1
=================================================
ASSET PURCHASE AGREEMENT
AMONG
THE SOURCE INFORMATION MANAGEMENT COMPANY,
MYCO, INC.
AND
RY, INC.
February 26, 1999
=================================================
2
TABLE OF CONTENTS
Page
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
i
3
TABLE OF CONTENTS
Page
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
ii
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 (Xxxxxx Xxxxx)
Exhibit G-2 -- Form of Employment and Noncompetition Agreement (Xxxx Xxxxxxx)
Exhibit G-3 -- Form of Employment and Noncompetition Agreement (Xxxx Xxxxx)
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
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
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
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
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
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
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
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
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
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
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 & Xxxxx 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
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
11
16
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
12
17
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
13
18
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
14
19
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
15
20
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;
16
21
(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;
17
22
(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;
18
23
(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.
19
24
(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.
20
25
(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:
21
26
(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;
22
27
(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.
23
28
(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;
24
29
(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);
25
30
(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.
26
31
(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;
27
32
(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
28
33
(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
29
34
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
30
35
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:
31
36
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.
32
37
(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
33
38
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
34
39
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
35
40
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.
36
41
(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
37
42
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.
38
43
(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
39
44
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 Xxxx-Xxxxx-Xxxxxx Act, will use its
reasonable best
40
45
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
41
46
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.
42
47
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;
43
48
(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 Xxxxxx Xxxxx, Xxxx Xxxxxxx and Xxxx Xxxxx 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;
44
49
(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
Xxxxxx Xxxxx, Xxxx Xxxxxxx and Xxxx Xxxxx 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) Xxxxxx Xxxxx, the Seller Stockholder being released
from all guarantees relating to any financing or other obligation of
Sellers.
45
50
(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
46
51
(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.
47
52
(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:
-----------------
48
53
MYCO, Inc.
RY, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxx, President
Copy to:
-------
Xxxxxxxx & Xxxxxxx
000 X. Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxxxxx, Esq.
If to Buyer:
-----------
The Source Information Management Company
00000 Xxxxxxx Xxxx Xxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attn: S. Xxxxxx Xxxxxx, Chairman & CEO
Copy to:
-------
Xxxxxxxxx Xxxxxxxx LLP
Xxx Xxxxxxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxx, Xx., 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
49
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
50
55
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.
51
56
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
THE SOURCE INFORMATION MANAGEMENT COMPANY
/s/ S. Xxxxxx Xxxxxx
By:___________________________________________
S. Xxxxxx Xxxxxx
Chairman and Chief Executive Officer
MYCO, INC.
/s/ Xxxxxx Xxxxx
By:___________________________________________
Xxxxxx Xxxxx
President
RY, INC.
/s/ Xxxxxx Xxxxx
By:___________________________________________
Xxxxxx Xxxxx
President
52
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.
