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FORM 10Q
SOFTECH, INC. AND SUBSIDIARIES
EXHIBIT 10(ii)
AGREEMENT AND AMENDMENT NUMBER 1 TO THE ASSET PURCHASE AGREEMENT
Agreement and Amendment Number 1 dated September 20, 1995 to the Asset
Purchase Agreement ("Agreement") entered into as of January 5, 1995 by and
among Information Decisions, Incorporated, a Michigan corporation ("Buyer"),
SofTech, Inc., a Massachusetts corporation and indirect parent of the Buyer
("SofTech"), Micro Control, Inc., a Pennsylvania corporation ("Seller") and
each of the stockholders of Seller as listed in Exhibit 1 to the Agreement
(individually, a "Stockholder" and collectively, the "Stockholders").
WITNESSETH
WHEREAS, under the Agreement the Seller and the Stockholders may have
the right to receive certain contingent payments if profit goals specified
in the Agreement are attained; and
WHEREAS, the periods during which the profit goals specified in the
Agreement are to be attained in order for such contingent payments to be
payable have not yet been completed (and have not yet begun for certain such
periods); and
WHEREAS, the parties wish to avoid the uncertainty of whether such
contingent payments will be payable and to amend the Agreement to delete
such contingent payments in exchange for the payment of the sums certain and
other amounts described herein.
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, the parties agree as follows:
1.) In consideration of the agreements contained herein by each
party, the parties agree to amend the Agreement by deleting Section 1.4 of
the Agreement in its entirety in order to evidence the agreement of the
Seller and the Stockholders to waive their right to receive Contingent
Payments (as defined in the Agreement) representing Contingent Purchase
Price (as also defined in the Agreement) including without limitation
Contingent Payment Number 4 described in Section 1.4 (d) of the Agreement
that did not require attainment of any specified profit goal, in exchange
for the payments to be made by Buyer and SofTech described herein.
2.) In consideration of the amendment of the Agreement described
above and the waiver by the Seller and the Stockholders of their right to
receive Contingent Payments, Buyer and SofTech agree to make a cash payment
totaling $426,497 concurrently with the signing of this Amendment No. 1
representing the following amounts:
(a) a cash payment of $281,497;
(b) an advance of $70,000 recoverable only against commissions that
may be due Seller from the sale of the CAD business as detailed below; and
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(c) a cash payment of $75,000 for the termination of the last two
years of the building lease at the Pennsylvania facility located at ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. The building lease is
hereby amended to terminate on November 4, 2000 rather than November 4,
2002.
3.) In consideration of the amendment of the Agreement described
above and the waiver by the Seller and the Stockholders of their right to
receive Contingent Payments, the Buyer and SofTech further agree to pay to
the Seller a commission payable upon the close of the sale of the CAD
business as follows:
Sale Price Commission
---------- ----------
Less than $5 million $ 60,000
Between $5.0 and $5.5 million 150,000
Between $5.5 and $6.0 million 3% of Sale Price
Between $6.0 and $7.0 million 4% of Sale Price
Between $7.0 and $8.0 million 5% of Sale Price
Between $8.0 and $9.0 million 8% of Sale Price
Between $9.0 and $10 million 10% of Sale Price
Greater than $10 million 12% of Sale Price
(a) The sale price of the CAD business of the Buyer (the "Sale
Price") above assumes the tangible net book value of the assets ("Tangible
Book Value") of the CAD business sold or otherwise disposed of is equal to
$2.0 million. Tangible Book Value is defined as the net book value of the
assets less the liabilities and the goodwill related to the CAD Division.
The Sale Price will be adjusted up or down for the purpose of calculating
this commission if the tangible net book value of the assets actually sold
is different than $2.0 million. For example, if the tangible net book value
of assets sold are equal to $2.5 million and the proceeds from the sale are
$6.0 million the Sale Price for the purpose of paying this commission would
equal $5.5 million and the commission earned would be $150,000. Conversely,
if the tangible net book value of the assets sold are equal to $1.5 million
and the proceeds from the sale are $6.0 million the Sale Price for the
purpose of paying this commission would equal $6.5 million and the
commission earned would be $260,000.
(b) The foregoing commission shall be payable whether the eventual
purchaser is identified by ▇▇▇▇▇ ▇▇▇▇▇▇▇ or another party, so long as ▇▇.
▇▇▇▇▇▇▇ is employed by the Buyer and he carries out all duties reasonably
requested of him during the sale process, including without limitation
assisting in the identification of potential purchasers, preparation of
materials relating to the proposed transaction, negotiation of agreements
related to the transaction, etc.; provided however that Seller and
Stockholders acknowledge and agree that SofTech and the Buyer retain full
and complete control of the process pursuant to which potential purchasers
may participate in the process relating to a potential transaction, and may
determine whether to proceed with any particular transaction and on what
terms, and whether to accept or reject any proposal, to proceed with any
transaction or to stop in its entirety the sale process, in each case in
their sole and absolute discretion.
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(c) If, upon the termination of ▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ employ from the
Seller, the Buyer has not accepted an offer with respect to the sale of the
CAD Division, ▇▇. ▇▇▇▇▇▇▇ will furnish the Buyer with a list of prospective
purchasers whom ▇▇. ▇▇▇▇▇▇▇ has contacted relating to the sale and purchase
of the CAD Division. If a transaction occurs involving any party on such
list within one year of the termination of ▇▇. ▇▇▇▇▇▇▇'▇ employ from the
Seller, and provided that ▇▇. ▇▇▇▇▇▇▇ would have qualified to earn such fee
prior to the expiration of this Amendment, ▇▇. ▇▇▇▇▇▇▇ shall be deemed to
have earned a fee as set forth in item 3 above, and such fee shall be
payable from the first funds available from the transaction.
(d) SofTech agrees to indemnify ▇▇. ▇▇▇▇▇▇▇ and hold him harmless
against any and all losses, claims, costs, damages or liabilities to which
▇▇. ▇▇▇▇▇▇▇ shall become subject arising in any manner out of or in
connection with the rendering of his services in seeking a purchaser for the
CAD Division, except for such losses, claims, damages or liabilities that
may result from or may be attributable to the negligence or misconduct of
▇▇. ▇▇▇▇▇▇▇.
(e) ▇▇▇▇▇ ▇▇▇▇▇▇▇ may utilize the services of outside advisors to
assist in this transaction with the written consent of SofTech. The
arrangement for contracting for such services shall be in writing and all
costs associated with such activities are the responsibility of ▇▇▇▇▇
▇▇▇▇▇▇▇. The services of SofTech's advisor, ▇▇▇▇▇▇▇▇▇ Associates, will be
available to assist as required. The costs associated with the services of
▇▇▇▇▇▇▇▇▇ Associates are the responsibility of SofTech.
4. ▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ base salary shall remain unchanged at $150,000 per
annum. Notwithstanding the Amendment of the Agreement set forth above, ▇▇.
▇▇▇▇▇▇▇ will be paid a bonus of $100,000 if the First Micro Control Goal, as
defined in Section 1.4 (g) of the Agreement, is attained. If the sale of the
CAD Division occurs prior to February 28, 1996, the end of the First
Measurement Period, as defined in Section 1.4 (g), a pro rata portion of the
bonus will be paid if the Micro Control Division has met or exceeded the pro
rata First Micro Control Goal during that shortened period. For example,
assuming the First Micro Control Goal is $700,000 for the First Measurement
Period which is a thirteen month period ending February 28, 1996. If the CAD
Division is sold on December 31, 1995, eleven months into the First
Measurement Period, the pro rata goal would be $592,308 ( $700,000 times
84.6154%). Assuming that pro rata goal was attained as of the sale date a
bonus of $84,615 would be earned.
5. SofTech and ▇▇▇▇▇ ▇▇▇▇▇▇▇ agree that the fair market value of the
1967 Corvette that was an Excluded Asset in the Agreement but for which the
Company retained a financial interest as detailed in the Letter Agreement
dated January 5, 1995, is $45,000. ▇▇▇▇▇ ▇▇▇▇▇▇▇ agrees to execute a 24
month promissory note bearing no interest as part of this Amendment. If not
already due, the unpaid portion of the note shall become due and shall be
offset against commissions earned as a result of the sale of the CAD
Division.
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6. As an important part of this Agreement, ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall cause
the ▇▇▇▇▇▇▇ Family Trust to extend an option to SofTech and its successors
to buy out the period from November 5, 1998 to November 4, 2000 under that
certain lease from the ▇▇▇▇▇▇▇ Family Trust to Micro Control, Inc. dated
November 5, 1992 and in exchange for $75,000. ▇▇. ▇▇▇▇▇▇▇ shall cause the
▇▇▇▇▇▇▇ Family Trust to execute and deliver to SofTech a written
acknowledgment of such buyout option and of the lease termination date
amendment described above, in form and substance acceptable to SofTech. Said
option to be valid for twelve (12) months from the date of this Agreement.
7. Stockholders hereby indemnify SofTech against any liabilities,
claims, and/or damages as related to incentive compensation plans made
between ▇▇▇▇▇ ▇▇▇▇▇▇▇ and certain employees of the Buyer's Micro Control
location for attainment of the First and Second Micro Control Goals as
defined in Section 1.4 ( g) of the Agreement. ▇▇▇▇▇ ▇▇▇▇▇▇▇ acknowledges
that SofTech was not a party to such arrangements, did not approve of such
arrangements, and that such arrangements were established solely for the
benefit of the Stockholders.
8. (a) ▇▇▇▇▇ ▇▇▇▇▇▇▇ and SofTech agree to change the day-to-day
responsibilities of ▇▇▇▇▇ ▇▇▇▇▇▇▇ in order to focus his time, energy and
talents at maximizing the Sale Price for the CAD Division. This effort will
be the first priority for ▇▇▇▇▇ ▇▇▇▇▇▇▇ subsequent to the execution of this
Agreement. ▇▇▇▇▇ ▇▇▇▇▇▇▇ agrees to communicate regularly with SofTech
management as to progress. A written status report will be prepared two
times per month and will be due in Waltham on the 15th and last day of each
month until the sale of the CAD Division is complete.
(b) In addition, ▇▇▇▇▇ ▇▇▇▇▇▇▇ will retain primary responsibility for
the day-to-day operations of the CAD office in Yardley, PA. Day-to-day
responsibility for all CAD offices other than the Yardley location will be
the responsibility of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇ will be available, as
requested, to assist ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in managing these other offices so long
as those requests are reasonable in terms of time required and such requests
do not substantially detract from ▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ efforts to maximize the
Sale Price for the CAD Division.
IN WITNESS WHEREOF the parties hereto have executed or caused this
Agreement and Amendment to be executed by their duly authorized
representatives as of the date set forth below.
SOFTECH, INC.
By: __________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chief Financial Officer
INFORMATION DECISIONS, INC.
By: __________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President
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MICRO CONTROL, INC.
By: __________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
STOCKHOLDERS
By: _________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
By: ________________________
▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
