ASSET PURCHASE AGREEMENT
dated as of
January 4, 2000
between
COMPAQ COMPUTER CORPORATION,
ITY CORP.
and
INACOM CORP.
TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITIONS......................................................................1
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. PURCHASED ASSETS.................................................................4
SECTION 2.02. EXCLUDED ASSETS..................................................................4
SECTION 2.03. ASSUMED LIABILITIES..............................................................4
SECTION 2.04. EXCLUDED LIABILITIES.............................................................4
SECTION 2.05. ASSIGNMENT OF CONTRACTS AND RIGHTS...............................................5
SECTION 2.06. PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE.....................................6
SECTION 2.07. CLOSING..........................................................................6
SECTION 2.08. CLOSING STATEMENT................................................................7
SECTION 2.09. ADJUSTMENT OF PURCHASE PRICE.....................................................9
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 3.01. CORPORATE EXISTENCE AND POWER...................................................11
SECTION 3.02. CORPORATE AUTHORIZATION.........................................................11
SECTION 3.03. GOVERNMENTAL AUTHORIZATION......................................................11
SECTION 3.04. NONCONTRAVENTION................................................................12
SECTION 3.05. REQUIRED AND OTHER CONSENTS.....................................................12
SECTION 3.06. FINANCIAL STATEMENTS............................................................12
SECTION 3.07. ABSENCE OF CERTAIN CHANGES......................................................12
SECTION 3.08. NO UNDISCLOSED MATERIAL LIABILITIES.............................................14
SECTION 3.09. MATERIAL CONTRACTS..............................................................14
SECTION 3.10. LITIGATION......................................................................15
SECTION 3.11. COMPLIANCE WITH LAWS AND COURT ORDERS...........................................16
SECTION 3.12. PROPERTIES......................................................................16
SECTION 3.13. SUFFICIENCY OF AND TITLE TO THE PURCHASED ASSETS................................17
SECTION 3.14. INTELLECTUAL PROPERTY...........................................................17
SECTION 3.15. LICENSES AND PERMITS............................................................18
SECTION 3.16. FINDERS' FEES...................................................................18
SECTION 3.17. ENVIRONMENTAL COMPLIANCE........................................................19
SECTION 3.18. YEAR 2000 COMPLIANCE ...........................................................20
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SECTION 3.19. NO TRANSFER OF SUBSTANTIALLY ALL OF SELLER'S ASSETS.............................20
SECTION 3.20. FINANCING.......................................................................21
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 4.01. CORPORATE EXISTENCE AND POWER...................................................21
SECTION 4.02. CORPORATE AUTHORIZATION.........................................................21
SECTION 4.03. GOVERNMENTAL AUTHORIZATION......................................................21
SECTION 4.04. NONCONTRAVENTION................................................................22
SECTION 4.05. FINDERS' FEES...................................................................22
ARTICLE 5
COVENANTS OF SELLER
SECTION 5.01. CONDUCT OF THE BUSINESS.........................................................22
SECTION 5.02. ACCESS TO INFORMATION; CONFIDENTIALITY..........................................23
SECTION 5.03. SELLER'S SALES PERSONNEL........................................................24
SECTION 5.04. ICG ALLIANCE....................................................................24
SECTION 5.05. LEASEHOLD DEFAULTS..............................................................24
SECTION 5.06. USE OF PROCEEDS.................................................................24
ARTICLE 6
COVENANTS OF BUYER
SECTION 6.01. ACCESS..........................................................................25
SECTION 6.02. PRODUCTS FOR SELLER'S FRANCHISEES...............................................25
ARTICLE 7
COVENANTS OF BUYER AND SELLER
SECTION 7.01. FURTHER ASSURANCES..............................................................25
SECTION 7.02. CERTAIN FILINGS.................................................................26
SECTION 7.03. PUBLIC ANNOUNCEMENTS............................................................26
SECTION 7.04. TRADEMARKS; TRADENAMES..........................................................26
SECTION 7.05. WARN ACT........................................................................27
SECTION 7.06. NOTICES OF CERTAIN EVENTS.......................................................27
SECTION 7.07. OPERATING AGREEMENTS............................................................27
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ARTICLE 8
TAX MATTERS
SECTION 8.01. TAX DEFINITIONS.................................................................28
SECTION 8.02. TAX MATTERS.....................................................................28
SECTION 8.03. TAX COOPERATION; ALLOCATION OF TAXES............................................28
ARTICLE 9
EMPLOYEE BENEFITS
SECTION 9.01. EMPLOYEE BENEFITS REPRESENTATIONS...............................................30
SECTION 9.02. EMPLOYEES AND OFFERS OF EMPLOYMENT..............................................31
SECTION 9.03. SELLER'S EMPLOYEE BENEFIT PLANS.................................................32
SECTION 9.04. BUYER BENEFIT PLANS.............................................................34
SECTION 9.05. INACTIVE EMPLOYEES..............................................................35
SECTION 9.06. SEVERANCE BENEFITS..............................................................35
SECTION 9.07. COBRA...........................................................................36
SECTION 9.08. CONTINUATION OF CERTAIN ADMINISTRATIVE SERVICES AND
INSURANCE COVERAGE..............................................................36
SECTION 9.09. SHORT TERM DISABILITY...........................................................37
SECTION 9.10. FOREIGN BENEFIT PLANS...........................................................37
SECTION 9.11. COOPERATION.....................................................................38
SECTION 9.12. NO THIRD PARTY BENEFICIARIES....................................................38
ARTICLE 10
CONDITIONS TO CLOSING
SECTION 10.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY.........................................39
SECTION 10.02. CONDITIONS TO OBLIGATION OF BUYER...............................................39
SECTION 10.03. CONDITIONS TO OBLIGATION OF SELLER..............................................40
ARTICLE 11
SURVIVAL; INDEMNIFICATION
SECTION 11.01. SURVIVAL........................................................................41
SECTION 11.02. INDEMNIFICATION.................................................................41
SECTION 11.03. PROCEDURES......................................................................42
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ARTICLE 12
TERMINATION
SECTION 12.01. GROUNDS FOR TERMINATION.........................................................42
SECTION 12.02. EFFECT OF TERMINATION...........................................................43
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. NOTICES.........................................................................43
SECTION 13.02. AMENDMENTS AND WAIVERS..........................................................44
SECTION 13.03. FEES AND EXPENSES...............................................................45
SECTION 13.04. SUCCESSORS AND ASSIGNS..........................................................45
SECTION 13.05. GOVERNING LAW...................................................................45
SECTION 13.06. JURISDICTION....................................................................45
SECTION 13.07. WAIVER OF JURY TRIAL............................................................45
SECTION 13.08. COUNTERPARTS; THIRD PARTY BENEFICIARIES.........................................46
SECTION 13.09. ENTIRE AGREEMENT................................................................46
SECTION 13.10. BULK SALES LAWS.................................................................46
SECTION 13.11. PARENT GUARANTEE................................................................46
SECTION 13.12. SCHEDULES.......................................................................46
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "AGREEMENT") dated as of January 4,
2000 among Compaq Computer Corporation, a Delaware corporation ("PARENT")
(solely for purposes of Section 13.11), ITY Corp., a Delaware corporation
("BUYER") and wholly-owned subsidiary of Parent, and InaCom Corp., a Delaware
corporation ("SELLER").
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITIONS.
(a) The following terms, as used herein, have the following meanings:
"AFFILIATE" means, with respect to any person, any other person
directly or indirectly controlling, controlled by, or under common control
with such other person.
"BUSINESS" has the meaning set forth in Schedule 1.01.
"LIEN" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim
of any kind in respect of such property or asset.
"KNOWLEDGE" means (i) with respect to Seller (A) for purposes of
Section 5.01, the actual knowledge of Xxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxx
Xxxxxxxxxxx, Xxxx Xxxxxxxxx, Xxxxxxx Xxxxxxx or Xxxx Xxxxxxxx and (B) for all
other purposes, the actual knowledge of Xxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxx
Xxxxxxxxxxx, Xxxx Xxxxxxxxx, Xxxxxxx Xxxxxxx, Xxxxx Xxxxxxxxx, Xxxx Xxxxxxx,
Xxxx Xxxxx or Xxxx Xxxxxxxx; and (ii) with respect to any other person, the
actual knowledge of such person.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
condition (financial or otherwise), business, assets or results of operations
of the Business or the Purchased Assets and Assumed Liabilities, except any
such effect resulting from or arising in connection with (i) changes in
economic conditions in the United States generally, (ii) changes or
conditions affecting the computer products or services industry generally or
(iii) changes resulting from any adverse
action taken by any customer or supplier of the Business as a result of the
announcement of this Agreement or the transactions contemplated hereby,
PROVIDED that Seller has used reasonable best efforts to maintain its
relationship with such customer or supplier, and has notified Buyer about
such adverse action.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
"SUBSIDIARY" means, with respect to any person, any entity of which
securities or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other persons performing similar
functions are at any time directly or indirectly owned by such person.
(b) A reference in this Agreement to any statute shall be to such
statute as amended from time to time and to the rules and regulations
promulgated thereunder.
(c) Each of the following terms is defined in the Section set forth
opposite such term:
TERM SECTION
Accounting Referee 2.06
Agreement preamble
Apportioned Obligations 8.03
Assumed Liabilities 2.03
Balance Sheet 2.08
Balance Sheet Date 3.07
Base Net Worth 2.09
Business Employees 9.02
Business Intellectual 3.14
Business Trademarks and Tradenames 7.04
Buyer preamble
Buyer 401(k) Plans 9.03
Closing 2.07
Closing Date 2.07
Closing Net Worth 2.08
Closing Plan Year 9.03
Closing Statement 2.08
Code 8.01
Confidentiality Agreement 5.02
Configuration Employee 9.02
Contracts 2.01
Damages 11.02
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TERM SECTION
Employee Plan 9.01
ERISA 9.01
ERISA Affiliate 9.01
Excess Payment 2.09
Exchange Agreement 3.03
Excluded Assets 2.02
Excluded Liabilities 2.04
Final Net Worth 2.09
HSR Act 3.03
Inactive Business Employee 9.05
Indemnified Party 11.03
Indemnifying Party 11.03
Intellectual Property Rights 3.14
IT Employee 9.02
Make-Up Payment 2.09
Marketing Employee 9.02
Other Consents 3.05
Parent preamble
Permits 3.15
Permitted Liens 3.12
Post-Closing Tax Period 8.03
Pre-Closing Tax Period 8.01
Property Rights 3.14
Purchased Assets 2.01
Purchase Price 2.06
Real Property 3.12
Required Consents 3.05
Seller preamble
Seller 401(k) Plans 9.01
Seller FSA 9.04
Seller Indebtedness 3.20
Tax 8.01
Tax Allocation Statement 2.06
Taxing Authority 8.01
Transfer Taxes 8.03
Transferred Employee 9.02
WARN Act 7.05
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ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. PURCHASED ASSETS. Except as otherwise provided in
Sections 2.02 and 2.05 and subject to the terms and conditions of this
Agreement, Buyer agrees to purchase from Seller and Seller agrees to sell,
convey, transfer, assign and deliver, or cause to be sold, conveyed,
transferred, assigned and delivered, to Buyer at the Closing, all right,
title and interest of Seller and its subsidiaries in, to and under
(a) the assets, properties and business, of every kind and
description, held or used primarily in connection with the Business as the
same shall exist on the Closing Date, and
(b) the assets, properties and businesses described on Schedule
2.01 (the items in clauses (a) and (b) collectively, the "PURCHASED ASSETS"),
in the case of tangible Purchased Assets, free and clear of all Liens, other
than Permitted Liens and Liens disclosed on Schedule 3.12(b).
SECTION 2.02. EXCLUDED ASSETS. Notwithstanding anything else
contained in this Agreement, the Purchased Assets shall not include all
right, title and interest of Seller and its subsidiaries in, to and under the
assets, properties and businesses described on Schedule 2.02 (such excluded
assets, properties and businesses being referred to as the "EXCLUDED ASSETS").
SECTION 2.03. ASSUMED LIABILITIES. Except as otherwise provided in
Section 2.04 and subject to the terms and conditions of this Agreement, Buyer
agrees, effective as of Closing, to assume all liabilities or obligations of
Seller and its subsidiaries of any kind, character or description (whether
known or unknown, accrued, absolute, contingent or otherwise)
(a) primarily relating to or arising out of the conduct of the
Business or the ownership or use of the Purchased Assets, or
(b) described on Schedule 2.03 or to be assumed by Buyer in Article
8 or Article 9 (the items in clauses (a) and (b) collectively, the "ASSUMED
LIABILITIES").
SECTION 2.04. EXCLUDED LIABILITIES. Notwithstanding anything else
contained in this Agreement, Buyer is not assuming any liability or
obligation of Seller or any of its subsidiaries (or any predecessor thereof
or any prior owner of all or part of any of their businesses, properties and
assets) of whatever nature,
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whether presently in existence or arising hereafter, known or unknown,
accrued, absolute, contingent or otherwise, other than the Assumed
Liabilities and, in any event, Buyer is not assuming any of the following:
(a) except as provided in Article 8 with respect Apportioned
Obligations and transfer taxes, any liability or obligation for Taxes of
Seller or any of its subsidiaries or any member of any consolidated,
affiliated, combined or unitary group of which Seller or any of its
subsidiaries is or has been a member, arising on or prior to the Closing Date;
(b) except to the extent provided in Article 9, all liabilities or
obligations relating to employees or their compensation or benefits;
(c) any liability or obligation under any indebtedness for borrowed
money (other than in respect of the Agreement for Wholesale Financing with
Deutsche Financial Services Corp. dated as of December 24, 1998, as amended
on May 25, 1999 and December 23, 1999);
(d) any liability or obligation described on Schedule 2.04;
(e) any liability or obligation relating to Excluded Assets; and
(f) any liability or obligation arising under or relating to any
Environmental Law which does not primarily relate to or arise out of the
conduct of the Business or the ownership or use of the Purchased Assets.
All such liabilities and obligations not being assumed by Buyer shall be
retained by and remain liabilities and obligations of Seller and its
subsidiaries (the "EXCLUDED LIABILITIES").
SECTION 2.05. ASSIGNMENT OF CONTRACTS AND RIGHTS. Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement to assign any Purchased Asset or any right or benefit
arising thereunder or resulting therefrom if an attempted assignment, without
the consent of a third party thereto, would constitute a breach or other
contravention thereof or in any way adversely affect the rights of Buyer or
Seller or their affiliates thereunder. Buyer and Seller will use reasonable
efforts (but without any payment of money) to obtain any required consents to
the assignment of the Purchased Assets to Buyer as Buyer may reasonably
request. If such consent is not obtained, or if an attempted assignment
thereof would be ineffective or would adversely affect the rights thereunder
so that Buyer would not in fact receive all such rights, Seller and Buyer
will cooperate in a mutually agreeable arrangement under which Buyer would
obtain the benefits and assume the obligations thereunder in accordance with
this Agreement.
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SECTION 2.06. PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE. (a) The
purchase price for the Purchased Assets (the "PURCHASE PRICE") is $369.5
million in cash. The Purchase Price shall be paid as provided in Section 2.07
and shall be subject to adjustment as provided in Section 2.09.
(b) As soon as practicable after the determination of the Final Net
Worth, the Buyer shall deliver to the Seller a statement (the "TAX ALLOCATION
STATEMENT"), allocating the Purchase Price, as adjusted pursuant to Section
2.09 (plus Assumed Liabilities, to the extent properly taken into account
under Section 1060 of the Code) among the Purchased Assets in accordance with
Section 1060 of the Code. If within 30 days after the delivery of the Tax
Allocation Statement the Seller notifies the Buyer in writing that the Seller
objects to the allocation set forth in the Tax Allocation Statement, the
Buyer and the Seller shall use commercially reasonable efforts to resolve
such dispute within 30 days. In the event that the Buyer and the Seller are
unable to resolve such dispute within 30 days, the Buyer and the Seller shall
jointly retain a nationally recognized accounting firm (the "ACCOUNTING
REFEREE") to resolve the disputed items. Upon resolution of the disputed
items, the allocation reflected on the Tax Allocation Statement shall be
adjusted to reflect such resolution. The costs, fees and expenses of the
Accounting Referee shall be borne equally by Buyer and Seller.
(c) Seller and Buyer agree to (i) be bound by the Tax Allocation
Statement and (ii) act in accordance with the Tax Allocation Statement in the
preparation, filing and audit of any Tax return.
(d) Not later than 30 days prior to the filing of their respective
Forms 8594 relating to this transaction, each party shall deliver to the
other party a copy of its Form 8594.
SECTION 2.07. CLOSING. The closing (the "CLOSING") of the purchase
and sale of the Purchased Assets and the assumption of the Assumed
Liabilities hereunder shall take place at the offices of Xxxxx Xxxx &
Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, as soon as possible, but
in no event later than 10 business days, after satisfaction of the conditions
set forth in Article 10, or at such other time or place as Buyer and Seller
may agree. "CLOSING DATE" means the date of the Closing. At the Closing:
(a) Buyer shall deliver to Seller the Purchase Price in immediately
available funds by wire transfer to an account of Seller with a bank in New
York City designated by Seller, by notice to Buyer, not later than three days
prior to the Closing Date,
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(b) Seller and Buyer shall enter into an Assignment and Assumption
Agreement substantially in the form attached hereto as Exhibit A, and
(c) Seller shall deliver to Buyer such deeds, bills of sale,
assignments and other good and sufficient instruments of conveyance and
assignment as the parties and their respective counsel shall deem reasonably
necessary to vest in Buyer all right, title and interest of Seller and its
subsidiaries in, to and under the Purchased Assets. Such instruments of
conveyance and assignment shall not contain any representation or warranty or
covenant in addition to those contained herein; nor shall the parties' rights
or obligations thereunder be different from those contained herein.
SECTION 2.08. CLOSING STATEMENT. (a) As promptly as practicable but
in no event later than 30 days after the Closing Date, Seller will close its
books and records relating to the Purchased Assets and Assumed Liabilities in
order to permit Buyer to prepare the Closing Statement. As promptly as
practicable thereafter but no later than 60 days after the closing of such
books and records, Buyer will cause to be prepared and delivered to Seller a
closing statement of Purchased Assets and Assumed Liabilities (the "CLOSING
STATEMENT") together with a report of Buyer's independent accountant thereon,
and a certificate based on such Closing Statement setting forth Buyer's
calculation of Closing Net Worth. The Closing Statement shall (x) fairly
present the Purchased Assets and Assumed Liabilities as at the close of
business on the Closing Date in accordance with U.S. generally accepted
accounting principles applied on a basis consistent with those used in the
preparation of the audited balance sheet of Seller included in Seller's
Supplemental Consolidated Financial Statements included in Seller's report on
Form 8-K/A dated March 3, 1999 (the "SELLER 8-K"), (y) be prepared in
accordance with accounting policies and practices consistent with those used
in the preparation of such financial statements and (z) include line items
substantially consistent with those in the statement of Purchased Assets and
Assumed Liabilities as of November 27, 1999 referred to in Section 3.06 (the
"BALANCE SHEET"). "CLOSING NET WORTH" means the excess of the book value of
the Purchased Assets over the book value of the Assumed Liabilities as
reflected on the Closing Statement. The Closing Statement shall exclude: (i)
all assets that in accordance with generally accepted accounting principles
would be classified as intangible assets, including, without limitation,
goodwill, patents, trademarks, deferred expenses and unamortized debt
discount; (ii) all liabilities for which Buyer is indemnified pursuant to
this Agreement and the receivable arising from such indemnification
obligation; and (iii) the effect (including the Tax effect) of any act, event
or transaction occurring after the Closing (but prior to the close of
business on the Closing Date) and not in the ordinary course of business of
the Business. For purposes of the Closing Statement, the amount of any
accounts payable due to, or any accounts receivable due from, Buyer or its
affiliates will be determined by agreement between Buyer and Seller, or
absent such agreement,
7
through arbitration. In auditing the Closing Statement, Buyer's independent
accountant will follow generally accepted auditing standards and such other
procedures as are customary including, as appropriate, conducting a physical
inventory and verifying third party receivables and payables.
(b) If Seller disagrees with Buyer's calculation of Closing Net
Worth delivered pursuant to Section 2.08(a), Seller may, within 30 days after
delivery of the documents referred to in Section 2.08(a), deliver a notice to
Buyer disagreeing with such calculation and setting forth Seller's
calculation of such amount. Any such notice of disagreement shall specify
those items or amounts as to which Seller disagrees, and Seller shall be
deemed to have agreed with all other items and amounts contained in the
Closing Statement and the calculation of Closing Net Worth delivered pursuant
to Section 2.08(a).
(c) If a notice of disagreement shall be duly delivered pursuant to
Section 2.08(b), Buyer and Seller shall, during the 15 days following such
delivery, use their reasonable commercial efforts to reach agreement on the
disputed items or amounts in order to determine, as may be required, the
amount of Closing Net Worth, which amount shall not be less than the amount
thereof shown in Buyer's calculations delivered pursuant to Section 2.08(a)
nor more than the amount thereof shown in Seller's calculation delivered
pursuant to Section 2.08(b). If during such period, Buyer and Seller are
unable to reach such agreement, they shall promptly thereafter cause the
Accounting Referee promptly to review this Agreement and the disputed items
or amounts for the purpose of calculating Closing Net Worth. In making such
calculation, the Accounting Referee shall consider only those items or
amounts in the Closing Statement or Buyer's calculation of Closing Net Worth
as to which Seller has disagreed. The Accounting Referee shall deliver to
Buyer and Seller, as promptly as practicable, a report setting forth such
calculation. Such report shall be final and binding upon Buyer and Seller.
The cost of such review and report shall be borne (i) by Buyer if the
difference between Final Net Worth and Closing Net Worth as set forth in
Buyer's calculation of Closing Net Worth delivered pursuant to Section
2.08(a) is greater than the difference between Final Net Worth and Closing
Net Worth as set forth in Seller's calculation of Closing Net Worth delivered
pursuant to Section 2.08(b), (ii) by Seller if the first such difference is
less than the second such difference and (iii) otherwise equally by Buyer and
Seller. "FINAL NET WORTH" means Closing Net Worth (x) as shown in Buyer's
calculation delivered pursuant to Section 2.08(a) if no notice of
disagreement with respect thereto is duly delivered pursuant to Section
2.08(b); or (y) if such a notice of disagreement is delivered, (A) as agreed
by Buyer and Seller pursuant to Section 2.08(c) or (B) in the absence of such
agreement, as shown in the Accounting Referee's calculation delivered
pursuant to Section 2.08(c); PROVIDED that in no event shall Final Net Worth
be less than Buyer's calculation of Closing Net Worth delivered pursuant
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to Section 2.08(a) or more than Seller's calculation of Closing Net Worth
delivered pursuant to Section 2.08(b).
(d) Buyer and Seller agree that they will, and agree to cause their
respective independent accountants to, cooperate and assist in the
preparation of the Closing Statement and the calculation of Closing Net Worth
and in the conduct of the audits and reviews referred to in this Section
2.08, including without limitation, the making available to the extent
necessary of books, records, work papers and personnel.
SECTION 2.09. ADJUSTMENT OF PURCHASE PRICE. (a) The parties will
make payments as follows:
(i) If Final Net Worth exceeds $335.9 million, Buyer shall pay
to Seller, in the manner and with interest as provided in 2.09(b), an
amount equal to such excess (the "EXCESS PAYMENT").
(ii) If Final Net Worth is less than $335.9 million, Seller
shall pay to Buyer, in the manner and with interest as provided in
Section 2.09(b), an amount equal to the sum of
(A) the lesser of (x) $19.5 million and (y) 110% of the
excess of $335.9 million over Final Net Worth, and
(B) the excess, if any, of $275 million over Final Net
Worth (the "MAKE-UP PAYMENT").
(b) Any payment pursuant to Section 2.09(a) shall be made within 10
days after determination of Final Net Worth (the "FINAL PAYMENT DATE") by the
paying party causing such payment to be credited to such account of the
receiving party as may be designated by such receiving party. The amount of
any payment to be made pursuant to this Section 2.09 shall bear interest from
and including the Closing Date to but excluding the date of payment at a rate
per annum equal to LIBOR plus 1.0%. For these purposes, "LIBOR" means
"USD-LIBOR-ISDA" (as defined in the 1991 ISDA Definitions published by the
International Swaps and Derivatives Association) with a "Designated Maturity"
of one month under such definition and reset every month. Such interest shall
be payable at the same time as the payment to which it relates and shall be
calculated daily on the basis of a year of 365 days and the actual number of
days elapsed.
Notwithstanding anything herein to the contrary, the parties agree
that:
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(i) All payments pursuant Section 2.09(a) shall be made in
cash or other immediately available funds except as provided in clause
(ii) or (iii) below.
(ii) The Excess Payment shall, at the option of Buyer, be paid
in (A) accounts receivable that are, as of the Final Payment Date, not
in dispute and not aged over 60 days and are valued on a basis
consistent with the Closing Statement or inventory that has been
received from the original manufacturer no longer than three weeks
prior to the Final Payment Date and valued at the lower of cost or
market (including any purchase price protection received thereon), in
each case that would have otherwise constituted Purchased Assets or
otherwise arises in connection with the Business after the Closing, (B)
cash or (C) any combination thereof. To the extent that any such items
are transferred to Seller, they shall be treated as Excluded Assets.
(iii) The Make-Up Payment shall, at the option of Seller, be
paid in Specified Current Assets, cash or any combination thereof.
"SPECIFIED CURRENT ASSETS" means, in each case free and clear of all
Liens,
(x) accounts receivable that (A) are, as of the Final
Payment Date, not in dispute and not aged over 60 days, (B)
are not accounts receivable due from IBM, Hewlett Packard,
Dell or Toshiba and (C) are valued on a basis consistent with
the Closing Statement, or
(y) product inventory that (A) has been received by
Seller from the original manufacturer no longer than three
weeks prior to the Final Payment Date, (B) is not IBM, Hewlett
Packard, Dell or Toshiba inventory and (C) is valued at the
lower of cost or market (including any purchase price
protection received thereon).
During the 60-day period after the Final Payment Date, Buyer will use
reasonable and customary efforts to collect such receivables and sell
such inventory in the ordinary course of business. At the end of such
period, Seller will pay to Buyer in cash the excess, if any, of the
Make-Up Payment (less the amount of such payment made in cash) over the
amounts actually realized by Buyer from such accounts receivable and
inventory not to exceed the value used in making the Make-Up Payment.
Buyer shall assign such unsold inventory and uncollected accounts
receivable to Seller. Buyer shall not waive any rights against the
account debtor in respect of any accounts receivable so assigned.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date hereof and as
of the Closing Date that:
SECTION 3.01. CORPORATE EXISTENCE AND POWER. Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of
the State of Delaware and has all corporate powers and all material
governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted. Seller is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction where such qualification is necessary, except for such matters
as would not, individually or in the aggregate, have a Material Adverse
Effect. Seller has heretofore delivered to Buyer true and complete copies of
the certificate of incorporation and bylaws of Seller as currently in effect.
SECTION 3.02. CORPORATE AUTHORIZATION. The execution, delivery and
performance by Seller of this Agreement and the consummation of the
transactions contemplated hereby are within Seller's corporate powers and
have been duly authorized by all necessary corporate action on the part of
Seller. This Agreement constitutes a valid and binding agreement of Seller.
In connection with the authorization of this Agreement, the Seller's Board of
Directors has received an opinion of Xxxxxxx, Xxxxx & Co. to the effect that
the consideration to be paid pursuant to this Agreement is fair to Seller
from a financial point of view.
SECTION 3.03. GOVERNMENTAL AUTHORIZATION. Except as set forth in
Schedule 3.03, the execution, delivery and performance by Seller of this
Agreement and the consummation of the transactions contemplated hereby
require no action by or in respect of, or filing with, any governmental body,
agency or official other than (i) compliance with any applicable requirements
of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX XXX");
(ii) any actions or filings which, if not taken or made, would not have a
Material Adverse Effect or materially adversely affect the ability of Seller
to consummate on the transactions contemplated hereby; and (iii) any filings
or notices not required to be made or given until after the Closing Date.
SECTION 3.04. NONCONTRAVENTION. Except as set forth in Schedule
3.04, the execution, delivery and performance by Seller of this Agreement and
the consummation of the transactions contemplated hereby do not and will not
(i) violate the certificate of incorporation or bylaws of Seller, (ii)
assuming compliance with the matters referred to in Section 3.03, violate any
law, rule,
11
regulation, judgment, injunction, order or decree, (iii) assuming the
obtaining of all Required and Other Consents, constitute a default under or
give rise to any right of termination, cancellation or acceleration of any
right or obligation or to a loss of any benefit relating to the Business or
the Purchased Assets or Assumed Liabilities to which Seller or any of its
subsidiaries is entitled under any agreement or other instrument or (iv)
result in the creation or imposition of any Lien on any Purchased Asset,
except, in the case of clauses (ii), (iii) and (iv), for such matters as
would not have a Material Adverse Effect.
SECTION 3.05. REQUIRED AND OTHER CONSENTS. (a) Schedule 3.05(a) sets
forth each agreement or other instrument binding upon Seller or any of its
subsidiaries or any Permit requiring a consent or other action by any person
as a result of the execution, delivery and performance of this Agreement,
except such consents or actions as would not, individually or in the
aggregate, have a Material Adverse Effect if not received or taken by the
Closing Date (the "REQUIRED CONSENTS").
(b) Schedule 3.05(b) sets forth each other consent or action by any
person (the "OTHER CONSENTS") under such agreements or other instruments or
Permits that is necessary with respect to the execution, delivery and
performance of this Agreement.
SECTION 3.06. FINANCIAL STATEMENTS. The November 27, 1999 statement
of Purchased Assets and Assumed Liabilities attached hereto as Schedule 3.06
fairly presents the Purchased Assets and Assumed Liabilities as at such date
in accordance with U.S. generally accepted accounting principles applied on a
basis consistent with those used in the preparation of the audited balance
sheet of Seller included in the Seller 8-K. The revenues, gross margins,
pre-coop selling, general and administrative expenses and earnings before
taxes for Company 42/Distribution-Operations business for each month in the
nine months ended September 25, 1999 fairly present such items in all
material respects on a consistent basis.
SECTION 3.07. ABSENCE OF CERTAIN CHANGES. Except as disclosed on
Schedule 3.07, since November 30, 1999 (the "BALANCE SHEET DATE") or, after
the date hereof, in respect of transactions required by this Agreement, the
Business has been conducted in the ordinary course consistent with past
practices and there has not been:
(a) any event, occurrence, development or state of circumstances or
facts which has had or could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect;
12
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of Seller, or
any repurchase, redemption or other acquisition by Seller or any of its
subsidiaries of any outstanding shares of capital stock or other equity
securities of, or other ownership interests in, Seller or any of its
subsidiaries;
(c) any incurrence, assumption or guarantee by Seller or any of its
subsidiaries of any indebtedness for borrowed money that will constitute an
Assumed Liability;
(d) any creation or other incurrence of any Lien on any Purchased
Asset other than in the ordinary course of business consistent with past
practices;
(e) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the Business or any Purchased Asset which,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect;
(f) any transaction or commitment made, or any contract or
agreement entered into, by Seller or any of its subsidiaries relating to the
Business or any Purchased Asset (including the acquisition or disposition of
any assets) or any relinquishment by Seller or any of its subsidiaries of any
contract or other right, in either case, material to the Business or
Purchased Assets and Assumed Liabilities, other than transactions and
commitments in the ordinary course of business consistent with past practices
and those contemplated by this Agreement;
(g) any change in any method of accounting or accounting practice
by Seller with respect to the Business, except for any such change required
by reason of a concurrent change in generally accepted accounting principles;
(h) any increase in compensation payable to any Business Employee,
other than in the ordinary course of business consistent with past practices;
or
(i) any material labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any Business Employees, which Business Employees were not
subject to a collective bargaining agreement at the Balance Sheet Date, or
any material lockouts, strikes, slowdowns, work stoppages or threats thereof
by or with respect to Business Employees.
SECTION 3.08. NO UNDISCLOSED MATERIAL LIABILITIES. There are no
liabilities or obligations of the Business of any kind (whether known or
unknown, accrued, contingent, absolute or otherwise) that will constitute an
Assumed
13
Liability and there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such a
liability, other than:
(a) liabilities or obligations provided for in the Balance Sheet or
disclosed in the notes thereto;
(b) liabilities disclosed on Schedule 3.08; and
(c) liabilities or obligations incurred in the ordinary course of
business consistent with past practice since the Balance Sheet Date, which in
the aggregate are not material to the Business.
SECTION 3.09. MATERIAL CONTRACTS. (a) Except as disclosed in
Schedules 3.09, 3.12, 3.14, 3.15 or 9.01, neither Seller nor any of its
subsidiaries is a party to or bound by any of the following agreements that
will constitute a Purchased Asset or an Assumed Liability:
(i) any lease of personal property (other than forklifts and
related equipment) providing for annual rentals of $50,000 or more or
any lease of real property;
(ii) any agreement committing Seller to purchase materials,
supplies, goods, services, equipment or other assets providing for
either (A) annual payments by Seller of $100 million or more or (B)
aggregate payments by Seller of $200 million or more;
(iii) any agreement committing Seller to sell materials,
supplies, goods, services, equipment or other assets providing for
either (A) annual payments to Seller of $50 million or more or (B)
aggregate payments to Seller of $100 million or more;
(iv) any partnership, joint venture or other similar agreement
or arrangement;
(v) any agreement relating to the prospective acquisition or
disposition of any business (whether by merger, sale of stock, sale of
assets or otherwise);
(vi) any agreement relating to indebtedness for borrowed money
or the deferred purchase price of property (in either case, whether
incurred, assumed, guaranteed or secured by any asset), except any such
agreement (A) with an aggregate outstanding principal amount not
exceeding $10 million and which may be prepaid on not more than 30 days
notice
14
without the payment of any penalty and (B) entered into subsequent
to the date of this Agreement as permitted by Section 3.07(c);
(vii) any option, license, franchise or similar agreement;
(viii) any sales agency, dealer, sales representative,
marketing or other similar agreement that, in the aggregate, accounted
for at least 80% of Seller's revenues from resellers for the nine
months ended September 25, 1999;
(ix) any agreement that limits the freedom of Seller or any of
its subsidiaries to compete in any line of business or with any person
or in any area or to own, operate, sell, transfer, pledge or otherwise
dispose of or encumber any Purchased Asset or which would so limit the
freedom of Buyer after the Closing Date;
(x) any agreement with or for the benefit of any officer,
director, 5% or more shareholder or affiliate of Seller; or
(xi) any other agreement, commitment, arrangement or plan not
made in the ordinary course of business that is material to the
Business.
(b) Each agreement disclosed in any Schedule to this Agreement or
required to be disclosed pursuant to this Section is a valid and binding
agreement of Seller and is in full force and effect, and none of Seller or
any of its subsidiaries or, to the knowledge of Seller, any other party
thereto is in default or breach in any material respect under the terms of
any such agreement, and, to the knowledge of Seller, no event or circumstance
has occurred that, with notice or lapse of time or both, would constitute any
event of default thereunder, except for such matters as would not have a
Material Adverse Effect. True and complete copies of each such agreement,
including all amendments and modifications thereto, have been delivered to
Buyer.
SECTION 3.10. LITIGATION. Except as set forth in Schedule 3.10,
there is no action, suit, investigation or proceeding pending against, or to
the knowledge of Seller, threatened against or affecting, the Business or any
Purchased Asset before any court or arbitrator or any governmental body,
agency or official which would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.
SECTION 3.11. COMPLIANCE WITH LAWS AND COURT ORDERS. Except as set
forth in Schedule 3.11, neither Seller nor any of its subsidiaries is in
violation of, or has violated, any applicable law, rule, regulation,
judgment, injunction, order or decree applicable to the Purchased Assets or
the conduct of the Business, except
15
for such matters as would not, individually or in the aggregate, have a
Material Adverse Effect.
SECTION 3.12. PROPERTIES. (a) Schedule 3.12(a) correctly lists all
real property used or held primarily in connection with the Business,
including leasehold interests (the "REAL PROPERTY"), and any Liens thereon
(other than Permitted Liens or Liens disclosed on Schedule 3.12(b)),
specifying in the case of leases or subleases, the name of the lessor or
sublessor.
(b) Seller has good and marketable, indefeasible, fee simple title
to, or in the case of leased property, valid leasehold interests in, all
tangible Purchased Assets (whether real, personal or otherwise) reflected on
the Balance Sheet or acquired after the Balance Sheet Date, except for
properties and assets sold since the Balance Sheet Date in the ordinary
course of business consistent with past practices. No tangible Purchased
Asset is subject to any Lien, except:
(i) Liens disclosed on Schedule 3.12(b);
(ii) Liens securing Assumed Liabilities; or
(iii) Liens that do not materially detract from the value of
such Purchased Asset, or materially interfere with any present or
intended use of such Purchased Asset (clauses (ii) - (iii) of this
Section 3.12(b) are, collectively, the "PERMITTED LIENS").
(c) There are no developments affecting any of the Purchased Assets
pending or, to the knowledge of Seller threatened, which are reasonably
likely to materially detract from the value, materially interfere with any
present or intended use or materially adversely affect the marketability of
such Purchased Assets.
(d) Except for the Excluded Assets, the Real Property includes all
real property as is used or held primarily in connection with the conduct of
the business and operations of the Business as heretofore conducted.
(e) Except as disclosed in Schedule 3.12 and except as would not
have a Material Adverse Effect, (i) the plants, buildings, structures and
equipment included in the Purchased Assets have no defects, are in good
operating condition and repair and have been reasonably maintained consistent
with standards generally followed in the industry (giving due account to the
age and length of use of same, ordinary wear and tear excepted), are adequate
and suitable for their present and intended uses and, in the case of plants,
buildings and other structures (including, without limitation, the roofs
thereof), are structurally sound; (ii) none of the structures on the Real
Property encroaches upon real property of another person, and no structure of
any other person encroaches upon any Real Property;
16
(iii) the Real Property, and its continued use, occupancy and operation as
currently used, occupied and operated, does not constitute a nonconforming
use under all applicable building, zoning, subdivision and other land use and
similar laws, regulations and ordinances; and (iv) there has been no actual
or, to Seller's knowledge, threatened taking of all or any portion of the
Real Property by eminent domain or similar governmental power, and no
condemnation proceedings are currently pending or, to Seller's knowledge,
threatened with respect to the Real Property.
SECTION 3.13. SUFFICIENCY OF AND TITLE TO THE PURCHASED ASSETS. (a)
Except for the Excluded Assets, the Purchased Assets constitute all of the
property and assets used or held primarily in connection with the Business
and are adequate to conduct the Business as currently conducted.
(b) Upon consummation of the transactions contemplated hereby, Buyer
will have acquired good and marketable title in and to, or a valid leasehold
interest (on the terms of the existing agreement as in effect on the date
hereof assuming that the subject asset is used in the same manner as it is
currently used by Seller) in, each of the tangible Purchased Assets, free and
clear of all Liens, except for Permitted Liens and Liens disclosed in
Schedule 3.12(b), and all of the right, title and interest of Seller and its
subsidiaries in and to any intangible Purchased Assets.
SECTION 3.14. INTELLECTUAL PROPERTY. Except for the Excluded Assets,
Seller and its subsidiaries have sufficient rights to use, whether through
ownership, licensing or otherwise, all patents, trademarks, service marks,
trade names, copyrights, trade secrets, processes and other proprietary
rights that are necessary for the Business as now conducted (collectively the
"INTELLECTUAL PROPERTY RIGHTS"). Except as set forth on Schedule 3.14, none
of Seller or any of its subsidiaries has assigned, hypothecated or otherwise
transferred or encumbered any of the Intellectual Property Rights and none of
the Intellectual Property Rights purport to grant sole or exclusive licenses
or other rights to any other person, including, without limitation sole or
exclusive licenses limited to specific fields of use. To the best of Seller's
knowledge, the patents owned by Seller or its subsidiaries relating to the
Business are valid and enforceable and any patent issuing from patent
applications of Seller or its subsidiaries will be valid and enforceable.
Except as disclosed in Schedule 3.14, (i) to the best of the Seller's
knowledge, there is no infringement by any other person of any of the
Intellectual Property Rights, and (ii) neither Seller nor any of its
subsidiaries has entered into any agreement to indemnify any person against
any charge of infringement of any of the Intellectual Property Rights except
for such matters as would not, individually or in the aggregate, have a
Material Adverse Effect. To the best of Seller's knowledge, neither Seller
nor any of its subsidiaries has violated or infringed in connection with the
Business any intellectual property right of any
17
other person, and neither Seller nor any of its subsidiaries has received any
communication alleging that it violates or infringes the intellectual
property right of any other person. Except as set forth on Schedule 3.14,
neither Seller nor any of its subsidiaries has been sued or is being sued or
has reason to believe that it may be sued for infringing in connection with
the Business any intellectual property right of another person. None of the
processes, techniques and formulae, research and development results or other
know-how or show-how relating to the Business, the value of which to the
Business is contingent upon maintenance of the confidentiality thereof, has
been disclosed by Seller or any affiliate thereof to any person other than
those persons who have a need to know thereof and who are bound to hold such
information in confidence pursuant to confidentiality agreements or by
operation of law.
SECTION 3.15. LICENSES AND PERMITS. Schedule 3.15 correctly
describes each material governmental license, authorization, consent and
approval to the extent relating to the Business (the "PERMITS") together with
the name of the government agency or entity issuing such Permit. Except as
set forth on the Schedule 3.15, (i) the Permits are valid and in full force
and effect, (ii) Seller is not in default, and no condition exists that with
notice or lapse of time or both would constitute a default, under the Permits
and (iii) none of the Permits will, assuming the related Required Consents
have been obtained prior to the Closing Date, be terminated or impaired or
become terminable, in whole or in part, as a result of the transactions
contemplated hereby. Upon consummation of such transactions, Buyer will,
assuming the related Required Consents or Other Consents, as the case may be,
have been obtained prior to the Closing Date, have all of the right, title
and interest in all Permits primarily relating to the Business (other than
Excluded Assets).
SECTION 3.16. FINDERS' FEES. Except for Xxxxxxx Xxxxx & Co., whose
fees will be paid by Seller, there is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on
behalf of Seller who might be entitled to any fee or commission in connection
with the transactions contemplated by this Agreement.
SECTION 3.17. ENVIRONMENTAL COMPLIANCE. (a) Except for such matters
as would not reasonably be expected to have a Material Adverse Effect or as
disclosed in Schedule 3.17:
(i) no written notice of violation or liability, demand,
request for information, citations, summons or order has been received,
no complaint has been filed, no penalty has been assessed and no
investigation, action, claim, suit, proceeding or review is pending, or
to the knowledge of Seller or any of its subsidiaries, threatened by
any governmental entity or other person with respect to any matters
relating to the Business or the
18
Purchased Assets or Assumed Liabilities and relating to or arising out
of any Environmental Law;
(ii) no Hazardous Substance has been discharged, disposed of,
dumped, injected, pumped, deposited, spilled, leaked, emitted or
released at any of the Purchased Assets or Real Property or any
property now or previously owned, leased or operated by Seller or any
of its subsidiaries and used in connection with the Business, except in
compliance with applicable Environmental Laws or where such would not
reasonably be expected to result in liability under any Environmental
Law; and
(iii) Seller and each of its subsidiaries have all
environmental permits necessary for the Business and the Purchased
Assets to comply with applicable Environmental Laws and are in
compliance with the terms of such permits and all applicable
Environmental Laws, and there are no Environmental Liabilities.
(b) There has been no environmental investigation, study, audit,
test, review or other analysis conducted of which Seller or any of its
subsidiaries has knowledge and possession in relation to the Business or the
Purchased Assets which has not been delivered to Parent at least two days
prior to the date hereof.
(c) Except as disclosed to Buyer in writing on or prior to the date
hereof, neither Seller nor any of its subsidiaries owns, leases or operates
any real property in respect of the Business or the Purchased Assets in New
Jersey or Connecticut.
(d) For purposes of this Section, the following terms shall have the
meanings set forth below:
"SELLER" and "SUBSIDIARY" shall include any entity which is, in
whole or in part, a predecessor of Seller or any of its subsidiaries;
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
regulation, or any binding agreement with any governmental authority,
relating to the environment or the effect of the environment on human health,
or regulating the discharge, release, disposal or emission to the environment
of pollutants, contaminants, wastes or chemicals or any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, wastes or
materials;
"ENVIRONMENTAL LIABILITIES" means any and all liabilities or
obligations of the Business or the Purchased Assets or Assumed Liabilities,
whether accrued,
19
contingent, absolute, determined, determinable or otherwise, arising under
any Environmental Law;
"HAZARDOUS SUBSTANCES" means any pollutant, contaminant, waste or
chemical or any toxic, radioactive, ignitable, corrosive, reactive or
otherwise hazardous substance, waste or material, or any substance, waste or
material having any constituent elements displaying of the foregoing
characteristics, including, without limitation, petroleum, its derivatives,
by-products and other hydrocarbons, which in any event is regulated under
Environmental Laws.
SECTION 3.18. YEAR 2000 COMPLIANCE. Seller has conducted an
assessment of its and its subsidiaries' internal operating systems,
processes, software, hardware and equipment relating to the Business and
based upon this assessment has developed a plan designed to ensure that the
same are Year 2000 Compliant on or before December 31, 1999. To the knowledge
of Seller, such plan will be implemented and successfully completed on or
before December 31, 1999, and the implementation and completion of such plan
will not have a Material Adverse Effect. The term "Year 2000 Compliant", as
used herein, shall mean that the applicable systems, processes, software,
hardware and/or equipment is able to perform the following functions without
human intervention: (a) handle date information before, during and after
January 1, 2000, including but not limited to accepting date input, providing
date output, and performing calculations on dates or portions of dates; (b)
function accurately and without interruption before, during and after January
1, 2000, without any change in operations associated with the advent of the
new century; (c) respond to two-digit year-date input in a way that resolves
the ambiguity as to century in a disclosed, defined and predetermined manner;
and (d) store and provide output of date information in ways that are
unambiguous as to century.
SECTION 3.19. NO TRANSFER OF SUBSTANTIALLY ALL OF SELLER'S ASSETS.
The transactions contemplated by this Agreement (i) do not require the
approval of Seller's stockholders under Delaware law and (ii) do not
constitute the conveyance, transfer or lease of all or substantially all of
Seller's assets substantially as an entirety under the agreements governing
the 6 3/4% Convertible Subordinated Debentures due 2016 issued by a
subsidiary of Seller and the 6 3/4 Trust Convertible Preferred Securities
related thereto.
SECTION 3.20. FINANCING. Seller has received and furnished a copy to
Buyer of an executed Third Amendment and Waiver dated as of January 4, 2000
(the "AMENDMENT AND WAIVER") to Seller's Credit Agreement dated as of April
9, 1999, as amended (the "CREDIT AGREEMENT") attached as Schedule 3.20
hereto. As of the date hereof, Seller has no knowledge, after reasonable
inquiry, of any facts or circumstances that would result in any of the
conditions set forth in the Amendment and Waiver not being satisfied.
20
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date hereof and as of
the Closing Date that:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of
the State of Delaware and has all corporate powers and all material
governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted.
SECTION 4.02. CORPORATE AUTHORIZATION. The execution, delivery and
performance by Buyer of this Agreement and the consummation of the
transactions contemplated hereby are within the corporate powers of Buyer and
have been duly authorized by all necessary corporate action on the part of
Buyer. This Agreement constitutes a valid and binding agreement of Buyer.
SECTION 4.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery
and performance by Buyer of this Agreement and the consummation of the
transactions contemplated hereby require no action by or in respect of, or
filing with, any governmental body, agency or official other than (i)
compliance with any applicable requirements of the HSR Act; (ii) any actions
or filings which, if not taken or made, would not have a material adverse
effect on Buyer or materially adversely effect the ability of Buyer to
consummate the transactions contemplated hereby; and (iii) any filings or
notices not required to be made or given until after the Closing Date.
SECTION 4.04. NONCONTRAVENTION. The execution, delivery and
performance by Buyer of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (i) violate the
certificate of incorporation or bylaws of Buyer, (ii) assuming compliance
with the matters referred to in Section 4.03, violate any law, rule,
regulation, judgment, injunction, order or decree, or (iii) constitute a
default under or give rise to any right of termination, cancellation or
acceleration of any right or obligation of Buyer or to a loss of any benefit
to which Buyer is entitled under any agreement or other instrument binding
upon Buyer, except, in the case of (ii) and (iii), for such matters as would
not materially adversely effect the ability of Buyer to consummate the
transactions contemplated by this Agreement.
SECTION 4.05. FINDERS' FEES. Except for Xxxxxxxxx & Co., LLC and
Xxxxxxx Xxxxx Barney Inc., whose fees will be paid by Buyer, there is no
investment banker, broker, finder or other intermediary which has been
retained
21
by or is authorized to act on behalf of Buyer who might be entitled to any
fee or commission from Seller or any of its affiliates upon consummation of
the transactions contemplated by this Agreement.
ARTICLE 5
COVENANTS OF SELLER
Seller agrees that:
SECTION 5.01. CONDUCT OF THE BUSINESS. From the date hereof until
the Closing Date, Seller and its subsidiaries shall conduct the Business in
the ordinary course consistent with past practice and shall use their
reasonable commercial efforts to preserve intact the business organizations
and relationships with third parties and to keep available the services of
the present employees of the Business. Without limiting the generality of the
foregoing, from the date hereof until the Closing Date and except as
otherwise required by this Agreement or the Fulfillment Agreement between
Buyer and Seller dated as of the date hereof (the "FULFILLMENT AGREEMENT"),
Seller will not, and will not permit any of its subsidiaries to:
(a) with respect to the Business, acquire a material amount of
assets from any other person, other than purchases of materials or products
in the ordinary course of business;
(b) sell, lease, license or otherwise dispose of any Purchased
Assets except (i) pursuant to existing contracts or commitments and (ii) sale
of inventory in the ordinary course consistent with past practice;
(c) except in the ordinary course consistent with Seller's customary
practices, will not with respect to the Business collect any accounts
receivable, delay payment of any accounts payable or sell any inventory;
(d) terminate the employment of any Business Employee (except for
(i) terminations of employment in connection with the restructuring of
Seller's business as publicly announced prior to the date hereof, which
terminations are itemized in Schedule 5.01(d), (ii) termination by an
employee and (iii) termination for cause);
(e) agree or commit to do any of the foregoing; or
22
(f) take or agree or commit to take any action that, to the
knowledge of Seller, would or is likely to make any representation or
warranty of Seller hereunder inaccurate in any respect at, or as of any time
prior to, the Closing Date.
SECTION 5.02. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) From the
date hereof until the Closing Date, Seller will (i) give Buyer and its
authorized representatives reasonable access to the properties, books and
records and employees of Seller and its subsidiaries relating to the Business
or the Purchased Assets or Assumed Liabilities and such financial and other
information relating to the Business or the Purchased Assets or Assumed
Liabilities as such persons may reasonably request and (ii) instruct the
employees, counsel and financial advisors of Seller to cooperate with Buyer
in its investigation of the Business or the Purchased Assets or Assumed
Liabilities. Any investigation pursuant to this Section shall be conducted in
such manner as not to interfere unreasonably with the conduct of the business
of Seller or otherwise unreasonably harm such business. Notwithstanding the
foregoing, Buyer shall not have access to personnel records of Seller
relating to individual performance or evaluation records, medical histories
or other information which in Seller's good faith opinion is sensitive or the
disclosure of which could subject Seller to risk of liability. No
investigation by Buyer or other information received by Buyer shall operate
as a waiver or otherwise affect any representation, warranty or agreement
given or made by Seller hereunder. The foregoing information shall be held in
confidence to the extent required by, and in accordance with, the provisions
of the letter agreement dated as of November 9, 1999 between Buyer and Seller
(the"CONFIDENTIALITY AGREEMENT") which shall continue in effect.
(b) After the Closing, Seller and its affiliates will hold, and will
use their reasonable commercial efforts to cause their respective officers,
directors, employees, accountants, counsel, consultants, advisors and agents
to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all confidential
documents and information concerning the Business or the Purchased Assets or
Assumed Liabilities, except to the extent that such information can be shown
to have been (i) in the public domain through no fault of Seller or its
affiliates or (ii) later lawfully acquired by Seller on a non-confidential
basis from sources other than those related to its prior ownership of the
Business. The obligation of Seller and its affiliates to hold any such
information in confidence shall be satisfied if they exercise the same care
with respect to such information as they would take to preserve the
confidentiality of their own similar information.
(c) After the Closing Date, Seller will give Buyer and its
authorized representatives reasonable access to properties, books and records
and employees of Seller to the extent necessary to permit Buyer to determine
any matters relating to its rights or obligations hereunder or any other
reasonable business purpose
23
relating to the Business or the Purchased Assets or Assumed Liabilities;
provided that any such access by Buyer shall not unreasonably interfere with
the conduct of the business of Seller or otherwise harm such business.
SECTION 5.03. SELLER'S SALES PERSONNEL. Seller agrees that for the
period from the date hereof until the Closing Date, Seller will review with
Buyer any plans of Seller or its subsidiaries to terminate the employment of
any of Seller's and its subsidiaries' sales and marketing employees.
SECTION 5.04. ICG ALLIANCE. At the request of Buyer, Seller will use
reasonable commercial efforts to ensure that Buyer becomes a member of the
ICG Services alliance prior to the Closing.
SECTION 5.05. LEASEHOLD DEFAULTS. Seller will as of the Closing cure
any payment defaults under any leases of Real Property.
SECTION 5.06. USE OF PROCEEDS. Seller will use a portion of the
Purchase Price for the repayment of Seller Indebtedness and will retain the
balance, if any, in Seller for use in its ongoing business.
ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
SECTION 6.01. ACCESS. After the Closing Date, Buyer will give Seller
and its authorized representatives reasonable access to the properties, books
and records and employees of Buyer and its affiliates relating to the
Business to the extent necessary to permit Seller to determine any matter
relating to its rights and obligations hereunder or any other reasonable
business purpose relating to any period ending on or before the Closing Date;
PROVIDED THAT any such access by Seller shall not unreasonably interfere with
the conduct of the business of Buyer and its affiliates.
SECTION 6.02. PRODUCTS FOR SELLER'S FRANCHISEES. Buyer will use
reasonable efforts to provide product to Seller for resale to Seller's
franchisees, but only to the extent such product is available to Buyer for
resale, on terms consistent with those Buyer offers to similarly situated
resellers
24
ARTICLE 7
COVENANTS OF BUYER AND SELLER
Buyer and Seller agree that:
SECTION 7.01. FURTHER ASSURANCES. (a) Subject to the terms and
conditions of this Agreement, Buyer and Seller will use their reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary or desirable under applicable laws and regulations
to consummate the transactions contemplated by this Agreement (including, in
the case of Seller, the condition in Section 10.03(b)). Seller and Buyer
agree to execute and deliver such other documents, certificates, agreements
and other writings and to take such other actions as may be necessary or
desirable in order to consummate or implement expeditiously the transactions
contemplated by this Agreement and to vest in Buyer good and marketable title
to the Purchased Assets.
(b) Seller hereby constitutes and appoints, effective as of the
Closing Date, Buyer and its successors and assigns as the true and lawful
attorney of Seller with full power of substitution in the name of Buyer, or
in the name of Seller but for the benefit of Buyer, (i) to collect for the
account of Buyer any items of Purchased Assets and (ii) to institute and
prosecute all proceedings which Buyer may in its sole discretion deem proper
in order to assert or enforce any right, title or interest in, to or under
the Purchased Assets, and to defend or compromise any and all actions, suits
or proceedings in respect of the Purchased Assets. Buyer shall be entitled to
retain for its own account any amounts collected pursuant to the foregoing
powers, including any amounts payable as interest in respect thereof.
SECTION 7.02. CERTAIN FILINGS. Seller and Buyer shall cooperate with
one another (i) in determining whether any action by or in respect of, or
filing with, any governmental body, agency, official or authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (ii) in
taking such actions or making any such filings, furnishing information
required in connection therewith and seeking timely to obtain any such
actions, consents, approvals or waivers.
SECTION 7.03. PUBLIC ANNOUNCEMENTS. The parties agree to consult
with each other before issuing any press release or making any public
statement with respect to this Agreement or the transactions contemplated
hereby and, except as may be required by applicable law or any listing
agreement with any national
25
securities exchange, will not issue any such press release or make any such
public statement prior to such consultation.
SECTION 7.04. TRADEMARKS; TRADENAMES. (a) Except as set forth
otherwise in this Section 7.04, after the Closing, (i) Seller and its
subsidiaries shall not use any of the marks or names used primarily in the
Business as set forth on Schedule 7.04(a) the "BUSINESS TRADEMARKS AND
TRADENAMES") and (ii) Buyer and its subsidiaries shall not use any of the
marks or names set forth on Schedule 7.04(b) (the "SELLER TRADEMARKS AND
TRADENAMES").
(b) After the Closing, Buyer shall have the right to sell existing
inventory and to use existing packaging, labeling, containers, supplies,
advertising materials, technical data sheets and any similar materials
bearing any Seller Trademarks and Tradenames until the earlier of (i) six
months after the Closing Date and (ii) the date existing stocks are
exhausted. Buyer shall have the right to use the Seller Trademarks and
Tradenames in advertising that cannot be changed by Buyer using reasonable
efforts for a period not to exceed 90 days after the Closing Date. Buyer
shall comply with all applicable laws or regulations in any use of packaging
or labeling containing the Seller Trademarks and Tradenames.
(c) Buyer shall not be obligated to change the Seller Trademarks and
Tradenames on goods in the hands of dealers, distributors and customers at
the time of the expiration of a time period set forth in subsection 7.04(b)
above. The obliteration of the Seller Trademarks and Tradenames shall be
deemed compliance with the covenant not to use the Seller Trademarks and
Tradenames pursuant to this Section 7.04 with respect to the property to
which such Seller Trademarks and Tradenames were not affixed.
(d) Buyer agrees to cease using the Seller Trademarks and Tradenames
on buildings, cars, trucks and other fixed assets as soon as possible within
a period not to exceed six months after the Closing Date.
(e) Seller agrees that its consent to the amendment or extension of
this Section will not be unreasonably withheld if Buyer cannot exhaust
existing inventory within six months of the Closing Date.
SECTION 7.05. WARN ACT. The parties agree to cooperate in good faith to
determine whether any notification may be required under the Worker Adjustment
and Retraining Notification Act (the "WARN ACT") as a result of the transactions
contemplated by this Agreement. Buyer will be responsible for providing any
notification that may be required under the WARN Act with respect to any
Transferred Employees. Seller will be responsible for providing any notification
26
that may be required under the WARN Act with respect to any employees of the
Business that are not Transferred Employees.
SECTION 7.06. NOTICES OF CERTAIN EVENTS. Buyer and Seller shall
promptly notify each other of:
(a) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement; and
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement.
SECTION 7.07. OPERATING AGREEMENTS. On the date hereof, the parties
entered into the Fulfillment Agreement in the form set forth as Exhibit B. At
Closing, the parties will enter into definitive agreements on the terms set
forth in Schedule 7.07 relating to the sharing of (1) Tech Center, (2)
Gateway Building, (3) Corporate Headquarters and (4) Corporate IT Function.
ARTICLE 8
TAX MATTERS
SECTION 8.01. TAX DEFINITIONS. The following terms, as used herein,
have the following meanings:
"CODE" means the Internal Revenue Code of 1986.
"PRE-CLOSING TAX PERIOD" means (i) any Tax period ending on or
before the Closing Date and (ii) with respect to a Tax period that commences
before but ends after the Closing Date, the portion of such period up to and
including the Closing Date.
"TAX" means (i) any tax, governmental fee or other like assessment
or charge of any kind whatsoever (including, without limitation, withholding
on amounts paid to or by any person, together with any interest, penalty,
addition to tax or additional amount imposed by any governmental authority (a
"TAXING AUTHORITY") responsible for the imposition of any such tax (domestic
or foreign), or (ii) liability for the payment of any amounts of the type
described in (i) as a result of being party to any agreement or any express
or implied obligation to indemnify any other person.
27
SECTION 8.02. TAX MATTERS. Seller hereby represents and warrants to
Buyer that
(a) Seller has timely paid all Taxes which will have been required
to be paid on or prior to the date hereof, the non-payment of which would
result in a Lien on any Purchased Asset, would otherwise adversely affect the
Business or would constitute an Assumed Liability.
(b) Seller has established, in accordance with generally accepted
accounting principles applied on a basis consistent with that of preceding
periods, adequate reserves for the payment of, and will timely pay, all
Taxes, which arise from or with respect to the Purchased Assets or the
operation of the Business and are incurred in or attributable to the
Pre-Closing Tax Period, the non-payment of which would result in a Lien on
any Purchased Asset, would otherwise adversely affect the Business or would
constitute an Assumed Liability.
SECTION 8.03. TAX COOPERATION; ALLOCATION OF TAXES. (a) Buyer and
Seller agree to furnish or cause to be furnished to each other, upon request,
as promptly as practicable, such information and assistance relating to the
Business and the Purchased Assets or Assumed Liabilities (including, without
limitation, access to books and records) as is reasonably necessary for the
filing of all Tax returns, the making of any election relating to Taxes, the
preparation for any audit by any Taxing Authority, and the prosecution or
defense of any claim, suit or proceeding relating to any Tax. Buyer and
Seller shall retain all books and records with respect to Taxes pertaining to
the Purchased Assets and Assumed Liabilities for a period of at least six
years following the Closing Date. At the end of such period, each party shall
provide the other with at least 10 days prior written notice before
destroying any such books and records, during which period the party
receiving such notice can elect to take possession, at its own expense, of
such books and records. Seller and Buyer shall cooperate with each other in
the conduct of any audit or other proceeding relating to Taxes involving the
Purchased Assets or Assumed Liabilities or the Business.
(b) All real property taxes, personal property taxes and similar ad
valorem obligations levied with respect to the Purchased Assets for a taxable
period which includes (but does not end on) the Closing Date (collectively,
the "APPORTIONED OBLIGATIONS") shall be apportioned between Seller and Buyer
based on the number of days of such taxable period included in the
Pre-Closing Tax Period and the number of days of such taxable period after
the Closing Date (with respect to any such taxable period, the "POST-CLOSING
TAX PERIOD"), PROVIDED, HOWEVER, that Seller shall not be responsible for any
increased assessments resulting from the transactions contemplated hereby.
Seller shall be liable for the proportionate amount of such taxes that is
attributable to the
28
Pre-Closing Tax Period, and Buyer shall be liable for the proportionate
amount of such taxes that is attributable to the Post-Closing Tax Period.
(c) All excise, sales, use, value added, registration stamp,
recording, documentary, conveyancing, franchise, property, transfer, gains
and similar Taxes, levies, charges and fees (collectively, "TRANSFER TAXES")
incurred in connection with the transactions contemplated by this Agreement
shall be borne equally by Seller and Buyer. Buyer and Seller shall cooperate
in providing each other with any appropriate resale exemption certifications
and other similar documentation. The party that is required by applicable law
to make the filings, reports, or returns with respect to any applicable
Transfer Taxes shall do so, and the other party shall cooperate with respect
thereto as necessary.
(d) Apportioned Obligations and Transfer Taxes described in Section
8.03(b) or 8.03(c) shall be timely paid, and all applicable filings, reports
and returns shall be filed, as provided by applicable law. The paying party
shall be entitled to reimbursement from the non-paying party in accordance
with Section 8.03(b) or (c), as the case may be. Upon receipt of any xxxx
for, or payment of, any such Apportioned Obligation or Transfer Tax, the
paying party shall present a statement to the non-paying party setting forth
the amount of reimbursement to which the paying party is entitled under
Section 8.03(b) or (c), as the case may be, together with such supporting
evidence as is reasonably necessary to calculate the amount to be reimbursed.
The non-paying party shall make such reimbursement promptly but no event
later than 10 days after the presentation of such statement. Any payment not
made within such time shall bear interest at a rate set forth in Section
2.09(b) for each day until paid.
ARTICLE 9
EMPLOYEE BENEFITS
SECTION 9.01. EMPLOYEE BENEFITS REPRESENTATIONS. Seller hereby
represents and warrants to Buyer as of the date hereof and as of the Closing
Date, that:
(a) Schedule 9.01(a) lists each material "employee benefit plan", as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974 ("ERISA"), each material employment, severance or similar contract,
plan, arrangement or policy and each other material plan or arrangement
(written or oral) providing for compensation, bonuses, profit-sharing, stock
option or other stock related rights or other forms of incentive or deferred
compensation, vacation benefits, insurance (including any self-insured
arrangements), health or medical
29
benefits, employee assistance program, disability or sick leave benefits,
workers' compensation, supplemental unemployment benefits, severance benefits
and post-employment or retirement benefits (including compensation, pension,
health, medical or life insurance benefits) which is maintained, administered
or contributed to by Seller or any ERISA Affiliate and covers any person who
is a Business Employee, as defined in Section 9.02 (any such plan,
arrangement or policy, an "EMPLOYEE PLAN"). Copies of each Seller 401(k) Plan
(as defined in Section 9.01(b)) and each other Employee Plan that provides
for severance, vacation, sick leave or deferred compensation and all
amendments thereto and written interpretations thereof have been furnished to
Buyer. For purposes of this Agreement, "ERISA AFFILIATE" of Seller shall mean
any other entity which, together with Seller, would be treated as a single
employer under Section 414 of the Code. Since December 31, 1998, except as
set forth in Schedule 9.01(a), no employee benefit plan or arrangement,
including without limitation any Employee Plan, or modification thereto, has
been adopted that would, individually or in the aggregate, increase
materially the operating cost of the Business.
(b) No Employee Plan is a multiemployer plan, as defined in Section
3(37) of ERISA, and no Employee Plan is subject to Title IV of ERISA. Neither
Seller nor any of Seller's ERISA Affiliates has incurred any liability under
Title IV of ERISA arising in connection with the termination of any plan
covered or previously covered by Title IV of ERISA that could become, after
the Closing Date, an obligation of Buyer or any of its affiliates. The InaCom
Employees Retirement Savings Plan and Trust, the Vanstar Corporation 401(k)
Plan, the Office Products of Minnesota Inc. 401(k) Plan, the National
Technology Group 401(k) Plan, the Computerland 401(k) Plan and the Mentor
Technologies Ltd. 401(k) Plan (the "SELLER 401(k) PLANS") have been
determined to be qualified under Section 401(a) of the Code and nothing has
occurred with respect to such plans since such determination that could
reasonably be expected to result in the loss of such qualification or
exemption from tax. Each plan loan outstanding under the Seller 401(k) Plans
is fully secured by the vested Plan account balance of the applicable
participant, and each such loan has been extended on such terms and
administered in such a manner as to avoid treatment as a distribution under
Section 72(p) of the Code.
(c) Neither Seller nor any of its subsidiaries is a party to or
subject to, or is currently negotiating in connection with entering into, any
collective bargaining agreement or other contract or understanding with a
labor union or labor organization.
(d) Neither Seller nor any of its subsidiaries has, in connection
with the Business, engaged any individual as an independent contractor or
made payments for services to be performed by any individual as an
independent contractor who
30
should be considered, under applicable law, an employee of (rather than an
independent contractor to) Seller or any of its subsidiaries.
SECTION 9.02. EMPLOYEES AND OFFERS OF EMPLOYMENT. For purposes of
this Agreement, "BUSINESS EMPLOYEES" shall mean the individuals described in
Schedule 9.02. As soon as practicable after the date hereof, Seller shall
provide Buyer with a list containing the names of all of the Business
Employees, and through the Closing Date Seller shall periodically revise such
list to include each Business Employee newly hired by Seller or its
affiliate, and to reflect termination of employment or similar personnel
changes. At Closing, Buyer or its affiliate shall offer employment, in a
comparable position and at the same rate of salary (or, if applicable, base
hourly rate), to each Business Employee who is actively employed as of the
Closing Date, and each inactive Business Employee who is on approved leave on
the Closing Date because of jury duty, family or medical leave, sick leave,
short-term disability, vacation or military duty; PROVIDED, HOWEVER, that
nothing contained herein is intended to confer upon any Business Employee any
right to continued employment after the Closing Date. Each Business Employee
who accepts (or is deemed to accept) employment with Buyer on the Closing
Date is referred to herein as a "TRANSFERRED EMPLOYEE". Seller hereby agrees
that neither Seller nor any affiliate shall (i) rehire or continue to employ
any Business Employee at any time prior to the first anniversary of the
Closing Date; or (ii) offer any Business Employee any severance or similar
benefits payable on termination of such Employees' employment by Seller or
its affiliate; PROVIDED, that this clause (ii) shall not apply with respect
to any Business Employee unless Buyer offers such Employee employment in
accordance with this Article 9, at a location no greater than 50 miles from
that in effect at the Closing Date.
SECTION 9.03. SELLER'S EMPLOYEE BENEFIT PLANS. (a) Seller shall
retain all obligations and liabilities under the Employee Plans and any other
benefit plan or arrangement of Seller or its affiliate in respect of each
employee or former employee (including any beneficiary thereof) who is not a
Transferred Employee. Except as expressly set forth herein, Seller or its
designated affiliate shall retain all liabilities and obligations in respect
of benefits accrued by Transferred Employees under the Employee Plans and any
other benefit plan or arrangement of Seller or its affiliate, and neither
Buyer nor any of its affiliates shall have any liability with respect
thereto. Except as expressly set forth herein, no assets of any Employee Plan
shall be transferred to Buyer or any of its affiliates or to any plan of
Buyer or any of its affiliates. Seller shall take all actions necessary
(including any necessary plan amendments) to cause accrued benefits or
account balances of Transferred Employees under the Seller 401(k) Plans to be
fully vested as of the Closing Date, and to provide that Transferred
Employees shall be entitled to the full benefit of any matching contribution
under the Seller 401(k) Plans for the plan year that includes the Closing
Date (the "CLOSING PLAN YEAR") attributable to
31
amounts actually deferred prior to the Closing Date by Transferred Employees
under the Seller 401(k) Plans during the Closing Plan Year, to the extent
consistent with the governing plan documents and the past practice of Seller,
excluding:
(i) any discretionary matching contribution determined after
the Closing Date; and
(ii) any nondiscretionary matching contribution the allocation
of which to a participant's account is conditioned on such
participant's being employed at the end of the Closing Plan Year.
(b) In the event that Seller reasonably determines that the
transactions contemplated by this Agreement constitute an event described in
Section 401(k)(10)(A)(ii) of the Code, Seller shall take all actions
necessary: (i) to permit Transferred Employees to elect to take distributions
(subject to applicable law) of their accounts thereunder in accordance with
the terms of such plans; and (ii) to the extent Transferred Employees so
elect, to roll over the amounts received from the Seller 401(k) Plans
(including, to the extent permissible under applicable law, any outstanding
loans) to an individual retirement account or to one or more defined
contribution retirement plans qualified under Section 401(a) of the Code and
maintained by Buyer or one of its affiliates (the "BUYER 401(k) PLANS").
Buyer shall cause the Buyer 401(k) Plans to accept such rollovers, PROVIDED
Buyer receives evidence reasonably acceptable to it that the Seller 401(k)
Plans are qualified under the applicable provisions of the Code. In the event
that Buyer and Seller reasonably determine that the transactions contemplated
by this Agreement do not constitute an event described in Section
401(k)(10)(A)(ii) of the Code, then as soon as practical following receipt by
Buyer and Seller of favorable determination letters or Buyer's certification
to Seller, and Seller's certification to Buyer, in a manner reasonably
acceptable to both Seller and Buyer, that Buyer's 401(k) Plans and Seller's
401(k) Plans are qualified under the applicable provisions of the Code,
Seller shall cause the trustee of Seller's 401(k) Plans to transfer, solely
in the form of cash or notes representing outstanding participant loans,
assets representing the full account balances of the Transferred Employees,
together with the appropriate net investment return (including unrealized
appreciation or depreciation) thereon, reduced by any necessary benefit or
withdrawal payments made in respect of Transferred Employees prior to the
actual date of transfer, to the trustee of Buyer's 401(k) Plans.
(c) With respect to the Transferred Employees (including any
beneficiary or dependent thereof), Seller shall retain (i) all liabilities
and obligations arising under any group life, accident, medical, dental or
similar arrangement (whether or not insured) to the extent that such
liability or obligation relates to claims that are covered by such
arrangements and incurred (whether or
32
not reported), prior to the Closing Date, and (ii) all liabilities and
obligations arising under any worker's compensation arrangement to the extent
such liability or obligation relates to claims incurred prior to the Closing
Date, including liability for any retroactive worker's compensation premiums
attributable to such period. With respect to Transferred Employees (including
beneficiaries or dependents thereof), Buyer or its affiliate shall be
responsible, in accordance with the terms of its benefit plans and
arrangements, for (I) all liabilities and obligations arising under any group
life, accident, medical, dental or similar arrangement (whether or not
insured) to the extent that such liability or obligation relates to claims
that are covered by such arrangements and incurred (whether or not reported)
on or after the Closing Date, and (II) all liabilities and obligations
arising under any worker's compensation arrangement to the extent such
liability or obligation relates to claims incurred on or after the Closing
Date, including liability for any retroactive workers' compensation premiums
attributable to such period. Buyer shall assume all liabilities and
obligations of Seller under any vacation or sick leave plan or arrangement
with respect to Transferred Employees, to the extent such liabilities are
reflected on the Closing Statement. Buyer shall assume all liabilities of
Seller under any nonqualified deferred compensation plan or arrangement with
respect to Transferred Employees, but only to the extent such liabilities are
funded by means of a rabbi trust; and Seller shall, as soon as practicable
after the Closing Date, pay to Buyer, by wire transfer in a cash lump sum,
the full amount of such funding.
For purposes of this Section 9.03(c), claims shall be deemed to have
been incurred:
(A) with respect to all death or dismemberment claims, on the
actual date of death or dismemberment;
(B) with respect to all disability claims on the date the
claimant became unable to (x) perform his or her regular duties of
employment, in the case of an employee claimant, or (y) perform the
normal day-to-day responsibilities that would reasonably be expected of
someone of similar age and lifestyle, in the case of a dependent
claimant;
(C) with respect to sick leave claims, on each day for which
sick leave benefits are payable to the claimant;
(D) with respect to all medical, drug or dental claims, on the
date the service was received or the supply was purchased by the
claimant; provided, however, a medical claim relating to a claimant's
hospitalization shall be deemed to be incurred on the date the claimant
was first hospitalized; and
33
(E) with respect to workers' compensation claims, on the date
the incident occurred.
SECTION 9.04. BUYER BENEFIT PLANS. As of the Closing Date, each
Transferred Employee shall become a participant in all employee benefit plans
of Buyer (or comparable employee benefit plans of its affiliate) on the same
terms and conditions as similarly situated employees of Buyer, to the extent
such Transferred Employee satisfies the applicable eligibility requirements
under such plans. Transferred Employees shall participate under Buyer's
"welfare plans" (within the meaning of Section 3(1) of ERISA) as of the
Closing Date without any waiting periods, evidence of insurability, or the
application of any preexisting physical or mental condition restrictions
(except, in each case, to the extent applicable and unsatisfied under
Seller's welfare plans, and except to the extent otherwise required for
coverage by Buyer's long-term disability insurance carrier); and, to the
extent relevant, Buyer shall provide credit for claims incurred during 2000
and prior to the Closing Date for purposes of applying deductibles, co-
payments, out-of-pocket maximums, and benefit maximums. Buyer or one of its
affiliates will recognize all service of the Transferred Employees with
Seller or any of its affiliates, only for purposes of: (i) eligibility to
participate and vesting, under those employee benefit plans (within the
meaning of Section 3(3) of ERISA) in which the Transferred Employees are
eligible to participate, and are in fact participating, on and after the
Closing Date; and (ii) level of benefits, under any vacation or sick leave
plan in which the Transferred Employees are eligible to participate, and are
in fact participating, on and after the Closing Date. With respect to any
Transferred Employee who participates in an Employee Plan which is a
"flexible spending arrangement," within the meaning of Proposed Treasury
Regulation Section 1.125-2 (a "SELLER FSA"), Buyer or its affiliate shall
permit such Transferred Employee to continue to participate after the Closing
Date in a flexible spending account maintained by Buyer, and shall credit
such Transferred Employee with an account balance equivalent to that which
applied, as of the Closing Date, to the Transferred Employee under the
applicable Seller FSA. As soon as practicable after the Closing Date, either
Seller shall pay to Buyer the amount described in "X" below, or Buyer shall
pay to Seller the amount described in "Y" below, whichever is applicable, in
either case by wire transfer in a cash lump sum. For this purpose, "X" shall
mean the amount, if any, by which the aggregate amount deferred through such
date by Transferred Employees under the Seller FSAs during the plan year in
which the Closing Date occurs exceeds aggregate claims paid for such year on
behalf of such Transferred Employees under the Seller FSAs; and "Y" shall
mean the amount, if any, by which aggregate claims paid for such year on
behalf of Transferred Employees under the Seller FSAs exceeds the aggregate
amount deferred through the Closing Date by Transferred Employees under the
Seller FSAs during such year.
34
SECTION 9.05. INACTIVE EMPLOYEES. Seller shall retain all liability
with respect to Business Employees who are absent from active employment on
the Closing Date other than for the reasons expressly stated in the third
sentence of Section 9.02 (any such employee, an "INACTIVE BUSINESS
EMPLOYEE"). Subject to applicable law, if any Inactive Business Employee
returns directly from such leave of absence to active employment, then from
and after the date of such return such Inactive Business Employee shall be
treated as a Transferred Employee under this Article 9, applying this Article
with respect to such Inactive Business Employee by substituting the date of
his or return to active employment for the Closing Date, where applicable
hereunder.
SECTION 9.06. SEVERANCE BENEFITS. Buyer agrees that, in the event
any Transferred Employee is terminated by Buyer during the one-year period
immediately following the Closing Date, Buyer shall provide such Transferred
Employee with a severance benefit which is not less than the cash separation
payment that would have been provided for by Seller's severance pay policy
and the severance agreements between Seller and certain Transferred Employees
as listed in Schedule 9.06, had such Transferred Employee been terminated
under the same circumstances by the Seller immediately prior to the Closing
Date, but only to the extent the terms of such severance pay policy and
severance agreements have been fully disclosed to Buyer prior to the date
hereof.
SECTION 9.07. COBRA. Seller shall retain all obligations and
liabilities arising under Section 601 of ERISA or Section 4980B of the Code
which result from the termination of employment of any employee of Seller or
its affiliate, including without limitation any such obligations or
liabilities which result from the termination of employment of any Business
Employee on or prior to the Closing. Buyer shall have sole responsibility for
all obligations and liabilities arising under Section 601 of ERISA or Section
4980B of the Code with respect to all Transferred Employees, and "qualified
beneficiaries" of Transferred Employees, for whom a "qualifying event" has
occurred after the Closing Date. The terms "qualified beneficiaries" and
"qualifying event" shall have the meaning ascribed to them under Section
4980B of the Code and Sections 601-608 of ERISA.
SECTION 9.08. CONTINUATION OF CERTAIN ADMINISTRATIVE SERVICES AND
INSURANCE COVERAGE. To the extent (i) requested by Buyer in writing prior to
the Closing Date and (ii) the Closing occurs within 30 days (or, if the
Seller fails to comply with its obligations under the last sentence of this
Section 9.08, 60 days) after the date of this Agreement (such 30- or 60-day
period, the "POST-SIGNING PERIOD"), Seller agrees to (A) continue to provide
certain administrative services in respect of the Transferred Employees as
reasonably necessary for Buyer to conduct the Business, which shall be
limited to payroll services, record keeping
35
services and claims processing services and (B) to cover Transferred
Employees under the Employee Plans which constitute "welfare plans" within
the meaning of Section 3(1) of ERISA and which provide for insurance
coverage, to the extent such coverage is permitted under the terms of such
plans and the applicable insurance contracts, and to provide claims
processing services in respect of the Transferred Employees in both cases for
the duration of the Post-Signing Period or, in either case, until such
earlier time as Buyer or its designated affiliate can assume responsibility
for such insurance and administrative services in an orderly manner. Buyer
agrees to reimburse Seller, within seven business days after its receipt from
Seller of an invoice with respect to such services, for any and all of
Seller's costs and all other expenses reasonably incurred in continuing to
provide such insurance and administrative services, including, without
limitation, insurance premiums, cost of direct claims reimbursement under any
self-insured plans and a reasonable share of all other related administrative
and other costs and expenses of any nature whatsoever. Such continuation of
insurance and administrative services shall not affect the allocation of
liabilities and obligations as set forth in this Article 9. Buyer shall use
all reasonable efforts to arrange for such insurance and administrative
services as promptly as possible in order to avoid using Seller's services
under this Section; and Seller shall use all reasonable efforts to provide
Buyer, as promptly as possible, with computer tapes, data or other payroll or
other information necessary for Buyer to assume responsibility for such
insurance and administrative services.
SECTION 9.09. SHORT TERM DISABILITY. Notwithstanding anything to the
contrary in this Article 9, the following provisions shall apply with respect
to any Business Employee who is absent from work on the Closing Date by
reason of short-term disability, within the meaning of the applicable
Employee Plan covering such Business Employee (an "STD EMPLOYEE"): At
Closing, Buyer or its affiliate shall offer employment, contingent on
returning to work, to each STD Employee in accordance with the third sentence
of Section 9.02, and Seller shall comply with the requirements set forth in
the last sentence of Section 9.02 with respect to such STD Employee
(substituting such STD Employee's Return Date, as defined below, for the
Closing Date). The date on which any STD Employee returns directly from
disability leave of absence to active employment shall be referred to
hereunder as such STD Employee's "RETURN DATE". Any STD Employee who accepts
Buyer's or its affiliate's offer of employment as of his or her Return Date
shall be treated as a Transferred Employee under this Article 9, applying
this Article with respect to such STD Employee by substituting his or her
Return Date for the Closing Date where applicable hereunder. Until his or her
Return Date, each STD Employee shall continue to be employed by Seller or its
affiliate and covered under the Employee Plans and other benefit arrangements
of Seller and its affiliates in accordance with their terms. Until each STD
Employee's Return Date, Buyer or its affiliate shall reimburse Seller or its
affiliate for one-half of the cost of any employee benefit incurred on or
after the Closing
36
Date with respect to such STD Employee which is: (i) incurred in the ordinary
course of business under an Employee Plan; and (ii) not provided through the
purchase of insurance. For this purpose, medical and dental benefits shall be
treated as provided through the purchase of insurance. Seller shall not take
any action that would impair or diminish the coverage of any STD Employee
under any applicable plan or policy of insurance.
SECTION 9.10. FOREIGN BENEFIT PLANS. Buyer and Seller agree to
cooperate and to take all actions reasonably necessary to effectuate the
transfer, where (i) permissible and consistent with common practice or (ii)
required by law, from Seller or one of its affiliates to Buyer or one of its
affiliates (or from a plan or trust maintained by Seller or one of its
affiliates to a plan or trust maintained by Buyer or one of its affiliates)
of assets (and corresponding liabilities) attributable to Transferred
Employees under any Employee Plan maintained primarily for the benefit of
employees resident outside the United States ("NON-U.S. BUSINESS EMPLOYEES").
Any liability that Buyer or its affiliate is required by law to assume with
respect to Non-U.S. Business Employees by virtue of the transactions
contemplated by this Agreement which is not fully offset by a transfer of
assets pursuant to the preceding sentence shall be reflected as a liability
on the Closing Statement; PROVIDED, that if such liability (determined
without reduction for any such transfer of assets) as reasonably computed by
the parties no later than seven days prior to the Closing Date exceeds
$500,000 in the aggregate, Buyer may elect, on notice given no later than
five days before the Closing Date, to assume such excess or cause all such
Non-U.S. Business Employees not to be treated as Business Employees (in which
case such Non-U.S. Business Employees shall be made available by Seller for
secondment to Buyer after the Closing Date, at Buyer's election, the
post-closing employment-related costs of such seconded employees to be borne
by Buyer); PROVIDED, that Seller may nevertheless cause such employees to be
treated as Business Employees if it, upon notice given to Buyer on or before
the Closing Date, pays such excess to Buyer. Seller shall promptly (and in
any event no later than 10 days after the date hereof) furnish Buyer with
full and complete information concerning the identities and locations of the
Non-U.S. Business Employees (nothing in this sentence being deemed to limit
Seller's ability to hire employees in the ordinary course of its business);
benefit, compensation, severance and similar plans, commitments or
obligations with respect thereto; and workers councils or similar
organizations applicable to the Non-U.S. Business Employees.
SECTION 9.11. COOPERATION. Seller and Buyer agree to cooperate with
each other in good faith in effectuating the provisions of this Article 9,
and to furnish each other promptly with such information concerning employees
and employee benefit plans, arrangements or policies as is necessary and
appropriate to carry out the terms hereof. Without limiting the foregoing,
Seller agrees to
37
provide Buyer with a reasonable opportunity to communicate with Business
Employees prior to the Closing Date.
SECTION 9.12. NO THIRD PARTY BENEFICIARIES. No provision of this
Article 9 shall create any third party beneficiary or other rights in any
employee or former employee (including any beneficiary or dependent thereof)
of Seller or of any of its subsidiaries in respect of continued employment
(or resumed employment) with either Buyer or any of its affiliates and no
provision of this Article 9 shall create any such rights in any such persons
in respect of any benefits that may be provided, directly or indirectly,
under any Employee Plan or any plan or arrangement which may be established
by Buyer or any of its affiliates. No provision of this Agreement shall
constitute a limitation on rights to amend, modify or terminate after the
Closing Date any such plans or arrangements of Buyer or any of its affiliates.
ARTICLE 10
CONDITIONS TO CLOSING
SECTION 10.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY. The
obligations of Buyer and Seller to consummate the Closing are subject to the
satisfaction of the following conditions:
(a) Any applicable waiting period under the HSR Act relating to the
transactions contemplated hereby shall have expired or been terminated.
(b) No provision of any applicable law or regulation and no
judgment, injunction, order or decree of a court of competent jurisdiction
shall prohibit or enjoin the consummation of the Closing.
(c) Buyer and the Board of Directors of Seller shall have received a
customary opinion of a nationally recognized investment banking or appraisal
firm, in form and substance reasonably satisfactory to Buyer and such Board ,
regarding the solvency of Seller after the Closing, including that the fair
value of Seller's assets would exceed Seller's liabilities, Seller would be
able to pay its debts as they become due and Seller's remaining capital would
not be unreasonably small for its business.
SECTION 10.02. CONDITIONS TO OBLIGATION OF BUYER. The obligation of
Buyer to consummate the Closing is subject to the satisfaction of the
following further conditions:
38
(a) (i) Seller shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Closing Date and (ii) the representations and warranties of Seller contained
in this Agreement, disregarding all qualifications and exceptions contained
therein relating to materiality or Material Adverse Effect, shall be true at
and as of the Closing Date, as if made at and as of such date with only such
exceptions as would not in the aggregate reasonably be expected to have a
Material Adverse Effect.
(b) There shall not be any injunction, judgment, order or decree of
a court of competent jurisdiction entered, or any law, rule or regulation
enacted, adopted, amended or deemed applicable that prohibits the Closing or
is reasonably likely to have a Material Adverse Effect, or a material adverse
effect on Buyer and its affiliates , taken as a whole, or the ability of
Buyer to own and exercise control over the Business after the Closing;
(c) The Amendment and Waiver shall have become effective (assuming
the Closing hereunder shall have occurred), or Seller shall have at Closing
available funds sufficient (i) to effect all necessary refinancing of all
outstanding indebtedness under the Credit Agreement that is required as a
result of the transactions contemplated by this Agreement and to pay all
related fees and expenses and (ii) to provide reasonable working capital to
Seller's business after the Closing.
(d) Execution and delivery by Seller of the Services, Supply and
Sales Agreement in the form and substance set forth as Exhibit C hereto (the
"SERVICES, SUPPLY AND SALES AGREEMENT");
(e) (i) Seller shall have received all Required Consents, in each
case in form and substance reasonably satisfactory to Buyer and without
imposing any incremental costs on Buyer, and no such consent, authorization
or approval shall have been revoked or be subject to revocation and (ii)
material terms of any lease of Real Property not subject to a Required
Consent shall not have been changed to impose any incremental costs to Buyer.
(f) Buyer shall have (i) obtained at its sole cost an ALTA extended
coverage form of leasehold owner's title insurance policies, or binders to
issue the same, dated the Closing Date and in amounts satisfactory to Buyer
insuring or committing to insure, at ordinary premium rates without any
requirement for additional premiums, title to the Real Property as indicated
by an asterisk in Schedule 3.12(a), free and clear of any Liens, except for
Permitted Liens and Liens disclosed on Schedule 3.12(b); PROVIDED that the
condition in this clause (i) will be deemed satisfied without regard to any
Liens that may exist on landlord's interest and (ii) received evidence
reasonably satisfactory to it that all Liens on
39
any of the Purchased Assets arising under any of Seller's indebtedness for
borrowed money that is not an Assumed Liability shall have been released,
including without limitation duly executed partial releases under all
applicable UCC financing statements.
(g) Buyer shall have received on or before the Closing Date an
opinion of Xxxxxxx Xxxx & Xxxxxxxxx and an opinion of Xxxxxxxx Xxxxxx &
Finger, in each case in the form provided to Buyer prior to the date hereof.
SECTION 10.03. CONDITIONS TO OBLIGATION OF SELLER. The obligation of
Seller to consummate the Closing is subject to the satisfaction of the
following further conditions:
(a) (i) Buyer shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Closing Date and (ii) the representations and warranties of Buyer contained
in this Agreement shall be true in all material respects at and as of the
Closing Date, as if made at and as of such date.
(b) The Amendment and Waiver shall have become effective (assuming
the Closing hereunder shall have occurred), or Seller shall have refinanced
all outstanding indebtedness under the Credit Agreement on terms that in the
aggregate are not, in Seller's reasonable judgment, materially more adverse
to Seller than the terms under the Amendment and Waiver.
(c) Execution and delivery by Buyer of the Services, Supply and
Sales Agreement in the form and substance set forth as Exhibit C hereto.
ARTICLE 11
SURVIVAL; INDEMNIFICATION
SECTION 11.01. SURVIVAL. The representations and warranties of the
parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall not survive
the Closing; PROVIDED that the representations and warranties contained in
Section 3.13 shall survive indefinitely.
SECTION 11.02. INDEMNIFICATION. (a) Seller hereby indemnifies Buyer
and its affiliates and their respective directors, officers, employees and
agents against and agrees to hold each of them harmless from any and all
damage, loss, liability and expense (including reasonable expenses of
investigation and
40
reasonable attorneys' fees and expenses in connection with any action, suit
or proceeding) ("DAMAGES") incurred or suffered by any such person arising
out of:
(i) any misrepresentation or breach of warranty made by Seller
contained in Section 3.13;
(ii) any breach of covenant or agreement made or to be
performed by Seller pursuant to this Agreement; or
(iii) any Excluded Liability.
(b) Buyer hereby indemnifies Seller and its affiliates and their
respective directors, officers, employees and agents against and agrees to
hold each of them harmless from any and all Damages incurred or suffered by
any such person arising out of:
(i) any breach of covenant or agreement made or to be
performed by Buyer pursuant to his Agreement; or
(ii) any Assumed Liability.
SECTION 11.03. PROCEDURES. The party seeking indemnification under
Section 11.02 (the "INDEMNIFIED PARTY") agrees to give prompt notice to the
party against whom indemnity is sought (the "INDEMNIFYING PARTY") of the
assertion of any claim, or the commencement of any suit, action or proceeding
in respect of which indemnity may be sought under such Section. The
Indemnifying Party may at the request of the Indemnified Party participate in
and control the defense of any such suit, action or proceeding at its own
expense. The Indemnifying Party shall not be liable under Section 11.02 for
any settlement effected without its consent of any claim, litigation or
proceeding in respect of which indemnity may be sought hereunder.
ARTICLE 12
TERMINATION
SECTION 12.01. GROUNDS FOR TERMINATION. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written agreement of Seller and Buyer; or
(b) by either Seller or Buyer,
41
(i) if the Closing shall not have been consummated on or
before March 31, 2000; PROVIDED that the right to terminate this
Agreement pursuant to this Section 12.01(b)(i) shall not be available
to any party whose breach of any provision of this Agreement results in
the failure of the Closing to be consummated by such time; or
(ii) if there shall be any law or regulation that makes
consummation of the transactions contemplated hereby illegal or
otherwise prohibited or if consummation of the transactions
contemplated hereby would violate any nonappealable final judgment,
injunction, order or decree of any court of competent jurisdiction.
The party desiring to terminate this Agreement pursuant to clause
12.01(b) shall give notice of such termination to the other party.
SECTION 12.02. EFFECT OF TERMINATION. If this Agreement is
terminated pursuant to Section 12.01, this Agreement shall become void and of
no effect with no liability on the part of any party hereto; PROVIDED that no
such termination shall relieve any party of any liability or damages
resulting from (i) any action taken by such party that, to such party's
knowledge after reasonable inquiry, would, or would likely result in a,
breach of any covenant hereunder or (ii) any inaccuracy in the
representations and warranties of such party as of the date hereof that would
constitute a failure to satisfy the conditions in Section 10.02(a)(ii) or
10.03(a)(ii), as applicable, if at the date hereof such party had or would
have had, after reasonable inquiry, knowledge of such inaccuracy. The
provisions of Section 13.03, 13.05, 13.06 and 13.07 shall survive any
termination hereof pursuant to Section 12.01.
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including
facsimile transmission) and shall be given,
42
if to Parent or Buyer, to:
Compaq Computer Corporation
20555 S.H. 249 MS110701
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxx Xxxxxxx
Fax: (000) 000-0000
with copies to:
Compaq Computer Corporation
20555 S.H. 249 MS110701
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx
Fax: (000) 000-0000
and
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx Xxxxx, Esq.
Fax: (000) 000-0000
if to Seller, to:
InaCom Corp.
00000 Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
All such notices, requests and other communications shall be deemed received
on the date of receipt by the recipient thereof if received prior to 5 p.m.
in the place of receipt and such day is a business day in the place of
receipt. Otherwise, any
43
such notice, request or communication shall be deemed not to have been
received until the next succeeding business day in the place of receipt.
SECTION 13.02. AMENDMENTS AND WAIVERS. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed, in the case of an amendment, by each party to
this Agreement, or in the case of a waiver, by the party against whom the
waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 13.03. FEES AND EXPENSES. Except as otherwise provided in
this Agreement, all costs and expenses incurred in connection with this
Agreement shall be paid by the party incurring such cost or expense. If the
Closing occurs, Buyer and Seller shall share equally the cost of obtaining
the opinion referenced in Section 10.01(c).
SECTION 13.04. SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; PROVIDED that no party
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the consent of each other party hereto, except
that Buyer may transfer or assign, in whole or from time to time in part, to
one or more of its affiliates, the right to purchase all or a portion of the
Purchased Assets, but no such transfer or assignment will relieve Buyer of
its obligations hereunder.
SECTION 13.05. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the law of the State of New York without
regard to the conflicts of law rules of such state.
SECTION 13.06. JURISDICTION. Except as otherwise expressly provided
in this Agreement, the parties hereto agree that any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be brought in the United States District Court for
the Southern District of New York or any New York State court sitting in New
York City, so long as such courts shall have subject matter jurisdiction over
such suit, action or proceeding, and each of the parties hereby irrevocably
consents to the jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and irrevocably
waives, to the fullest extent permitted by law, any
44
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought in
an inconvenient forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 13.01
shall be deemed effective service of process on such party.
SECTION 13.07. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 13.08. COUNTERPARTS; THIRD PARTY BENEFICIARIES. This
Agreement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Agreement shall become effective when
each party hereto shall have received a counterpart hereof signed by the
other party hereto. No provision of this Agreement is intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
SECTION 13.09. ENTIRE AGREEMENT. This Agreement, the Fulfillment
Agreement, the Services, Supply and Sales Agreement, the agreements
contemplated by Section 7.07 and the Confidentiality Agreement constitute the
entire agreement between the parties with respect to the subject matter of
this Agreement and supersedes all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter of
this Agreement.
SECTION 13.10. BULK SALES LAWS. Buyer and Seller each hereby waive
compliance by Seller with the provisions of the "bulk sales", "bulk transfer"
or similar laws of any state.
SECTION 13.11. PARENT GUARANTEE. Parent hereby agrees to guarantee
Buyer's obligations to Seller, in accordance with the terms of this
Agreement, for payment of the Purchase Price under Article 2 and any
indemnification amounts under Section 11.02(b).
SECTION 13.12. SCHEDULES. Reference to any Schedule in Article 3
shall be deemed a reference to the applicable section of the disclosure
schedule provided by Seller to Buyer on or prior to the date hereof.
45
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
INACOM CORP.
By:______________________________________
Xxxxxx X. Xxxxxxxxx
President and Chief Executive Officer
COMPAQ COMPUTER
CORPORATION
By:______________________________________
Xxxxxxx X. Xxxxxxx
Senior Vice President and
Group Manager
ITY CORP.
By:______________________________________
Xxxxxxx X. Xxxxxxx
President
46
EXHIBIT A
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of ________ __, 2000,
between InaCom Corp., a Delaware corporation ("SELLER"), and ITY Corp., a
Delaware corporation ("BUYER").
W I T N E S S E T H :
WHEREAS, Buyer and Seller have concurrently herewith consummated the
purchase by Buyer of the Purchased Assets pursuant to the terms and
conditions of the Asset Purchase Agreement dated as of January __, 2000 (the
"ASSET PURCHASE AGREEMENT"; terms defined in the Asset Purchase Agreement and
not otherwise defined herein being used herein as therein defined);
WHEREAS, pursuant to the Asset Purchase Agreement, Buyer has agreed
to assume certain liabilities and obligations of Seller;
NOW, THEREFORE, in consideration of the sale of the Purchased Assets
and in accordance with the terms of the Asset Purchase Agreement, Buyer and
Seller agree as follows:
1. (a) Seller does hereby sell, transfer, assign and deliver to
Buyer all of the right, title and interest of Seller in, to and under the
Purchased Assets; provided that no sale, transfer, assignment or delivery
shall be made of any or any material portion of any of the agreements or
Permits if an attempted sale, assignment, transfer or delivery, without the
consent of a third party, would constitute a breach or other contravention
thereof or in any way adversely affect the rights of Buyer or Seller
thereunder. The foregoing sale, transfer, assignment and delivery is made
without representation, warranty or recourse of any kind, except as set forth
in the Asset Purchase Agreement.
(b) Buyer does hereby accept all the right, title and interest of
Seller in, to and under all of the Purchased Assets (except as aforesaid) and
Buyer assumes and agrees to pay, perform and discharge promptly and fully
when due all of the Assumed Liabilities.
47
2. This Agreement shall be governed by and construed in accordance
with the law of the State of New York, without regard to the conflicts of law
rules of such state.
3. This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
INACOM CORP.
By:______________________________________
Name:
Title:
ITY CORP.
By:______________________________________
Name:
Title:
49
SCHEDULE 1.01
DEFINITION OF THE BUSINESS
The Business means the following businesses currently conducted by
Seller and its subsidiaries:
- Configuration and distribution operations, including:
- Distribution center and distribution services
- Configuration and configuration support
- Central sales
- Project and technology project management
- Purchasing
- Quality assurance
- Traffic
- Memphis distribution and configuration activities
- Microsoft project
- Asset recovery
- Bid desk
- Client services
- Operations - International
- Loss prevention
- Reseller business, other than (1) obligations under franchise
and TMS franchise agreements and (2) in Latin America
- Tangible assets and liabilities of Government services unit,
but not including Sysorex goodwill.(1)
- Information technology systems and applications, but only to
the extent allocated to Buyer under Section 7.07.
- International Operations as follows:
- Project management activities located in Omaha,
Nebraska and, if any, in Luxembourg
- Canadian operations (solely through Buyer's purchase
of Seller's 19% interest in InaCom Information
Systems, Ltd., a Canadian entity).(2)
- Boston Computer Exchange
The Business does not include the following (the "EXCLUDED BUSINESS"):
- Services organization, excluding procurement.
______________________
(1) Buyer has an option within three weeks of the date hereof to delete
this item from the definition of "BUSINESS" if Buyer reasonably concludes
after review and upon notice to Seller on or prior to the end of such
three-week period that contracts representing a substantial portion of the
Government business are not assignable without consent and not likely to be
consented to within a customary period of time needed for obtaining such
consents, including novations if necessary.
(2) Buyer has an option within two weeks of the date hereof to delete
this item from the definition of the "Business".
1
- Product and service field sales force.
- Communications group.
- Franchisees (including TMS) business, including sales offices
and equity investments in or loans or advances to franchisees.
- Latin American reseller business.
- Rentals business.
- Europe business.
2
SCHEDULE 2.01
PURCHASED ASSETS
_______________________________________________________________________________
ITEM PURCHASED ASSETS
_______________________________________________________________________________
CASH AND CASH - None
EQUIVALENTS
_______________________________________________________________________________
ACCOUNTS RECEIVABLE
- Trade - All non-direct product accounts receivable,
other than those arising out of (1) Communications
group, (2) Latin America and (3) Europe
- Government receivables
- Boston Computer Exchange receivables.
- Vendor - All accounts receivable due from Compaq.
- Securitization - None.
_______________________________________________________________________________
INVENTORY
- All product inventory, other than non-committed
inventory related to the following vendors and
businesses: IBM, HP, Dell, Toshiba and the Excluded
Business (as defined on Schedule 1.01)
- All HP printer inventory.
- All committed product inventory.
- Boston Computer Exchange inventory.
_______________________________________________________________________________
OTHER CURRENT ASSETS
- Prepaids - None.
- Deferred Taxes - None.
- Other - None.
_______________________________________________________________________________
1
_______________________________________________________________________________
ITEM PURCHASED ASSETS
_______________________________________________________________________________
FIXED ASSETS - All assets primarily used by the Business or the
Transferred Employees.
- Leasehold interests and all fixed assets and
equipment associated with the following:
- Distribution and configuration centers and
central sales call centers in (1) Omaha,
Nebraska, (2) Indianapolis, Indiana, (3)
Swedesboro, New Jersey and (4) Ontario,
California.
- Tech center in Omaha, Nebraska, excluding
personnel and assets not associated with
information technology or distribution. See
Section 7.07 for allocation of use of this
facility.(3)
- Gateway building in Omaha, Nebraska. See
Section 7.07 for allocation of use of this
facility.
- Corporate headquarters in Omaha, Nebraska.
See Section 7.07 for allocation of use of
this facility.
- Livermore, California facility.
- Memphis, Tennessee facility.
- Boston Computer Exchange.
- Distribution center in Singapore.
_______________________________________________________________________________
INTANGIBLES - None.
_______________________________________________________________________________
OTHER ASSETS
- Other - 19% interest in InaCom Information Systems, Ltd., a
Canadian entity, and option to purchase remainder.(4)
- Deferred Taxes - None.
_______________________________________________________________________________
------------------
(3) If landlord consent to transfer of the Tech Center has not been
received by Closing, the Tech Center shall become an Excluded Asset and Seller
shall sublease it to Buyer.
(4) Buyer has option within two weeks of the date hereof to delete this
item from the definition of "Purchased Assets" and to add it to the definition
of "Excluded Assets". If this item is to be included, Buyer will purchase
Seller's 19% equity interest in InaCom Information Systems, Ltd., and not the
underlying assets.
2
SCHEDULE 2.02
EXCLUDED ASSETS
_______________________________________________________________________________
ITEM EXCLUDED ASSETS
_______________________________________________________________________________
CASH AND CASH - All.
EQUIVALENTS
_______________________________________________________________________________
ACCOUNTS RECEIVABLE
- Trade - All direct product accounts receivable (other than
Government receivables and Boston Computer Exchange
receivables).
- All accounts receivable arising out of (1)
Communications group, (2) Latin America and (3)
Europe.
- Vendor - All accounts receivable other than those due from
Compaq.
- Securitization - All.
_______________________________________________________________________________
INVENTORY
- All non-committed product inventory related to
the following vendors and businesses: IBM, HP,
Dell, Toshiba and the Excluded Business.
_______________________________________________________________________________
OTHER CURRENT ASSETS
- Prepaids - All.
- Deferred Taxes - All.
- Other - All.
_______________________________________________________________________________
FIXED ASSETS - All assets primarily used by the Excluded Business.
- Leasehold interests and all fixed assets and
equipment associated with the following:
- Services call centers in (1) Tempe,
Arizona, (2) Atlanta, Georgia and (3)
Omaha, Nebraska.
- Branch offices.
- Xxxxxxx repair facility.
- South Building in Omaha, Nebraska.
- Atlanta Facilities.
- Corporate airplane.
_______________________________________________________________________________
INTANGIBLES - All intangibles (including goodwill and InaCom name
and logo).
_______________________________________________________________________________
OTHER ASSETS
- Other - All losses, loss carryforwards and rights to receive refunds,
credits and loss carryforwards with respect to any and all
Taxes of Seller that constitute Excluded Liabilities,
including any interest receivable with respect thereto.
- Stock in any subsidiary of Seller, other than
pursuant to
_______________________________________________________________________________
3
Buyer's option on the Canadian entity.
- Desktops for all employees other than Transferred
Employees.
- Any receivables from Seller.
-Deferred Taxes - All.
_______________________________________________________________________________
- Other - Monies or other properties received by Seller as a
result of affirmative claims made by Seller against
third parties for the matters set forth in Schedule
3.10.
- Authorizations to do business.
- If Buyer elects not to acquire the Canadian
interest or the Government unit, those items will
become Excluded Assets.
_______________________________________________________________________________
4
SCHEDULE 2.03
ASSUMED LIABILITIES
_______________________________________________________________________________
ITEM ASSUMED LIABILITIES
_______________________________________________________________________________
ACCOUNTS PAYABLE - All accounts payable related to the following vendors and
businesses: Compaq, Microsoft, Xxxxxx, Tech Data, 3Com,
Lexmark, other 3rd party product vendors, reseller business,
and Boston Computer Exchange business.
- Liabilities under the Agreement for Wholesale Financing
with Deutsche Financial Services Corp. dated as of
December 24, 1998, as amended on May 25, 1999 and
December 23, 1999.
- Government payables.
_______________________________________________________________________________
NOTES PAYABLE None.
_______________________________________________________________________________
OTHER CURRENT
LIABILITIES
- Accrued liabilities - See Article 9 relating to compensation and benefits.
- Taxes payable. - None.
- Accrued other - See Article 9 relating to compensation and benefits.
_______________________________________________________________________________
LONG TERM DEBT - None.
_______________________________________________________________________________
PREFERRED STOCK - None.
_______________________________________________________________________________
5
SCHEDULE 2.04
EXCLUDED LIABILITIES
_______________________________________________________________________________
ITEM EXCLUDED LIABILITIES
_______________________________________________________________________________
ACCOUNTS PAYABLE - All accounts payable related to the following vendors and
businesses: IBM, Hewlett-Packard, Dell, Toshiba,
Lucent, rental business, international businesses,
Inacom Latin America, Oracle A/P (administrative
payables).
- Liabilities under Agreement for Inventory Financing with
IBM Credit Corporation dated as of April 27, 1998.
- Accounts payable to Compaq or its affiliates for which
checks have been written, but not yet released to Buyer by
Seller (provided such checks will be delivered in
the ordinary course).
_______________________________________________________________________________
NOTES PAYABLE All.
_______________________________________________________________________________
OTHER CURRENT
LIABILITIES
- Accrued liabilities - All, other than as provided in Article 9 relating to
compensation and benefits.
- All intangibles or liabilities associated with Sysorex.
- Taxes payable. - All.
- Accrued other - All, other than as provided in Article 9 relating to
compensation and benefits.
_______________________________________________________________________________
LONG TERM DEBT - All.
_______________________________________________________________________________
PREFERRED STOCK - All.
_______________________________________________________________________________
OTHER - Any liabilities relating to any Vanstar litigation.
- Any liabilities relating to earn out or contingent payment
obligations arising from pre-closing acquisitions.
- Any liabilities relating to litigation (whether pending,
threatened or settled) disclosed in Schedule 3.10.
- Computer Associates software license obligations.
- Any payable to Seller.
_______________________________________________________________________________
6
SCHEDULE 7.07
Information Technology
Physical Separation and Sharing of Common Costs
Both Inacom and Compaq (the "PARTIES") recognize that while the
Information Technology infrastructure is being physically separated, both
Parties will be required to share the cost of certain personnel and assets.
All cost sharing will be based on actual direct costs, with no markup or
loading of indirect costs of any sort.
During the period beginning on the signing date and ending on the
Closing Date, the Parties undertake to initiate and complete a classification
of all Information Technology personnel and assets as either (a) dedicated
solely to the Business (the "BUSINESS PERSONNEL AND THE BUSINESS ASSETS"),
(b) dedicated solely to the Excluded Business (the "EXCLUDED BUSINESS
PERSONNEL AND THE EXCLUDED BUSINESS ASSETS"), or (c) jointly supporting both
the Business and the Excluded Business (the "JOINT PERSONNEL AND JOINT
ASSETS").
Excluded Business Personnel remain employees of Inacom and Excluded
Business Assets become Excluded Assets at the Closing Date. Each Party will
bear the cost of their respective personnel and assets.
With respect to Joint Personnel and Joint Assets (a) the Parties
agree to jointly prepare a time schedule within which to achieve physical
separation, and (b) share the costs of such personnel and assets, using a
percentage to be determined monthly, during the period that such personnel
and assets are jointly employed. As Joint Personnel or Joint Assets are no
longer required, each Party will share equally in the termination cost of the
Joint Personnel or the disposal cost of the Joint Asset. If either party
elects to assume complete responsibility for a Joint Personnel or Joint
Asset, such party will settle up with the other based on the original
classification or accounting at the Closing Date.
In any event, both Parties agree that time is of the essence in
achieving separation and that in any event, all separation activities will be
completed no later than 12 months after the Closing Date.
7
Administrative Services
Jointly Provided Services
The Parties recognize that subsequent to closing, the temporary
services of administrative support personnel will be required until such time
as complete physical separation can be achieved. The Parties agree to share
the cost of such personnel based on periodic estimates of the amount of time
devoted to each. All cost sharing will be based on actual direct salary,
benefit and insurance costs, with no markup or loading of indirect costs of
any sort.
During the period beginning on the signing date and ending on the
Closing Date, Inacom and Compaq (the "PARTIES") undertake to initiate and
complete a classification of all Administrative Support personnel as either
(a) dedicated solely to the Business (the "BUSINESS PERSONNEL"), (b)
dedicated solely to the Excluded Business (the "EXCLUDED BUSINESS
PERSONNEL"), or (c) jointly supporting both the Business and the Excluded
Business (the "JOINT PERSONNEL").
Excluded Business Personnel and Joint Personnel remain employees of
Inacom at the Closing Date. Each Party will bear the cost of their respective
personnel and assets.
With respect to Joint Personnel (a) the Parties agree to jointly
prepare a time schedule within which to achieve physical separation, and (b)
share the costs of such personnel, using a percentage to be determined
quarterly, during the period that such personnel are jointly employed. As
Joint Personnel are no longer required, each Party will share equally in the
termination cost of the Joint Personnel. If either party elects to assume
complete responsibility for Joint Personnel, such party will settle up with
the other based on the original classification or accounting at the Closing
Date.
In any event, both Parties agree that time is of the essence in
achieving separation and that in any event, all separation activities will be
completed no later than 12 months after the Closing Date.
Shared Space Arrangements
In all matters related to leased space in the Corporate Headquarters
and Gateway Buildings, each Party shall take reasonable steps to help reduce
the costs to be borne by the other Party.
8
With respect to the Gateway building, each Party will bear the cost
of leased space attributable to the space occupied by the Business or the
Excluded Business, as applicable, at the date hereof. Subtenant rentals will
directly offset the cost of the leased space for the Party to which the space
was attributed at the date hereof.
With respect to the Corporate Headquarters, Seller will reimburse
Buyer for its pro rata portion of the building occupied by Excluded Business
Personnel and its share of Joint Personnel at the date hereof. The pro rata
portion is to be based on a fraction, the numerator of which is the sum of
Excluded Business Personnel plus Seller's share of Joint Personnel occupying
the building at the date hereof and the denominator of which is the total
number of Seller Employees occupying the building at the date hereof. The
resulting fraction will be used to allocate the net cost of the building
until the lease term expires. The net cost of the building is defined as the
total lease cost less subtenant lease payments.
With respect to the Tech Center in Chalco Hills:
- With respect to the portion of the building not occupied by
Information Technology personnel and assets at the date
hereof, Seller will reimburse Buyer it pro rata portion of the
building occupied by Excluded Business Personnel. The pro rata
portion is be based on a fraction, the numerator of which is
the square footage of such space occupied by Excluded Business
Personnel at the date hereof and the denominator of which is
the total square footage of the building (excluding the square
footage occupied by Information Technology personnel and
assets) at the date hereof. The resulting fraction will be
used to allocate the net cost of the building until the lease
term expires. Buyer agrees to use reasonable best efforts to
take over space vacated by Seller and to the extent it does so
utilize the vacated space, adjust the fraction downward.
- With respect to the space occupied by Information Technology
personnel and assets, Seller will reimburse Buyer its pro rata
portion of the building occupied by Excluded Business
Personnel and its share of Joint Personnel. The pro rata
portion is to be based on a fraction, the numerator of which
is the sum of Excluded Personnel plus Seller's share of Joint
Personnel and the denominator of which is the sum of Excluded
Business Personnel plus Business Personnel plus Joint
Personnel.
9
SCHEDULE 9.02
BUSINESS EMPLOYEES
The term "Business Employees" means any person primarily employed in
connection with the Business, including:
1. Order management/central sales (approximately 806 employees,
including 160 employees resident in branch offices);
2. Procurement services (approximately 780 employees);
3. Configuration centers (Indianapolis; Omaha; Ontario, CA; and
Swedesboro, NJ (approximately 450 employees in total);
4. Boston computer exchange (approximately 10 employees);
5. Bid desk unit (approximately 10 employees);
6. Reseller group (approximately 40 employees);
7. IT systems and applications to the extent provided in Schedule
1.01 (approximately 150 employees);
8. Memphis center exclusively devoted to Federal Express
(approximately 30 employees);
9. Government unit (approximately 130 employees); and
10. Human resource, finance and marketing communications
functions, but only those employees directly and exclusively
involved in support of the categories listed above
(approximately 30 employees).
11. Configuration and Logistics Project Management resources in
US, Europe, Singapore and Hong Kong.
10
