calculation, or if Buyer fails to object thereto in writing on or prior to the
15th day after the date on which the Calculation is delivered to it, the
Calculation shall be deemed to have been accepted by Buyer, and Buyer shall
deliver to MYCO the number of shares of Buyer Stock representing the Additional
Purchase Price.
If Buyer, prior to the 15th day after delivery to it of the
Calculation, delivers a written objection thereto to MYCO and if the Parties are
unable to agree to the Calculation within fifteen (15) days after such written
objection, the Parties shall retain the services of an independent accounting
firm of national reputation (the "Auditor") to determine the amount of the
Additional Purchase Price. Buyer and MYCO shall each bear 50% of the fees and
other expenses of the Auditor. All Parties shall cooperate with the Auditor and
provide it with all records and documentation the Auditor may reasonably request
in order to determine the Additional Purchase Price. The determination of the
Auditor shall be final and binding on all Parties.
(g) Allocation. The Parties agree to allocate the Initial Purchase
Price and the Additional Purchase Price (and all other capitalizable costs)
among the Acquired Assets for all purposes (including financial accounting and
tax purposes) in accordance with the allocation schedule attached hereto as
Exhibit B.
(h) Employee Benefit Plans.
(i) Buyer's Employee Benefit Plans shall provide, for purposes
of eligibility to participate and vesting, that employment of Hired
Employees with Seller shall be treated as employment with Buyer and
Buyer's Subsidiaries.
(ii) Effective as of the Closing Date, Buyer shall cause
Source-Myco, Inc. ("S-M"), a Delaware corporation, to adopt and become
the "plan sponsor" (within the meaning of Section 3(16)(B) of ERISA) of
plans ("Buyer Welfare Plans") which have terms substantially the same
as Seller Welfare Plans (defined
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below) for the benefit of the Hired Employees. The term
"Seller Welfare Plans" means the following employee welfare benefit
plans sponsored by Seller for the benefit of its eligible employees:
Myco, Inc Flexible Benefit Plan (the "MYCO Cafeteria Plan") and Myco,
Inc. Employee Health Benefit Plan (the "MYCO Medical Plan"). Seller
shall cooperate with Buyer and S-M if Buyer and S-M want to receive an
assignment or transfer of Seller's current excess loss (stop loss)
insurance contract issued to Seller in connection with the MYCO Medical
Plan. Nothing in this Agreement shall prevent Buyer or S-M from
amending or terminating the Buyer Welfare Plans at any time or in any
manner.
Seller shall pay in the Ordinary Course of Business all claims
made under the MYCO Medical Plan prior to Closing Date for
hospitalization, medical and dental benefits services rendered to Hired
Employees (and eligible dependents of Hired Employees). Buyer shall
cause S-M to assume liability for hospitalization, medical and dental
benefits for Hired Employees (and eligible dependents of Hired
Employees) for claims made on and after the Closing Date. The Buyer
Welfare Plans shall take into account, for purposes of participant
deductibles, out-of-pocket expenses for hospitalization, medical and
dental benefits under the MYCO Medical Plan incurred by Hired Employees
during the 1999 Plan Year (defined below) prior to the Closing Date.
Seller shall furnish Buyer with a schedule setting forth the
deductibles and out-of-pocket expenses incurred for each Hired Employee
during the 1999 Plan Year. Seller shall pay S-M all amounts S-M pays
under this paragraph for hospitalization, medical and dental benefits
for Hired Employees with respect to claims incurred prior to the
Closing Date. Such payments by Seller shall be made within thirty days
of Seller being invoiced for such amounts by S-M (exclusive of any
reimbursements S-M is entitled to receive for such claims under any
excess loss or similar policy of insurance).
Any account balances (credits) for the benefit of a Hired
Employee under the MYCO Cafeteria Plan as of the Closing Date shall be
transferred by the Seller
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to S-M for the equivalent Buyer Welfare Plan and shall be
maintained for the benefit of such Employee in accordance with the
terms of such Buyer Welfare Plan. Seller shall transfer to S-M in cash,
as soon as practicable following the Closing Date, the account balances
valued as of the Closing Date, of Hired Employees under the MYCO
Cafeteria Plan. Seller and Buyer shall reasonably cooperate so as to
minimize any disruption to employee contributions made to such Buyer
Welfare Plan before and after the Closing Date. Seller shall be
entitled to reimbursement from Buyer after the Closing Date to the
extent any of the Hired Employees receive an Excess Benefit (defined
below) under the MYCO Cafeteria Plan prior to the Closing Date. The
term "Excess Benefit" means the receipt of a benefit (reimbursement) by
the Hired Employee under the MYCO Cafeteria Plan in excess of the
employee's contribution for such benefit during the 1999 Plan Year
prior to the Closing Date.
For purposes of this Subsection 2(h)(ii), the term "1999 Plan
Year" shall mean the Plan Year of the Assumed Plans commencing January
1, 1999.
(iii) Seller shall, on or before the Closing Date, cause the
accounts of Hired Employees under the Seller Plan to be fully vested.
As soon as administratively possible, but no later than one hundred and
twenty days after the Closing Date, Seller shall instruct the trustee
under the Seller Plan to cause the transfer of cash, in an amount equal
to the value of the accounts of Hired Employees under the Seller Plan
as of a date chosen by Seller but not more than ten days prior to the
date of such transfer, from the trust under the Seller Plan to the
trust under the Buyer Plan; provided, however, that a participant loan
credited to a Hired Employee's account under the Seller Plan, instead
of being transferred to the trust under the Buyer Plan in cash, shall
be assumed by the trust under the Buyer Plan. Upon receipt of assets
pursuant to this Subsection 2(h)(iii), Buyer shall cause to be
established for each Hired Employee an account in an amount equal to
the value of such Hired Employee's account under the Seller Plan as of
a
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date which is as close to the date of transfer as practicable.
Seller contributions pursuant to the Seller Plan, which have accrued as
of the Closing Date but have not been paid as of the time of transfer
described in this Subsection 2(h)(iii), shall be paid by the Seller to
the trust under the Buyer Plan and shall be credited to the accounts of
Hired Employees under the Buyer Plan. Seller and Buyer shall cooperate
as may be reasonably required with respect to each of the filings,
calculations and other actions necessary to effect the transactions
contemplated by this Subsection 2(h)(iii), including the obtaining of
any governmental approvals required to effect such transfer and
amendments of the Seller and Buyer Plans and related trusts, if
necessary, to effect this Subsection 2(h)(iii).
(iv) Buyer shall cause S-M to assume and discharge all unpaid
vacation pay and time, sick leave and paid holidays accrued by Hired
Employees as of the Closing Date under the Seller vacation plan and
payroll practices.
3. Representations and Warranties of the Sellers. The Sellers jointly
and severally represent and warrant to the Buyer that the statements contained
in this ss.3 are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this ss.3), except as set forth in the disclosure schedule
accompanying this Agreement and initialed by the Parties (the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this ss.3.
(a) Organization of the Sellers. Each Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authorization of Transaction. Each Seller has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of
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directors of each Seller and the Seller Stockholders of each Seller have duly
authorized the execution, delivery, and performance of this Agreement by such
Seller. This Agreement constitutes the valid and legally binding obligation of
each Seller, enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which either of the Sellers is subject or any
provision of the charter or bylaws of either of the Sellers or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any material agreement, contract, lease,
license, instrument, or other arrangement to which either of the Sellers is a
party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets).
Neither of the Sellers needs to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement (including the assignments and assumptions referred to in ss.2
above).
(d) Brokers' Fees. Neither Seller has any Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(e) Title to Assets. Each Seller has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, located on
its premises, or shown on its Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of such
Most Recent Balance Sheet. Without limiting the generality of the foregoing,
each
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Seller has good and marketable title to all of its Acquired Assets, free and
clear of any Security Interest or restriction on transfer.
(f) Subsidiaries. Neither Seller has any Subsidiaries.
(g) Financial Statements. Attached hereto as Exhibit F are the
following financial statements (collectively the "Financial Statements"): (i)
reviewed balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended December 31, 1996 and
December 31, 1997 (the "Most Recent Fiscal Year End") for each Seller; and (ii)
unaudited balance sheets and statements of income, changes in stockholders'
equity, and cash flow (the "Most Recent Financial Statements") as of and for the
nine (9) months ended September 30, 1998 (the "Most Recent Fiscal Month End")
for each Seller. The Financial Statements (including the Notes thereto) have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby, present fairly the financial condition of each
Seller as of such dates and the results of operations of each Seller for such
periods, are correct and complete, and are consistent with the books and records
of each Seller (which books and records are correct and complete).
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of either Seller. Without limiting the generality of the foregoing,
since that date:
(i) neither Seller has sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) neither Seller has entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases,
and licenses) either involving more than $20,000 or outside the
Ordinary Course of Business;
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(iii) no party (including either Seller) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) involving more than $20,000 to which either Seller is a party
or by which either of them is bound;
(iv) neither Seller has imposed any Security Interest upon any
of its assets, tangible or intangible;
(v) neither Seller has made any capital expenditure (or series
of related capital expenditures) either involving more than $20,000 or
outside the Ordinary Course of Business;
(vi) neither Seller has made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans, and
acquisitions) either involving more than $20,000 or outside the
Ordinary Course of Business;
(vii) neither Seller has issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligation either involving
more than $20,000;
(viii) neither Seller has delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) neither Seller has canceled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving more than $20,000 or outside the Ordinary Course of
Business;
(x) neither Seller has granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
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(xi) there has been no change made or authorized in the
charter or bylaws of either Seller;
(xii) neither Seller has declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(xiii) neither Seller has experienced any damage, destruction,
or loss (whether or not covered by insurance) to its property;
(xiv) neither Seller has made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xv) neither Seller has entered into any employment contract
or collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
(xvi) neither Seller has granted any increase in the base
compensation of any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xvii) neither Seller has adopted, amended, modified or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(xviii) neither Seller has made any other change in employment
terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
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(xix) neither Seller has made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business;
(xx) neither Seller has paid any amount to any third party
with respect to any Liability or obligation (including any costs and
expenses such Seller has incurred or may incur in connection with this
Agreement and the transactions contemplated hereby) which would not
constitute an Assumed Liability if in existence as of the Closing;
(xxi) to Sellers' Knowledge, there has not been any other
material occurrence, event, incident, action, failure to act, or
transaction outside the Ordinary Course of Business involving either
Seller; and
(xxii) neither Seller has committed to any of the foregoing.
(i) Undisclosed Liabilities. Neither Seller has any Liability, except
for (i) Liabilities set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) and (ii) Liabilities which have arisen after
the Most Recent Fiscal Month End in the Ordinary Course of Business (none of
which results from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law).
(j) Legal Compliance. Each Seller has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against either of them alleging any failure so to comply.
(k) Tax Matters.
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(i) Each Seller has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by each Seller (whether or not shown on any
Tax Return) have been paid. Neither Seller currently is the beneficiary
of any extension of time within which to file any Tax Return. No claim
has ever been made by an authority in a jurisdiction where either
Seller does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction within the last three (3) years. There
are no Security Interests on any of the assets of each Seller that
arose in connection with any failure (or alleged failure) to pay any
Tax.
(ii) Each Seller has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to
any employee, independent contractor, creditor, stockholder, or other
third party.
(iii) Neither Seller or director or officer (or employee
responsible for Tax matters) of each Seller expects any authority to
assess any additional Taxes for any period for which Tax Returns have
been filed. There is no dispute or claim concerning any Tax Liability
of each Seller either (A) claimed or raised by any authority in writing
or (B) as to which any of the Seller Stockholders and the directors and
officers (and employees responsible for Tax matters) of such Seller has
Knowledge based upon personal contact with any agent of such authority.
ss.3(k) of the Disclosure Schedule lists all federal, state, local, and
foreign income Tax Returns filed with respect to any of each Seller for
taxable periods ended on or after December 31, 1993, indicates those
Tax Returns that have been audited, and indicates those Tax Returns
that currently are the subject of audit. Each Seller has delivered to
the Buyer correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed
against or agreed to by such Seller since January 1, 1994.
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(iv) Neither Seller has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(v) The unpaid Taxes of each Seller (A) did not, as of the
Most Recent Fiscal Month End, exceed the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face
of the Most Recent Balance Sheet (rather than in any notes thereto) and
(B) do not exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and
practice of such Seller in filing its Tax Returns.
(vi) None of the Assumed Liabilities is an obligation to make
a payment that will not be deductible under Code ss.280G. Neither
Seller is a party to any Tax allocation or sharing agreement. Neither
Seller (A) has been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group the common
parent of which was such Seller) or (B) has any Liability for the Taxes
of any Person (other than such Seller) under Treas. Reg. ss.1.1502-6
(or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(l) Real Property.
(i) ss.3(l)(i) of the Disclosure Schedule lists and describes
briefly all real property that either Seller owns or to which either
Seller controls title as the sole beneficiary of the land trust with
American National Bank, as Trustee under trust agreement dated May 15,
1992 and known as Trust No. 115508-37 (the "Land Trust"). A certified
copy of the Land Trust is attached hereto as Exhibit J. With respect to
each such parcel of real property:
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(A) the identified owner has good and marketable
title to the parcel of real property, free and clear of any
Security Interest (other than those to be discharged at
Closing, which are listed in Section 3(e) of the Disclosure
Schedule), easement, covenant, or other restriction, except
for installments of special assessments not yet delinquent and
matters disclosed by the title commitment recorded easements,
covenants, zoning and building laws and building line
restrictions and ordinances and other restrictions each of
which do not materially impair the current use, occupancy, or
value, or the marketability of title, of the property subject
thereto;
(B) there are no pending or, to the Knowledge of any
of the Sellers, threatened condemnation proceedings, lawsuits,
or administrative actions relating to the property or other
matters having a material adverse affect on the current use,
occupancy, or value thereof;
(C) Seller has received no written notice of a
violation of applicable setback requirements, zoning laws, and
ordinances (and, to Sellers' Knowledge, none of the properties
or buildings or improvements thereon are subject to "permitted
non-conforming use" or "permitted non-conforming structure"
classifications);
(D) Seller has not received any written notice
asserting that all facilities have not received all approvals
of governmental authorities (including licenses and permits)
required in connection with the ownership or operation
thereof;
(E) there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to
any party or parties the right of use or occupancy of any
portion of the parcel of real property;
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(F) there are no outstanding options or rights of
first refusal to purchase the parcel of real property, or any
portion thereof or interest therein;
(G) there are no parties (other than a Seller) in
possession of the parcel of real property, other than tenants
under any leases disclosed in ss.3(l)(i) of the Disclosure
Schedule who are in possession of space to which they are
entitled; and
(H) all facilities located on the parcel of real
property are supplied with utilities and other services
necessary for the operation of such facilities as currently
operated.
(ii) ss.3(l)(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to each Seller
(the "Leases"). The Sellers have delivered to the Buyer correct and
complete copies of the Leases listed in ss.3(l)(ii) of the Disclosure
Schedule (as amended to date). Each of the Leases shall be terminated
as of the Closing.
(m) Intellectual Property.
(i) Each Seller owns or has the sole and exclusive right to
use pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary for the operation of the businesses of
such Seller as presently conducted. Each item of Intellectual Property
owned or used by each Seller immediately prior to the Closing hereunder
will be owned or available for use by the Buyer on identical terms and
conditions immediately subsequent to the Closing hereunder. Each Seller
has taken all necessary action to maintain and protect each item of
Intellectual Property that it owns or uses.
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(ii) To Sellers' Knowledge, neither Seller has interfered
with, infringed upon, misappropriated, or otherwise come into conflict
with any Intellectual Property rights of third parties, and none of the
Seller Stockholders and the directors and officers (and employees with
responsibility for Intellectual Property matters) of either Seller has
ever received any charge, complaint, claim, demand, or notice alleging
any such interference, infringement, misappropriation, or violation
(including any claim that either Seller must license or refrain from
using any Intellectual Property rights of any third party). To the
Knowledge of any of the Seller Stockholders and the directors and
officers (and employees with responsibility for Intellectual Property
matters) of such Seller, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of such Seller.
(iii) ss.3(m)(iii) of the Disclosure Schedule identifies each
patent or registration which has been issued to either Seller with
respect to any of its Intellectual Property, identifies each pending
patent application or application for registration which either Seller
has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which either
Seller has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions). Each Seller
delivered to the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as
amended to date). ss.3(m)(iii) of the Disclosure Schedule also
identifies each trade name or unregistered trademark used by either
Seller in connection with any of its businesses. With respect to each
item of Intellectual Property required to be identified in ss.3(m)(iii)
of the Disclosure Schedule:
(A) the appropriate Seller possesses all and sole
right, title, and interest in and to the item, free and clear
of any Security Interest, license, or other restriction;
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(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the Knowledge of any of the Seller Stockholders and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of the Sellers, is threatened
which challenges the legality, validity, enforceability, use,
or ownership of the item; and
(D) neither Seller has ever agreed to indemnify any
Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iv) ss.3(m)(iv) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that either
Seller uses pursuant to license, sublicense, agreement, or permission.
The Sellers have delivered to the Buyer correct and complete copies of
all such licenses, sublicenses, agreements, and permissions (as amended
to date). With respect to each item of Intellectual Property required
to be identified in ss.3(m)(iv) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and
in full force and effect;
(B) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the
consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2
above);
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(C) no party to the license, sublicense, agreement,
or permission is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or
acceleration thereunder;
(D) no party to the license, sublicense, agreement,
or permission has repudiated any provision thereof;
(E) with respect to each sublicense, the
representations and warranties set forth in subsections (A)
through (D) above are true and correct with respect to the
underlying license;
(F) the underlying item of Intellectual Property is
not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual
Property; and
(H) neither Seller has granted any sublicense or
similar right with respect to the license, sublicense,
agreement, or permission.
(v) To the Knowledge of the Seller Stockholders and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of the Sellers, neither Seller will
interfere with, infringe upon, misappropriate, or otherwise come into
conflict with, any Intellectual Property rights of third parties as a
result of the continued operation of its businesses as presently
conducted.
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(n) Tangible Assets. Each Seller owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of its
business as presently conducted. Each such tangible asset material to the
operation of the business of either Seller is free from defects, has been
maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear), and is suitable for the
purposes for which it presently is used.
(o) Inventory. The inventory of each Seller consists of raw materials
and supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged,
or defective, subject only to the reserve for inventory write-down set forth on
the face of the Most Recent Balance Sheet (rather than in any Notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of such Seller.
(p) Contracts. ss.3(p) of the Disclosure Schedule lists the following
contracts and other agreements to which either Seller is a party:
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $20,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, result in a loss to either Seller, or involve consideration in
excess of $20,000;
(iii) any agreement concerning a partnership or joint venture;
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(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of
$20,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement involving any of the Seller Stockholders
and their Affiliates (other than the Sellers);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $70,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xi) any agreement under which a default exists and the
consequences of a default or termination could have a material adverse
effect on the business, financial condition, operations, results of
operations, or future prospects of either Seller; or
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(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $20,000.
The Sellers have delivered to the Buyer a correct and complete copy of each
written agreement listed in ss.3(p) of the Disclosure Schedule (as amended to
date) and a written summary setting forth the terms and conditions of each oral
agreement referred to in ss.3(p) of the Disclosure Schedule. With respect to
each such agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect, in accordance with its terms and conditions; (B)
Seller is not, and to Sellers' Knowledge, any other party is not in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (C) Seller has not, and to Sellers'
Knowledge, no other party has repudiated any provision of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts receivable of
each Seller are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of such Seller.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of either Seller.
(s) Insurance. ss.3(s) of the Disclosure Schedule sets forth a
Certificate of Insurance of Sellers, providing Sellers' property, casualty,
liability, and workers' compensation coverage and bond and surety arrangements
to which either Seller has been a party, a named insured, or otherwise the
beneficiary of coverage.
Each Seller has been covered during the past five (5) years by insurance in
scope and amount customary and reasonable for the business in which it has
engaged during the aforementioned
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period. ss.3(s) of the Disclosure Schedule describes any self-insurance
arrangements affecting either Seller.
(t) Litigation. ss.3(t) of the Disclosure Schedule sets forth each
instance in which either Seller (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to Sellers'
Knowledge, is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in ss.3(t) of the Disclosure Schedule could result in
any material adverse change in the business, financial condition, operations,
results of operations, or future prospects of either Seller.
(u) Product Warranty. To Sellers' Knowledge, each product manufactured,
sold, leased, or delivered by either Seller has been in substantial conformity
with all applicable contractual commitments and, to Sellers' Knowledge, there is
no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability for replacement or repair thereof or other damages in
connection therewith, subject only to the reserve for product warranty claims
set forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of such Seller. To Seller's
Knowledge, no product manufactured, sold, leased, or delivered by either Seller
is subject to any guaranty, warranty, or other written indemnity beyond the
applicable standard terms and conditions of sale or lease. ss.3(u) of the
Disclosure Schedule includes copies of the standard terms and conditions of sale
or lease for each Seller (containing applicable guaranty, warranty, and
indemnity provisions).
(v) Product Liability. To Sellers' Knowledge, neither Seller has any
Liability (and, to Sellers' Knowledge, there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against such Seller giving rise to any
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Liability) arising out of any injury to individuals or property as a result of
the ownership, possession, or use of any product manufactured, sold, leased, or
delivered by either Seller.
(w) Employees. Except as set forth on 3(w) of the Disclosure Schedule:
(i) To Sellers' Knowledge, no executive, key employee, or
group of employees of the Seller has now or ever had any plans to
terminate employment with either Seller.
(ii) To Sellers' Knowledge, there is not pending or,
threatened any strike, walkout or other work stoppage or any union
organizing effort relating to the Sellers' employees.
(iii) With respect to their employees, Sellers, to their
Knowledge, are in compliance with all Federal and state laws with
respect to employment and employment practices, terms and conditions of
employment, and wages and hours, and are not engaged in any unfair
labor practice, and there is no unfair labor practice complaint against
the Sellers with respect to their employees pending before the National
Labor Relations Board.
(iv) With respect to Sellers' employees, no organized labor
representation question exists and no grievance or any arbitration
proceeding is pending and no claim therefore exists.
(v) Sellers have not experienced any labor stoppage, concerted
labor activity, or other material labor difficulty with respect to
their employees during the last three years.
(vi) No current or former employee of Sellers has a formal or
informal claim against Sellers, which is currently pending, on account
of or for:
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1. overtime pay, other than overtime pay for the current
period;
2. wages or salary for any period other than the current
payroll period;
3. vacation, time off or pay in lieu of vacation or
time off, other than that earned with respect to the current
fiscal year; or
4. any violation of any Federal, state or local
antidiscrimination statute, breach of terms of employment or
wrongful discharge whether arising under any contract or
statute, or any tort.
(vii) Sellers have no outstanding commitment or agreement to
effect any general wage or salary increase for their employees, except
in the Ordinary Course of Business, have not increased the salary or
wages of any of their employees since the Most Recent Financial
Statements and have no plan or commitment to amend any Employee Benefit
Plan.
(viii) Except for persons hired on a short-term, temporary
basis, none of the persons employed by the Sellers is provided to
Sellers under a contract with a third party.
(ix) With respect to their employees, Sellers, to their
Knowledge, are not in violation in any material respect of the
Americans with Disabilities Act of 1990 or any law, regulation or order
relating to employment discrimination or occupational safety, nor have
Sellers received any unresolved complaint from any Federal or state
agency alleging violations of any such laws or regulations, nor are
Sellers subject to any orders or consent decrees remedying any such
prior violation.
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(x) Employee Benefits.
(i) ss.3(x) of the Disclosure Schedule lists each Employee
Benefit Plan that either Seller maintains or to which either Seller
contributes.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form (but only
to the extent the governing plan document is required to
comply in form and content prior to the Closing Date with
applicable legal requirements) and in operation in all
material respects with the applicable requirements of ERISA,
the Code, and other applicable laws.
(B) All reports and descriptions required to be filed
with governmental agencies or distributed to employees, plan
participants or their beneficiaries (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's, and Summary
Plan Descriptions) have been filed or distributed
appropriately with respect to each such Employee Benefit Plan.
The requirements of Part 6 of Subtitle B of Title I of ERISA
and of Code ss.4980B have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
(C) All contributions (including all employer
contributions and employee salary reduction contributions) to
an Employee Benefit Plan which is an Employee Pension Benefit
Plan which are due prior to the Closing Date have been or will
be paid to such Plan prior to such date and all contributions
for any period ending on or before the Closing Date which are
not yet due have been paid to each such Employee Pension
Benefit Plan or accrued in accordance with the past custom and
practice of the Sellers. All premiums or other payments for
all periods ending on or before the
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Closing Date have been paid with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
(D) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the requirements of a
"qualified plan" under Code ss.401(a) and has received a
favorable determination letter from the Internal Revenue
Service covering all legal requirements which must be in the
governing plan document prior to the Closing Date.
(E) The Sellers do not presently sponsor, and have
never previously sponsored an Employee Benefit Plan which is a
defined benefit pension plan within the meaning of Section
3(35) of ERISA.
(F) The Sellers have delivered to the Buyer, for each
Employee Benefit Plan, correct and complete copies of the plan
documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue
Service, the three most recent Form 5500 Annual Reports, and
all related trust agreements, insurance contracts, and other
funding agreements which implement each such Employee Benefit
Plan.
(ii) With respect to each Employee Benefit Plan that either
Seller maintains or ever has maintained or to which either of them
contributes, ever has contributed, or ever has been required to
contribute:
(A) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been, prior to the
Closing Date, completely or partially terminated or been the subject of
a Reportable Event as to which notices would be required to be filed
with the PBGC. No proceeding by the PBGC to terminate any such Employee
Pension Benefit Plan (other than any Multiemployer Plan) has been
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instituted or, to the Knowledge of any of the Seller
Stockholders and the directors and officers (and employees with
responsibility for employee benefits matters) of the Sellers
threatened.
(B) Prior to the Closing Date, there have been no Prohibited
Transactions with respect to any such Employee Benefit Plan. In the
case of any Fiduciary which is a Seller or any officer or employee of a
Seller, no such Fiduciary has any Liability for breach of fiduciary
duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit
Plan. In the case of any Fiduciary other than a Seller or any officer
or employee of a Seller, neither the Sellers nor any of the Seller
Stockholders have any Knowledge of any Liability of such Fiduciary for
breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any
such Employee Benefit Plan. No action, suit, proceeding, hearing, or
investigation with respect to the administration or the investment of
the assets of any such Employee Benefit Plan (other than routine claims
for benefits) is pending or, to the Knowledge of any of the Seller
Stockholders and the directors and officers (and employees with
responsibility for employee benefits matters) of the Sellers
threatened. None of the Seller Stockholders and the directors and
officers (and employees with responsibility for employee benefits
matters) of Sellers has any Knowledge of any Basis for any such action,
suit, proceeding, hearing, or investigation.
(C) Neither Seller has incurred, and none of the Seller
Stockholders and the directors and officers (and employees with
responsibility for employee benefits matters) of the Sellers has any
reason to expect that either Seller will incur; any Liability to the
PBGC (other than PBGC premium payments) or otherwise under Title IV of
ERISA (including
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any withdrawal Liability) or under the Code with respect to
any such Employee Benefit Plan which is an Employee Pension Benefit
Plan other than any liability for routine payments, such as user fees
in connection with the request for a favorable determination as to the
tax qualified status of an Employee Pension Benefit Plan.
(iii) Neither Seller nor any ERISA Affiliate contributes to,
ever has contributed to, or ever has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal
liability) under any Multiemployer Plan.
(iv) Neither Seller nor any ERISA Affiliate has any liability
under Title IV of ERISA with respect to the termination of any Employee
Pension Benefit Plan or liability under Section 4063 of Title IV of
ERISA.
(v) To the knowledge of Seller, Seller Stockholders, and
Seller Directors, officers and employees responsible for employee
benefit matters, no event has occurred which could result in a material
increase in the premium costs of the MYCO Medical Plan and/or the MYCO
Cafeteria Plan in excess of premium costs as of the Closing Date.
(vi) Seller has never sponsored an Employee Welfare Benefit
Plan which provides medical or life insurance benefits, other than
otherwise required by Part 6 of Subtitle B of Title I of ERISA beyond
an employee's employment with Seller.
(y) Guaranties. Neither Seller is a guarantor or otherwise is liable
for any Liability or obligation (including indebtedness) of any other Person.
(z) Environment, Health, and Safety.
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(i) To Sellers' Knowledge, each of the Sellers and its
predecessors has complied with all Environmental, Health, and Safety
Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply. Without limiting the
generality of the preceding sentence, to Sellers' Knowledge, each of
the Sellers and its predecessors has obtained and been in compliance
with all of the terms and conditions of all permits, licenses, and
other authorizations which are required under, and has complied with
all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables
which are contained in, all Environmental, Health, and Safety Laws.
(ii) To Sellers' Knowledge, neither Seller has any Liability
(and, to Sellers' Knowledge, neither Seller has handled or disposed of
any substance, arranged for the disposal of any substance, exposed any
employee or other individual to any substance or condition, or owned or
operated any property or facility in any manner that could, to Sellers'
Knowledge, form the Basis for any material present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against either Seller giving rise to any Liability) for damage
to any site, location, or body of water (surface or subsurface), for
any illness of or personal injury to any employee or other individual,
or for any reason under any Environmental, Health, and Safety Law.
(iii) To Sellers' Knowledge, all properties and equipment used
in the business of the Sellers have been free of asbestos, PCB's,
methylene chloride, trichloroethylene, 1,2-trans-dichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances or such
materials have been used in compliance with applicable laws.
(aa) Certain Business Relationships With the Sellers. None of the
Seller Stockholders and their Affiliates has been involved in any business
arrangement or relationship
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with either of the Sellers within the past twelve (12) months, and none of the
Seller Stockholders and their Affiliates owns any asset, tangible or intangible,
which is used in the business of either of the Sellers.
(ab) Disclosure. The representations and warranties contained in this
ss.3 do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this ss.3 not misleading.
(ac) Investment. Each Seller (i) understands that the shares of Buyer
Stock to be delivered to Sellers hereunder have not been, and will not be,
registered under the Securities Act, or under any state securities laws, and are
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (ii) is acquiring the Buyer
Stock solely for its own account for investment purposes, and not with a view to
the distribution thereof (except to the Seller Stockholders), (iii) is a
sophisticated investor with knowledge and experience in business and financial
matters, (iv) has received certain information concerning the Buyer and has had
the opportunity to obtain additional information as desired in order to evaluate
the merits and the risks inherent in holding the Buyer Stock, (v) is able to
bear the economic risk and lack of liquidity inherent in holding the Buyer
Stock, and (vi) is an Accredited Investor for the reasons set forth in ss.3(ac)
of the Disclosure Schedule.
4. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Sellers that the statements contained in this ss.4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this ss.4),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this ss.4.
(a) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
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(b) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Buyer is a party or by which it is bound or to which any of its assets is
subject. The Buyer does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement (including the assignments and assumptions referred to in ss.2
above).
(d) Brokers' Fees. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Sellers could become
liable or obligated.
(e) Buyer Plan. The Buyer Plan complies in all material respects with
the applicable requirements of ERISA, meets the requirement of a "qualified
plan" under Section 401(a) of the Code and has received a favorable
determination letter from the Internal Revenue Service to this effect. No act or
omission has occurred which would cause the loss of qualified status for the
Buyer Plan under Code section 401(a). All required reports and descriptions
(including Form 5500 Annual Reports, summary annual reports and the summary plan
description) have been appropriately and timely filed and distributed with
respect to the Buyer Plan. There
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have been no prohibited transactions as defined in Section 406 of Title I of
ERISA with respect to the Buyer Plan. No litigation concerning the Buyer Plan is
pending or, to the Buyer's knowledge, threatened, nor, to the Knowledge of the
Buyer, is there outstanding or threatened any complaint to the Department of
Labor concerning the Buyer Plan. Neither the Buyer nor its affiliates nor any of
their officers, employees or any other Fiduciary has any liability for failure
to comply with ERISA, the Code or any other law for any action or failure to act
in connection with the administration of investment of the Buyer Plan. The Buyer
has delivered to the Sellers, for the Buyer Plan, correct and complete copies of
the plan and trust documents, the summary plan description, the most recent
determination letter received from the Internal Revenue Service, the three most
recent Form 5500 reports, the three most recent audited financial reports, and
all insurance contracts and funding agreements which implement the Buyer Plan.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary in order to consummate and
make effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in ss.7
below).
(b) Notices and Consents. Each Seller will give any notices to third
parties, and each Seller will use its reasonable best efforts to obtain any
third party consents, that the Buyer may request in connection with the matters
referred to in ss.3(c) above. Each of the Parties will give any notices to, make
any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in ss.3(c) and ss.4(c) above. Without
limiting the generality of the foregoing, each of the Parties will file any
Notification and Report Forms and related material that it may be required to
file with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the Hart-Scott-Rodino Act, will use its
reasonable best
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efforts to obtain an early termination of the applicable waiting period, and
will make any further filings pursuant thereto that may be necessary in
connection therewith.
(c) Operation of Business. Neither Seller will engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, neither Sellers will
(i) declare, set aside, or pay any dividend or make any distribution with
respect to its capital stock or redeem, purchase, or otherwise acquire any of
its capital stock, (ii) pay any amount to any third party with respect to any
Liability or obligation (including any costs and expenses such Seller have
incurred or may incur in connection with this Agreement and the transactions
contemplated hereby) which would not constitute an Assumed Liability if in
existence as of the Closing, and (iii) otherwise engage in any practice, take
any action, or enter into any transaction of the sort described in ss.3(h)
above.
(d) Preservation of Business. Each Seller will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
(e) Reasonable Access. Each Seller will permit representatives of the
Buyer to have reasonable access upon reasonable notice to all premises,
properties, personnel, books, records (including Tax records), contracts, and
documents of or pertaining to such Seller.
(f) Notice of Developments. Each Party will give prompt written notice
to the other Parties of any material adverse development causing a breach of any
of its own representations and warranties in ss.3 and ss.4 above. No disclosure
by any Party pursuant to this ss.5(f), however, shall be deemed to prevent or
cure any misrepresentation, breach of warranty, or breach of covenant.
(g) Exclusivity. Neither Seller will (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets, of either Seller (including any
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acquisition structured as a merger, consolidation, or share exchange) or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. Each Seller will notify the Buyer immediately if any Person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.
(h) Title Insurance. The Sellers will obtain, at Buyer's cost, in
preparation for the Closing an ALTA Owner's Policy of Title Insurance Form
B-1994, issued by Chicago Title Insurance Company, in such amount as that
portion of the Purchase Price allocated to the real estate and improvements
insuring title to such real property to be in the Buyer as of the Closing
(subject only to the title exceptions described above in ss.3(l)(i) and in
ss.3(l)(i) of the Disclosure Schedule). Each title insurance policy delivered
under ss.5(h) shall (A) insure title to the real property and all recorded
easements benefitting such real property, (B) contain an "extended coverage
endorsement" insuring over the general exceptions contained customarily in such
policies, (C) contain an ALTA Zoning Endorsement 3.1 (or equivalent), (D)
contain an endorsement insuring that the real property described in the title
insurance policy is the same real estate as shown on the Survey delivered with
respect to such property and (E) contain an endorsement insuring that each
street adjacent to the real property is a public street and that there is direct
and unencumbered pedestrian and vehicular access to such street from the real
property.
(i) Surveys. With respect to each parcel of real property that either
Seller owns and as to which a title insurance policy is to be procured pursuant
to ss.5(h) above, the Sellers will procure in preparation for the Closing a
current survey of the real property certified to the Buyer, prepared by a
licensed surveyor and conforming to current ALTA Minimum Detail Requirements for
Land Title Surveys, disclosing the location of all improvements, recorded and
visible easements, party walls, sidewalks, roadways, utility lines, and other
matters shown customarily on such surveys, and showing access affirmatively to
public streets and roads (the "Survey"). The Survey shall not disclose any
survey material defect or encroachment from or onto the real property which has
not been cured or insured over prior to the Closing.
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6. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.3 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) each Seller shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) each Seller shall have procured all of the third party
consents specified in ss.5(b) above, all of the title insurance
commitments, policies, and riders specified in ss.5(h) above, and all
of the surveys specified in ss.5(i) above;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (C) affect adversely the right of the Buyer to own the
Acquired Assets, to operate the former businesses of the Sellers (and
no such injunction, judgment, order, decree, ruling, or charge shall be
in effect);
(v) each Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above
in ss.6(a)(i)-(iv) is satisfied in all respects;
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(vi) Buyer shall have entered into side agreements in form and
substance as set forth in Exhibits G-1, G-2 and G-3, respectively,
attached hereto with Robert Yedor, Hugh Shannon and John Quinn and the
same shall be in full force and effect;
(vii) the Buyer shall have received from counsel to the
Sellers an opinion in form and substance as set forth in Exhibit H
attached hereto, addressed to the Buyer, and dated as of the Closing
Date;
(viii) all actions to be taken by the Sellers in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this ss.6(a) if it executes a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.4 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
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(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(iv) the Buyer shall have delivered to the Sellers a
certificate to the effect that each of the conditions specified above
in ss.6(b)(i)-(iii) is satisfied in all respects;
(v) Buyer shall have entered into side agreements in form and
substance as set forth in Exhibits G-1, G-2 and G-3, respectively, with
Robert Yedor, Hugh Shannon and John Quinn and the same shall be in full
force and effect;
(vi) the Sellers shall have received from counsel to the Buyer
an opinion in form and substance as set forth in Exhibit I attached
hereto, addressed to the Sellers, and dated as of the Closing Date; and
(vii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Sellers.
(viii) Robert Yedor, the Seller Stockholder being released
from all guarantees relating to any financing or other obligation of
Sellers.
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(ix) the Buyer delivering at Closing to Sellers the executed
of Industrial Revenue Bonds Assumption Agreement, in the form set forth
on Exhibit K.
The Sellers may waive any condition specified in this ss.6(b) if they execute a
writing so stating at or prior to the Closing.
7. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Sellers on or before December 31, 1998 if the Buyer is
not satisfied with the results of its continuing business, legal, and
accounting due diligence regarding the Sellers;
(iii) the Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing (A) in the event
either Seller have breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the Buyer
has notified the Sellers of the breach, and the breach has continued
without cure for a period of fifteen (15) days after the notice of
breach or (B) if the Closing shall not have occurred on or before
February 1, 1999, by reason of the failure of any condition precedent
under ss.6(a) hereof (unless the failure results primarily from the
Buyer itself breaching any representation, warranty, or covenant
contained in this Agreement); and
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(iv) the Sellers may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (A) in the
event the Buyer has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the
Sellers have notified the Buyer of the breach, and the breach has
continued without cure for a period of fifteen (15) days after the
notice of breach or (B) if the Closing shall not have occurred on or
before February 1, 1999, by reason of the failure of any condition
precedent under ss.6(b) hereof (unless the failure results primarily
from a Sellers breaching any representation, warranty, or covenant
contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to ss.7(a) above, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party (except
for any Liability of any Party then in breach).
8. Miscellaneous.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder as and to the extent provided in the Agreement
With Seller Stockholders.
(b) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that Buyer may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the Buyer
will use its reasonable best efforts to advise the Sellers prior to making the
disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
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(d) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party; provided, however, that the Buyer may (i) assign any or all
of its rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Sellers:
-----------------
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MYCO, Inc.
RY, Inc.
1122 Milford Avenue
Rockford, Illinois 61109
Attn: Robert Yedor, President
Copy to:
-------
Schwartz & Freeman
401 N. Michigan Avenue, Suite 1900
Chicago, Illinois 60611
Attn: Lewis Greenblatt, Esq.
If to Buyer:
-----------
The Source Information Management Company
11644 Lilburn Park Road
St. Louis, Missouri 63146
Attn: S. Leslie Flegel, Chairman & CEO
Copy to:
-------
Armstrong Teasdale LLP
One Metropolitan Square
St. Louis, Missouri 63102
Attn: John L. Gillis, Jr., Esq.
Prior to Closing, any Party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or
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<PAGE> 54
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any Party may change the address
to which notices, requests, demands, claims, and other communications hereunder
are to be delivered by giving the other Parties notice in the manner herein set
forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Illinois without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Illinois or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Illinois.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Sellers. The Sellers may consent to any such amendment at any time
prior to the Closing with the prior authorization of their respective boards of
directors. No waiver by any Party of any default, misrepresentation, or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Buyer, the Sellers, and the Seller
Stockholders will bear his or its own costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby, except for Buyer's payment of Sellers' 1997 and 1998 audit
costs upon the Closing of this Transaction or if Buyer fails to close this
Transaction in breach of this Agreement. Each Seller also agrees that it has not
paid any
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amount to any third party, and will not pay any amount to any third party until
after the Closing, with respect to any of the costs and expenses of the Sellers
and the Seller Stockholders (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
(m) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(n) Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matte, in addition to any other remedy to which it may be
entitled, at law or in equity.
(o) Bulk Transfer Laws. The Buyer acknowledges that the
Sellers will not comply with the provisions of any bulk transfer laws of any
jurisdiction in connection with the transactions contemplated by this Agreement.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
THE SOURCE INFORMATION MANAGEMENT COMPANY
/s/ S. Leslie Flegel
By:___________________________________________
S. Leslie Flegel
Chairman and Chief Executive Officer
MYCO, INC.
/s/ Robert Yedor
By:___________________________________________
Robert Yedor
President
RY, INC.
/s/ Robert Yedor
By:___________________________________________
Robert Yedor
President
52
<PAGE> 57
A list briefly identifying the contents of all omitted schedules and exhibits to
the Asset Purchase Agreement (the "Agreement") dated as of February 26, 1999, by
and between The Source Information Management Company ("Registrant"), MYCO, Inc.
and RY, Inc. appears in the Table of Contents to the Agreement. Registrant will
furnish supplementally a copy of any omitted schedule or exhibit to the
Securities and Exchange Commission upon request.
<PAGE> 1
AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT TO ASSET PURCHASE AGREEMENT entered into as of February
26, 1999 (this "Amendment"), by and among THE SOURCE INFORMATION MANAGEMENT
COMPANY, a Missouri corporation (the "Buyer"), MYCO, INC., an Illinois
corporation, and RY, INC., an Illinois corporation (MYCO, Inc. and RY, Inc.
referred to collectively as "Sellers" and individually as a "Seller"). The Buyer
and the Sellers are referred to collectively herein as the "Parties."
WHEREAS, the Parties have executed an Asset Purchase Agreement dated as
of February 19, 1999 (the "Purchase Agreement"); and
WHEREAS, the Parties desire to amend the terms of the Purchase
Agreement.
Now, therefore, in consideration of the mutual promises herein made,
and in consideration of the representations, warranties, and covenants contained
in the Purchase Agreement, the Parties agree as follows:
1. Section 2(c) of the Purchase Agreement shall be deleted in its
entirety and replaced with the following:
(c) Initial Purchase Price. The Buyer agrees to pay to the Sellers at
the Closing $12 million in cash and 134,615 shares of Buyer Stock (the "Initial
Purchase Price"). The Initial Purchase Price shall be allocated between Sellers
as provided in Exhibit B.
2. Section 2(f) of the Purchase Agreement shall be deleted in its
entirety and replaced with the following:
(f) Additional Purchase Price. MYCO will be entitled to receive as
additional consideration hereunder (the "Additional Purchase Price") 250,000
shares of Buyer Stock if Source-Myco, Inc.'s earnings before interest, taxes,
depreciation and amortization ("EBITDA") for the twelve (12) month period
immediately following the Closing hereunder (the "One Year EBITDA") exceeds Four
Million Dollars ($4,000,000). In the event that the One Year EBITDA does not
exceed Four Million Dollars ($4,000,000), the Additional Purchase Price shall be
reduced by 150,000 shares of Buyer Stock and by one (1) additional share of
Buyer Stock for each Ten Dollars ($10) by which One Year EBITDA is less than
Four Million Dollars ($4,000,000); provided, however, that the Additional
Purchase Price will not be reduced to less than zero. For purposes of
calculating One Year EBITDA, (i) if products are transferred from MYCO to the
Buyer or a subsidiary of the Buyer and sold by the transferee to a consumer,
MYCO will be credited with the selling price at which such products are sold to
the consumer rather than with the inter-company transfer price, and (ii) if
front-end fixtures are sold by the Buyer or any subsidiary of the Buyer to any
of the retailers listed on Schedule A attached hereto for use at a location and
for a purpose to which and for which MYCO had previously sold front-end fixtures
in response to an order given to MYCO by the Buyer, MYCO will be credited with
<PAGE> 2
an amount equal to the EBITDA directly attributable to that sale by the entity
selling such fixtures.
Buyer shall provide MYCO, within forty-five days after the expiration
of the twelve (12) calendar month (March, 1999 through February 2000) period
described above, with a copy of Source-Myco's financial statements prepared
(except as provided in the preceding paragraph) in accordance with Source-Myco,
Inc.'s customary accounting practices, which shall comply with generally
accepted accounting principles ("GAAP") (and which practices, unless they are
not in accordance with GAAP, MYCO shall not have the right to object to),
including an EBITDA schedule, for the twelve (12) month period immediately
following the Closing hereunder (the "Calculation"). If MYCO notifies Buyer in
writing that it accepts the Calculation, or if MYCO fails to object thereto in
writing on or prior to the 15th day after the date on which the Calculation is
delivered to it, the Calculation shall be deemed to have been accepted by MYCO,
and Buyer shall deliver to MYCO the number of shares of Buyer Stock representing
the Additional Purchase Price.
If MYCO, prior to the 15th day after delivery to it of the Calculation,
delivers a written objection thereto to Buyer (subject to the condition on
objection contained in the preceding paragraph) and if the Parties are unable to
agree to the Calculation within fifteen (15) days after such written objection,
the Parties shall retain the services of an independent accounting firm of
national reputation (the "Auditor") to determine the amount of the Additional
Purchase Price. If the Parties are unable to agree on selection of the Auditor,
the Auditor shall be selected by the independent accountants then performing
audit services for the Buyer. Buyer and MYCO shall each bear 50% of the fees and
other expenses of the Auditor. All Parties shall cooperate with the Auditor and
provide it with all records and documentation the Auditor may reasonably request
in order to determine the Additional Purchase Price. The determination of the
Auditor shall be final and binding on all Parties.
3. Exhibit E to the Purchase Agreement, titled "EBIDTA Schedule" shall
be deleted in its entirety. Any reference to Exhibit E in the Purchase Agreement
shall also be deleted.
4. All other terms and provisions of the Purchase Agreement shall
remain in full force and effect.
[Signature Page Follows]
<PAGE> 3
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
The Source Information Management Company
/s/ S. Leslie Flegel
By:_____________________________________________
S. Leslie Flegel
Chairman and Chief Executive Officer
MYCO, Inc.
/s/ Robert Yedor
By:_____________________________________________
Robert Yedor
President
RY, Inc.
/s/ Robert Yedor
By:_____________________________________________
Robert Yedor
President
