EXHIBIT 99.01
EUROPEAN MICRO HOLDINGS, INC.
0000 X. X. 000 XXXXXX, XXXX X-00
XXXXX, XXXXXXX 00000
May 5, 1999
American Surgical Supply Corp. of Florida
0000 X. X. 000 Xxxxxx, Xxxx X-00
Xxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx, Xx.
Gentlemen:
This letter confirms the intent of European Micro Holdings, Inc., a Nevada
corporation (the "Buyer"), to acquire all of the outstanding capital stock (the
"AMCC Shares") of American Surgical Supply Corp. of Florida d/b/a American Micro
Computer Center, a Florida corporation ("AMCC"), from the shareholders named on
the signature page hereto (each a "Shareholder" and collectively the
"Shareholders").
1. Purchase Price. The Buyer shall purchase from the Shareholders all of
the AMCC Shares in exchange for cash or newly-issued shares of common stock, par
value $0.01 per share, of the Buyer (the "Buyer's Shares"). The purchase price
for the AMCC Shares shall be equal to the sum of (the "Purchase Price"):
a. Book Value Amount (as defined herein); plus
b. 1998 Normalized Earnings Payment Amount (as defined herein); plus
c. the Earn-Out Amount (as defined herein).
2. Certain Definitions.
a. "Book Value Amount" means an amount equal to AMCC's shareholder's
equity (stated capital, paid-in surplus and retained earnings) as of the last
day of the month immediately prior to Closing (as defined herein). The Book
Value Amount shall be determined as provided herein and in accordance with
generally accepted accounting principles ("GAAP"), and shall be based on the
financial statements of AMCC for the applicable period, as audited (or reviewed
and accepted) by Xxxxx's independent certified public accountants. The Book
Value Amount shall be adjusted as set forth in Section 5 hereof.
American Surgical Supply Corp. of Florida
May 5, 1999
Page 2
b. "1998 Normalized Earnings Payment Amount" means two (2)times the
1998 after-tax earnings of AMCC as adjusted by adding back non-recurring items
and subtracting an assumed tax rate of 34%, all as set forth on Exhibit "A"
hereto.
c. The "Earn-Out Amount" means the sum of (i) two (2) times the
After-Tax Earnings (as defined herein) of AMCC (the "First Earn-Out Amount") in
the twelve (12) month calendar period ended December 31, 1999 (the "First
Earn-Out Period") and (ii) two (2) times the After-Tax Earnings of AMCC (the
"Second Earn-Out Amount") in the twelve (12) month calendar period ended
December 31, 2000 (the "Second Earn-Out Period").
d. "After-Tax Earnings" means net income after taxes for AMCC computed
as provided herein and otherwise in accordance with GAAP, and shall be based on
the financial statements of AMCC for the applicable period, as audited (or
reviewed and accepted) by Xxxxx's independent certified public accountants. In
determining After-Tax Earnings, AMCC's net earnings shall be reduced by the
adjustments described in Section 5 hereof. The Buyer shall cause its accountants
to complete their audit (or review) of AMCC's financial statements as soon as
practicable after the end of each Earn-Out Period.
e. "Per Share Value" means the average closing price for the Buyer's
Shares on the Nasdaq Stock Market for the thirty (30) trading days ending on the
last trading day before the date of issuance of the Buyer's Shares in question.
3. Payment of Indebtedness. Within thirty (30) days of the Closing, the
Buyer shall pay and satisfy the Indebtedness (as defined herein). For the
purposes hereof, the "Indebtedness" means the amounts specified on and payable
to the persons identified on Exhibit "B" hereto.
4. Manner of Payment of the Purchase Price. The Purchase Price shall be
payable as follows: (a) at Closing, an amount equal to the sum of (i) Book Value
Amount, plus (ii) 1998 Normalized Earnings Payment Amount (collectively, the
"First Installment"); (b) within ninety (90) days of the end of the First
Earn-Out Period, the First Earn-Out Amount (the "Second Installment"); and (c)
within ninety (90) days of the end of the Second Earn-Out Period, an amount
equal to the Second Earn-Out Amount (the "Third Installment"). The First
Installment shall be paid in immediately available funds. The Second Installment
and Third Installment shall, at the option of the Buyer, be paid in cash or
Buyer's Shares, or any combination thereof. The number of Buyer's Shares to be
issued in payment of any portion of the Purchase Price shall be equal to: (a)
the portion of the Purchase Price payable in Buyer's Shares, divided by (b) the
Per Share Value (as defined herein); PROVIDED that in the event the Buyer elects
to pay any portion of the Purchase Price in Buyer's Shares, then the
Shareholders shall within fifteen (15) days of the receipt of the Buyer's Shares
arrange to sell such shares in approximately equal amounts over the next forty
(40) succeeding trading days. In the event that the sale of the Buyer's Shares
American Surgical Supply Corp. of Florida
May 5, 1999
Page 3
by the Shareholders results in net proceeds of less than the amount of either
the Second Installment or the Third Installment (as applicable), then the Buyer
shall pay to the Shareholders the difference in cash within twenty eight (28)
days of being notified of the amount of any shortfall.
5. Adjustments to Book Value. Book Value shall be reduced by an amount
equal to the difference between (a) the sum of any accounts receivable (or any
portion thereof) identified on the financial statements of AMCC as of the last
day of the month immediately prior to Closing which are not collected in full,
without any set-off, within one hundred fifty (150) days after Closing, plus any
inventory identified on the financial statements of AMCC as of the last day of
the month immediately prior to Closing not sold by AMCC within two hundred forty
(240) days after Closing for an amount at least equal to its book value, and (b)
any applicable reserves as of the last day of the month immediately prior to
Closing. Any account receivable or inventory which results in a reduction in
Book Value under this Section 5 shall be assigned to the Shareholders upon
payment by the Shareholders to Buyer of the amount due to the Buyer. Payments by
the Shareholders of any adjustments to the Book Value under this Section 5 shall
be paid in cash on the applicable determination date and unpaid amounts shall
bear interest at the rate of 8% per annum. Any unpaid balance shall be set off
against any installments due to Shareholders under Section 4 hereof.
6. Costs. Each party agrees to pay, without right of reimbursement from the
other party and regardless of whether or not the transaction is consummated, the
costs incurred by it in connection with this transaction, including legal fees
and other costs incidental to the negotiation of the terms of the transaction
and the preparation of related documentation. Each party represents to the
others that it has dealt with no finder or broker in connection with this
transaction. The Buyer agrees to pay any costs of obtaining an opinion regarding
the fairness of this transaction to the Buyer and its shareholders. Each party
will indemnify and hold the others harmless from any loss, liability or expense
(including, without limitation, legal fees) resulting from the indemnifying
party's breach of the representations and agreements contained in this Section
6.
7. Conditions Precedent to Closing. The Agreement (as defined in Section 15
hereof) shall contain such conditions precedent as required by Buyer in its sole
discretion, including but not limited to (i) amendment of AMCC's existing credit
arrangements to extend the maturity date for a period of one year from date of
closing, at the same interest rate and with right of prepayment without penalty,
(ii) the execution of Employment Agreements on terms satisfactory to Buyer by
such "key" employees as designated by Buyer, (iii) receipt of all required
consents with respect to all agreements designated as "material" by Xxxxx and
(iv) receipt of an opinion from an investment banking firm satisfactory to the
American Surgical Supply Corp. of Florida
May 5, 1999
Page 4
Buyer in its sole discretion stating that the transaction taken as a whole is
fair from a financial point of view to the Company and its shareholders.
8. Press Releases. Prior to the Closing, none of the parties will make any
press release, statement to employees or other disclosure of this letter or the
purchase contemplated hereby without the prior written consent of the other
party, except as required by law. Neither AMCC nor Shareholders shall make any
such disclosure unless Buyer shall have received prior notice of the
contemplated disclosure and has had adequate time and opportunity to comment on
such disclosure, which shall be satisfactory in form and content to Buyer and
its counsel.
9. Closing. This transaction will be consummated at a closing (the
"Closing") to be held at the offices of Xxxxx's attorneys, on a date which shall
be on or before June 30, 1999.
10. Due Diligence Inspection. For a period of forty-five (45) days
following the date hereof, the Buyer and its representatives may make such
examinations and inspections of AMCC as they may reasonably require to analyze
its financial condition, properties, legal matters, business and affairs,
including the taking of a physical inventory, so long as such examinations do
not unreasonably interfere with the conduct of business. The Shareholders will
cause their attorneys, legal advisors, accountants and other advisors and agents
to cooperate with the Buyer in its investigation and to make their files and
work papers available.
11. Exclusivity. From the date of this letter until June 30, 1999, neither
the Shareholders nor AMCC and its officers, directors, employees or other agents
will, directly or indirectly, take any action to solicit, initiate or encourage
any acquisition of substantially all of the assets or any of the issued share
capital of AMCC or any transaction similar to the transaction outlined herein,
nor will they entertain any unsolicited proposals or approaches in this regard.
12. Continued Operations. AMCC will conduct its business only in the normal
and ordinary course and in a manner consistent with good business practices.
Without the prior written consent of the Buyer, AMCC will not (a) engage in any
transaction which would have an adverse effect on the business, operations,
assets, financial condition or prospects of AMCC, or (b) amend its
organizational documents or any material contracts or issue any equity
securities of AMCC or securities convertible, exercisable or exchangeable into
equity securities of AMCC. AMCC will preserve its business organization intact
and preserve its existing business relationships.
13. Confidentiality. Each of the parties agrees to maintain the
confidentiality of all information furnished to it by the other party hereto
concerning the business, operations and financial condition of the party
furnishing such information, except to the extent required by applicable law.
American Surgical Supply Corp. of Florida
May 5, 1999
Page 5
14. Approval. This transaction shall be subject to (i) the unanimous
approval of an independent committee of the Buyer's Board of Directors formed
for the sole purpose of evaluating this transaction, which approval shall be
made in such committee's sole discretion, and (ii) the approval of Buyer's Board
of Directors.
15. Non-Binding Letter of Intent. Except for Sections 6, 8, 10, 11, 12, 13,
14, 15 and 17 hereof, this letter is an expression of interest only and is not
intended to be a binding letter of intent, and the general principles set forth
in this letter shall not constitute an agreement to consummate the transaction
described herein. Upon the satisfactory completion of the due diligence
investigation described in Section 10 hereof to Buyer's sole satisfaction and
which confirms the Buyer's intent to consummate the transaction for the purchase
price described in Section 1 hereof, the parties will proceed to use their best
efforts to negotiate the definitive terms of this transaction and enter into a
formal and binding agreement (the "Agreement") which would set forth such
representations, warranties, covenants, indemnifications and other provisions as
are acceptable to the parties in their sole discretion. This letter of intent is
not an agreement to enter into any definitive agreement.
16. Counterparts. This letter may be signed in counterparts, each of which
will be considered an original and all of which will constitute the same
document.
17. Governing Law. This letter shall be interpreted in accordance with the
laws of the State of Florida without regard to its conflicts of law principles.
If this letter accurately reflects your understanding, please indicate
your agreement by signing both enclosed copies of this letter and returning one
executed copy to me by May 7, 1999.
Sincerely yours,
EUROPEAN MICRO HOLDINGS, INC.
By: /s/ Xxxxx X. Xxxxxxx
--------------------
Name: Xxxxx X. Xxxxxxx
Title: Co-Chairman
American Surgical Supply Corp. of Florida
May 5, 1999
Page 6
ACCEPTED AND AGREED THIS 5TH DAY OF
MAY 1999:
AMERICAN SURGICAL SUPPLY
CORP. OF FLORIDA
By: /s/ Xxxx X. Xxxxxxxxx, Xx.
---------------------------
Name: Xxxx X. Xxxxxxxxx, Xx.
Title: President
SHAREHOLDERS:
/s/ Xxxx X. Xxxxxxxxx, Xx.
--------------------------
Xxxx X. Xxxxxxxxx, Xx.
/s/ Xxxx X. Xxxxxxxxx
---------------------
Xxxx X. Xxxxxxxxx
EXHIBIT "A"
1998 EXPENSES - NORMALIZED EARNINGS
Xxxxxxxx Xxxx $15,600
Xxxxx Xxxxx $15,600
Xxxxxx Xxxxxxxx $9,100
Xxxx X. Xxxxxxxxx $26,000
JPG Car Depreciation $9,523
JPG Car Insurance $2,912
JPG Gas $1,169
Ameritech Freight Ins. $3,497
JBG Phone Expenses $1,226
CHS Purchase Legal Fees $11,026
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TOTAL: $95,653
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EXHIBIT "B"
Shareholder loan payable to Xxxx X. Xxxxxxxxx in the approximate amount of
$300,000.
