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EXHIBIT 2
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ASSET PURCHASE AGREEMENT
BY AND BETWEEN
ELEK-TEK, INC.
AND
CREATIVE COMPUTERS, INC.
SEPTEMBER 17, 1997
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TABLE OF CONTENTS
PAGE
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PRELIMINARY RECITALS ................................................................. 1
ARTICLE 1 DEFINITIONS ................................................................ 1
Section 1.1 Defined Terms ...................................................... 1
Section 1.2 Other Definitional Provisions ...................................... 3
ARTICLE 2 Purchase and Sale of Assets; Assumption of Liabilities; Purchase Price ..... 3
Section 2.1 Purchase and Sale of Assets ........................................ 3
Section 2.2 Excluded Assets .................................................... 4
Section 2.3 Excluded Liabilities ............................................... 4
Section 2.4 Purchase Price ..................................................... 4
Section 2.5 Instruments of Conveyance and Transfer, Assumption, etc. ........... 6
Section 2.6 DISCLAIMER ......................................................... 7
Section 2.7 Further Assurances ................................................. 7
ARTICLE 3 Representations, Warranties and Covenants .................................. 7
Section 3.1 Representations and Warranties of Seller ........................... 7
Section 3.2 Representations and Warranties of Purchaser ........................ 8
Section 3.3 Covenants of Seller ................................................ 9
ARTICLE 4 Conditions to Purchaser's Obligations ...................................... 10
Section 4.1 Court Order ........................................................ 10
Section 4.2 Representations and Warranties True ................................ 10
Section 4.3 Performance ........................................................ 11
Section 4.4 Services Agreement ................................................. 11
Section 4.5 Successful Bidder .................................................. 11
Section 4.6 Finding of Good Faith Purchaser .................................... 11
Section 4.7 Employment Matters ................................................. 11
Section 4.8 Financing .......................................................... 11
Section 4.9 Consents ........................................................... 11
ARTICLE 5 Conditions to Seller's Obligations ......................................... 11
Section 5.1 Representations and Warranties True ................................ 12
Section 5.2 Performance ........................................................ 12
Section 5.3 Services Agreement ................................................. 12
Section 5.4 Consents ........................................................... 12
Section 5.5 Court Order ........................................................ 12
Section 5.6 Successful Bidder .................................................. 12
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ARTICLE 6 Closing .................................................................... 12
ARTICLE 7 Amendment, Termination and Waiver .......................................... 13
Section 7.1 Amendment and Modification ......................................... 13
Section 7.2 Termination ........................................................ 13
Section 7.3 Extension Waiver ................................................... 13
ARTICLE 8 Auction .................................................................... 14
Section 8.1 Competitive Process ................................................ 14
Section 8.2 Plan of Reorganization ............................................. 14
ARTICLE 9 Miscellaneous Provisions ................................................... 14
Section 9.1 Fees and Expenses .................................................. 14
Section 9.2 Transfer Taxes ..................................................... 14
Section 9.3 Notices ............................................................ 14
Section 9.4 Public Announcements ............................................... 15
Section 9.5 Confidentiality .................................................... 16
Section 9.6 Assignment ......................................................... 16
Section 9.7 Governing Law ...................................................... 16
Section 9.8 Counterparts ....................................................... 16
Section 9.9 Interpretation ..................................................... 16
Section 9.10 Entire Agreement ................................................... 16
Section 9.11 Severability ....................................................... 16
Section 9.12 No Third Party Beneficiaries ....................................... 17
Section 9.13 Exhibits ........................................................... 17
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of September 17, 1997 ("Agreement")
between ELEK-TEK, INC., a Delaware corporation (the "Seller") and CREATIVE
COMPUTERS, INC., a Delaware corporation, or its assigns (the "Purchaser").
PRELIMINARY RECITALS
Seller intends to file a case under Chapter 11 of the Bankruptcy Code
before the Federal Bankruptcy Court (the "Court"), such case to be captioned In
re Elek-Tek, Inc. (the "Bankruptcy Case").
Seller is a full line, national marketer of microcomputer hardware,
software and related accessories and supplies. Seller sells products through
retail stores, a mail order operation, and a corporate sales force to
individuals, businesses, institutions and government agencies.
Seller and Purchaser desire to enter into this Agreement to set forth
their agreement, understanding and undertaking regarding the terms and
conditions of the sale to, and the assumption of and assignment to, Purchaser
of certain assets of the Seller as specifically set forth herein.
Accordingly, in consideration of the premises and of the mutual
obligations, undertakings, representations, warranties and covenants set forth
herein, Seller and Purchaser agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"ACCOUNTS RECEIVABLE" means all accounts and other rights to payment
arising out of contracts to which Seller is a party, and on account of which
Seller has issued a written invoice that is actually received by the obligor(s)
or on account of advertising notices or price protection notices as of the
Effective Time.
"ACQUISITION DOCUMENTS" shall mean this Agreement, all Exhibits
hereto and all agreements contemplated hereby.
"AFFILIATE" shall mean, with respect to any Person, any person that
controls, is controlled by or is under common control with such Person.
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"BANKRUPTCY CODE" shall mean Title 11 and applicable provisions of
Title 28 of the United States Code, as amended from time to time.
"BUSINESS" shall mean all sales and marketing activities as
well as all other business operations as currently conducted by the Seller,
including without limitation the assets, rights and business of the Seller
relating thereto.
"CASH" shall mean all cash, cash equivalents, certificates of
deposit, money market and similar accounts.
"CLOSING DATE" or "CLOSING" shall have the meaning set forth in
Article 6.
"CURRENT ASSET VALUE" shall mean the sum of all Accounts Receivable
and Inventory, not reduced by the amount of Reserves. The foregoing accounting
categories shall be presented in all cases in accordance with Seller's
historical accounting practices, the Seller's audited financial statements and
in accordance with generally accepted accounting principles, consistently
applied.
"EFFECTIVE TIME" shall mean 12:01 a.m., Chicago, Illinois time the
day of the Closing.
"ESCROW" shall mean the escrow established pursuant to Section 2.4
pursuant to which a portion of the Purchase Price payable in relation to the
Transaction will be retained. One million dollars of the escrow will provide
the sole source of recovery for post-closing adjustments to the Purchase Price
based on the Review pursuant to Section 2.4(e)(ii).
"FINAL ORDER" shall mean (a) a judgment, order or other decree
issued and entered by the Court or by any state or other federal court or
other tribunal location in one of the states, territories or possessions of the
United States or the District of Columbia, which judgment, order or other
decree is enforceable in accordance with applicable provisions of the
Bankruptcy Code, Federal Rules of Bankruptcy Procedure and the Federal Rules of
Civil Procedure and which has not been reversed or stayed and as to which the
time to appeal has expired and as to which no appeal or petition for review,
rehearing or certiorari is pending, or with respect to which any appeal has
been finally decided and no further appeal or petition for certiorari can be
taken or granted, or (b) a stipulation or other agreement entered into which
has the effect of any such judgment, order or other decree.
"INVENTORY" shall mean all of Seller's inventory, whether now owned
or hereafter acquired and wherever located, including but not limited to,
all goods intended for sale by Seller in the ordinary course of the Business.
"RESERVES" shall mean the amount reserved on the Seller's books and
records for Accounts Receivable and Inventory, respectively.
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"LIEN" shall mean any encumbrance, obligation, liability, contractual
commitment, claim, including, without limitation, any theory of successor
liability, de facto merger, or substantial continuity, whether based in law or
equity, employee benefit obligations (including, without limitation, under the
Employee Retirement Income Security Act and the comprehensive Omnibus Budget
Reconciliation Act), any security interest, mortgage, lien, charge against or
interest in property, adverse claim, claim of possession, right of way,
license, easement or restriction of any kind, including, but not limited to,
any restriction on the use, voting, transfer, receipt of income or other
exercise of any attributes of ownership or any option to purchase, option,
charge, retention agreement which is intended as security or other matters of
any person or entity.
"PERSON" shall mean any individual, partnership, corporation,
association, business trust, joint venture, governmental entity or other
entity of any nature.
"TRANSACTION" shall mean the transactions described in and
contemplated by this Agreement.
SECTION 1.2 OTHER DEFINITIONAL PROVISIONS. All capitalized terms not
otherwise defined in Section 1.1 shall have the meaning ascribed to them as
provided in this Agreement.
ARTICLE 2
PURCHASE AND SALE OF ASSETS;
ASSUMPTION OF LIABILITIES; PURCHASE PRICE
SECTION 2.1 PURCHASE AND SALE OF ASSETS. Subject to the terms and
conditions of this Agreement and except as specifically set forth in this
Agreement, on the Closing Date, Seller shall sell, transfer, convey, quitclaim,
assign without recourse, representation or warranty of any kind and deliver to
the extent same are capable of transfer by Seller ("Transfer") to Purchaser,
free and clear of any and all Liens, and, subject to the terms and conditions
of this Agreement, Purchaser shall purchase, acquire and accept from Seller,
all of the assets and property of the Seller, but specifically excluding the
Excluded Assets (as defined below), including, without limitation, the
following assets and property of Seller (collectively, the "Transferred
Assets"):
(a) Tangible Personal Property. All Seller's customer lists, data
bases, catalog inventory, books, records, computer hardware, computer
software, equipment, office furniture, fixtures, office supplies and
other tangible personal property owned, used or useful in connection with
the Business, wherever located and whether owned or leased,
(b) Intangible Personal Property. All Seller's intangible personal
property owned, used or maintained by the Seller, including, without
limitation, all trade marks (including specifically the names "Elek-Tek"
and "The Computer Wonderland"), trade names, trade secrets, goodwill,
copyrights, uncopyrighted work, proprietary information, intellectual
property, software, licenses, permits and databases,
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(c) Accounts Receivable. All Seller's trade accounts receivable,
vendor accounts receivable and other rights to payment arising out of
contracts to which Seller is a party,
(d) Inventory. All Seller's Inventory.
(e) Real Property. All Seller's real estate owned in connection
with the Business,
(f) Other Assets. All other monies, payments or benefits arising
from or relating to Seller's contract for commitments, oral or written,
known or unknown.
SECTION 2.2 EXCLUDED ASSETS. Notwithstanding anything to the
contrary contained in Section 2.1, Seller shall retain all right, title
and interest in and to, and shall not transfer or assign to Purchaser, any of
the following assets, property, rights, claims and causes of action of the
Seller (collectively, the Excluded Assets"):
(a) Any Federal, state, local or foreign tax benefits and attributes
with respect to any period ending on or before the Closing Date,
including net operating loss carryovers, refunds paid or due to be paid
in connection with the income or operations of the Seller and all Federal
and state withholding tax deposits paid by Seller;
(b) The minute and stock books and similar corporate records and any
documents which the Seller is required by law to retain or as a matter of
good business practice should retain in its possession;
(c) All Cash of the Seller;
(d) All contracts and leases with other parties to which the Seller
is a party; (other than Accounts Receivable); and
(e) All other rights, claims, counterclaims or causes of action
vested in the Seller including without limitation, causes of action
relating to fraudulent conveyance, preference or other avoidance powers
under the Bankruptcy Code and any other causes of action.
SECTION 2.3 EXCLUDED LIABILITIES. Notwithstanding anything to the
contrary contained or implied in this Agreement, Purchaser shall not assume,
and shall have no liability for, any debts, liabilities, obligations, taxes,
contracts or commitments of any kind, nature, manner or degree including but
not limited to obligations of any kind whatsoever owing to employees (e.g.,
taxes, pensions, severance payments, vacations, etc.) (collectively, the
"Excluded Liabilities") in connection with the Business presently existing or
hereafter arising, known or unknown, contingent or liquidated.
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SECTION 2.4 PURCHASE PRICE.
(a) The Purchase Price payable by Purchaser to Seller (the "Purchase
Price") for the Transferred Assets shall be $43,000,000 plus or minus (as
the case may be) the Adjustment (as defined below).
(b) Purchaser shall pay the Purchase Price to Seller as follows:
(i) The sum of $42,000,000 (less (i) any assumptions of
debt owed by Seller to Deutsche Financial Services
Corporation ("Deutsche Financial") and (ii) any stay
bonuses payable to the key employees identified on
Schedule 4.7 in the amounts approved by the Bankruptcy
Court, which liabilities for such stay bonuses shall be
assumed by Purchaser on the Closing Date), in current
funds shall be paid on the Closing Date by the Purchaser
to the Seller, adjusted as provided in subsection (d)
below;
(ii) The sum of $1,000,000 shall be placed into Escrow with
an institutional escrow agent mutually acceptable to
the parties pursuant to an Escrow Agreement
substantially in the form of Exhibit 3 attached hereto.
Such escrowed funds shall be held for a period of
ninety (90) days following the Closing Date.
(c) The Purchase Price shall be paid by wire transfer of immediately
available funds (unless otherwise assumed pursuant to assumption
agreements with Deutsche Financial) to Seller's account(s) in accordance
with written instructions to be given by Seller to Purchaser prior to the
Closing.
(d) The Purchase Price shall be increased or decreased on a
dollar-for-dollar basis by the amount that the Current Asset Value is
respectively greater or less than $47,900,000 on the Closing Date (the
"Adjustment"). The amount of such increase or decrease in Current Asset
Value shall be an adjustment to the Purchase Price on the Closing Date.
It is understood and agreed by the parties that the adjustment will
reflect the Current Asset Value as presented on a "Current Asset Value
Statement" prepared by the Seller and delivered on the Closing Date. The
Current Asset Value Statement shall be subject to audit pursuant to
subsection (e) below and the Purchase Price adjusted if the audit so
dictates.
(e) (i) A pre-closing audit (the "Audit") shall be conducted by a
big six accounting firm mutually satisfactory to the parties on behalf of
Purchaser and at Purchaser's expense, to determine any necessary
accounting adjustments to the Current Asset Value Statement. Seller
agrees that the Audit may be provided to Purchaser's lender. Purchaser
will allow one or more members of Seller's internal accountants or other
representatives, at Seller's expense, to review and fully participate in
the Audit so that Seller can identify and confirm any adjustments to
Current Asset Value on the Current Asset Value Statement.
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Purchaser and Seller shall agree on the methodology for the Audit, which
methodology shall be consistent with Seller's past practices, which
practices should reflect generally accepted accounting principles,
consistently applied. The methodology shall include, but is not limited
to, those matters addressed on Schedule 2.4(e). If the Audit uncovers
any unrecorded assets, the Purchase Price will not be adjusted by such
unrecorded assets.
(ii) Within ninety (90) days of Closing, a post-closing review
(the "Review") shall be completed and the results reported by the
Buyer to determine any necessary adjustments to the Current Asset Value
Statement as a result of any breach of Section 3.1 (c), (d) or (e). In
addition to these adjustments further adjustments will be made based on
collectability of Accounts Receivable and the realizable value of the
Inventory (taking into consideration the Reserves). Based upon the
results of the Review and subject to subsection (e)(iii) below, the
escrow agent shall disburse the funds from the Escrow. In no event shall
such post-closing adjustment exceed $1,000,000.
(iii) The written results of the Audit and the Review,
respectively, shall be provided to the parties as soon as available but,
in the case of the Audit, no later than one day prior to the day of
the hearing for the motion seeking the Entry of the Approval Order.
Buyer and Seller shall each be deemed to have accepted such results
unless either party gives written notice to the other of such party's
objection to any item in the Audit or the Review within three (3)
business days of receipt of the Audit or the Review. In the event the
parties are unable to resolve such objection within two (2) business days
after delivery of notice of such rejection, either party may request that
the Bankruptcy Court resolve the dispute on an expedited basis. Both
parties submit to and consent to the jurisdiction of the Bankruptcy Court
for the expedited resolution of any disputes that arise in connection
with the Audit or the Review. The parties agree that the decision of the
Bankruptcy Court shall be final and binding on the parties and both
parties waive any rights of appeal. The amount of any dispute arising
from the Audit shall be deducted from the Purchase Price and settled
immediately upon resolution of the Audit dispute.
SECTION 2.5 INSTRUMENTS OF CONVEYANCE AND TRANSFER, ASSUMPTION, ETC.
(a) At the Closing, Seller will deliver to Purchaser:
(i) quitclaim deeds and bills of sale, in form and
substance reasonably satisfactory to Purchaser
transferring to Purchaser the Transferred Assets;
(ii) such other quitclaim deeds, bills of sale,
endorsements, assignments and other good and
sufficient instruments of conveyance and transfer, in
form and substance reasonably satisfactory to
Purchaser, as shall be effective to transfer to
Purchaser all of Seller's right, title and interest in
and to the Transferred Assets; and
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(iii) executed originals (to the extent available to Seller)
or legible copies (to the event available to
Seller) of all assigned contracts, leases and
commitments, books, records and other data except as
described in Section 2.2 (which Purchaser shall have
the option of copying), relating to the assets and
operations of the Business.
(iv) such other documents and certificates as Purchaser or
its counsel shall reasonably request.
Simultaneously with such deliveries, Seller will take such steps as may
be necessary to put Purchaser in immediate actual possession and
operating control of the Transferred Assets.
(b) At the Closing, Purchaser will deliver to Seller (i) the
Purchase Price (to the extent and as provided in Section 2.4 hereof),
(ii) such undertakings as Seller may reasonably request, and (iii) such
other documents and certificates as Seller or its counsel shall
reasonably request.
SECTION 2.6 DISCLAIMER. EXCEPT TO THE EXTENT EXPRESSLY SET FORTH IN
SECTION 3.1, THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND BY ANY ONE OR
MORE OF THE OTHER ACQUISITION DOCUMENTS ARE AND SHALL BE WITHOUT REPRESENTATION
OR WARRANTY OF ANY KIND, WHETHER EXPRESS OR IMPLIED, BY, OR RECOURSE AGAINST,
PURCHASER OR SELLER.
SECTION 2.7 FURTHER ASSURANCES. From time to time during the
pendency of the Bankruptcy Case and after the Closing and subject to any
restrictions per court order in the Bankruptcy Case, at Purchaser's expense but
without further consideration to Seller, each party will execute and deliver to
the other party such instruments of conveyance, assignment, transfer and
delivery and take such other action as the other party reasonably may request,
but without representation, warranty, undertaking, or covenant of or by
recourse against Seller of any kind whatsoever, to consummate the transactions
contemplated hereby.
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF SELLER.
Notwithstanding the terms of any instruments delivered at Closing, Seller
hereby represents and warrants to Purchaser as follows:
(a) Organization, Etc. Seller is a corporation duly incorporated
and validly existing under the law of the state of its incorporation.
(b) Authorization, Etc. Subject to Entry of the Approval Order (as
defined in Section 4.1), Seller has full power and authority to enter
into this Agreement and the other
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Acquisition Documents, to perform its obligations hereunder and
thereunder, to Transfer the Transferred Assets and to carry out the
transactions contemplated hereby and thereby. Subject to Entry of the
Approval Order, this Agreement and the other Acquisition Documents to
which Seller is a party are valid and binding agreements of Seller,
enforceable against Seller in accordance with their respective terms,
except that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses as
recognized by the Bankruptcy Court.
(c) Title to Assets. As of the Closing Date, Seller has marketable
title to all of the Transferred Assets, and, subject to the Entry of the
Approval Order, shall have full power and authority to transfer title to
such assets to the Purchaser free and clear of all Liens.
(d) Inventory. Seller has provided Purchaser with a complete list,
as of the date hereof, of all of the Inventory for the Business at August
31, 1997, and such Inventory (less Reserves) is merchantable and saleable
at customary prices in the ordinary course of business.
(e) Accounts Receivable. Seller has provided Purchaser with a
complete list, as of the date hereof, of all of the Accounts Receivable
for the Business at August 31, 1997, and all Accounts Receivable of the
Business are valid and enforceable claims, and the goods sold and
delivered that gave rise to such Accounts Receivable were sold and
delivered in arms-length transactions in conformity with the Business'
standard purchase orders, agreements and specifications.
(f) Personnel. Seller has provided Buyer with a complete list, as
of the date hereof, of all sales persons engaged in the corporate, mail
order (inbound and outbound), government and education sales for the
Business or who are instrumental in managing, supervising or supporting
the Seller's sales force as of August 31, 1997 and the sales each such
person was responsible for since January 1, 1997.
(g) Insurance. Seller will maintain until the Closing Date all
insurance policies, including insurance on the Business' tangible real
and personal property and assets against loss or damage by fire or other
casualty, in amounts equal to or in excess of one hundred percent (100%)
of the replacement value thereof, subject to normal deductibles. All
such insurance is in full force on the date of this Agreement and is
carried with reputable insurers.
(h) No Broker. There are no claims for brokerage or other
commissions or finder's or other similar fees payable in connection with
the Transaction, other than ABN AMRO Chicago Corporation, whose costs
will be borne solely by Seller.
(i) SEC Filings. The Seller's public filings with the Securities
and Exchange Commission are true, comply with rules and regulations for
such securities filings and are accurate in all material respects as of
the date of such filings.
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(j) Income Statements. The Seller's income statements for the year
ended December 31, 1996 and the six months ended June 30, 1997 are
true, complete and accurate in all material respects as of such date.
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
hereby represents and warrants to Seller as follows:
(a) Organization, Etc. Purchaser is a corporation duly incorporated
and validly existing under the law of the state of its incorporation.
(b) Authorization, Etc. Purchaser has full power and authority to
enter into this Agreement and the other Acquisition Documents, to perform
its obligations hereunder and thereunder, to carry out the transactions
contemplated hereby and thereby and to acquire and own the Transferred
Assets. All necessary actions required to authorize and ratify the
execution and delivery by Purchaser of its obligations hereunder and
thereunder and the consideration of the transactions contemplated hereby
and thereby have been duly taken. This Agreement and the other
Acquisition Documents are valid and binding agreements of Purchaser,
enforceable against Purchaser in accordance with their terms.
(c) No Violation. To the knowledge of Purchaser, neither the
execution and delivery of this Agreement or the other Acquisition
Documents to which Purchaser is a party, the performance by Purchaser of
its obligations hereunder and thereunder nor the consummation of the
transactions contemplated hereby and thereby will (i) violate any
provision of the corporate governance documents of Purchaser, (ii)
violate, be in conflict with, permit the termination of, constitute a
default under or cause the acceleration of the maturity of any debt or
obligation of Purchaser, or (iii) require the consent of any other party
to or constitute a breach under any agreement or commitment to which
Purchaser is a party or by which Purchaser is bound or violate any
statute or law or any judgment, decree, order regulation or rule of any
court or governmental authority to which Purchaser is subject or by which
Purchaser or any of its assets is or at Closing will be bound.
(d) Litigation. There is no action, proceeding or investigation
pending or, to the knowledge of Purchaser, threatened against Purchaser
before any court, arbitrator or administrative or governmental body which
challenges the validity of this Agreement or the other Acquisition
Documents, any action taken or to be taken by Purchaser pursuant to this
Agreement or the other Acquisition Documents or the Transaction, and
Purchaser does not know of any such action, proceeding or investigation
which is probable of assertion.
(e) No Broker. There are no claims for brokerage or other
commissions or finder's or other similar fees payable in connection with
the Transaction.
(f) Financing. Deutsche Financial has provided Purchaser with the
letter attached hereto as Schedule 3.2(f) with respect to the
Transaction, and such financing is subject to the conditions referenced
in the letter.
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SECTION 3.3 COVENANTS OF SELLER. Seller hereby covenants to the
Purchaser as follows:
(a) Ordinary Course of Business. Seller will operate the Business
and its affairs in the ordinary course of business as debtor and
debtor-in-possession subject to the Bankruptcy Code, Federal Rules of
Bankruptcy Procedure, orders of the Bankruptcy Court and rules and
regulations of the U.S. Trustee during the period between the
commencement of the Bankruptcy Case and the Closing, including but not
limited to, maintaining all insurance policies presently in effect, and
except as otherwise provided for in the Services Agreement.
(b) Notification of Certain Activities. From the date hereof to the
Closing Date, Seller shall not enter into any purchase or sales
commitments relating to the Business in excess of $200,000 without first
providing notice to the Purchaser. If Purchaser does not consent to such
purchase or sales commitments, the Inventory acquired or Accounts
Receivable generated shall not be acquired by the Purchaser and the
Current Asset Value reduced accordingly.
(c) Full Access. Prior to Closing, Purchaser and its authorized
representatives shall have full access to all properties, books, records,
contracts and documents of Seller, and Seller shall furnish to Purchaser
and its authorized representatives all information with respect to the
affairs of Seller as Purchaser and its authorized representatives may
reasonably request.
(d) Personnel. Seller will use its best efforts (without making any
commitments on behalf of Purchaser) to preserve its corporate sales staff
and to preserve its present relationships with its customers and others
having business relations with the Seller.
SECTION 3.4 COVENANTS OF PURCHASER. Purchaser shall have prepared
and filed a notice in accordance with the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976 within five days after commencement of the Bankruptcy
Case.
ARTICLE 4
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligation of Purchaser to consummate the Transaction in
accordance with the terms of this Agreement is subject to the
satisfaction, on or before the Closing Date, of each of the following
conditions, any of which may be waived in writing by Purchaser by notice to the
Seller, without the necessity for further order of the Court or notice to any
other party.
SECTION 4.1 COURT ORDER. On or before October 24, 1997 (as such
date may be extended from time to time by the Purchaser), the Court in the
Bankruptcy Case shall have entered, and the clerk of such Court shall have
entered on the docket (collectively, the "Entry") an order
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pursuant to Section 363 of the Bankruptcy Code (the "Approval Order"), in form
and substance substantially similar to Exhibit 1 hereto, confirming that
Purchaser constitutes a good faith purchaser within the meaning of Section 363
of the Bankruptcy Code, confirming that notice provided by Seller to all
Persons entitled to receive such notice under the Bankruptcy Code and the
Federal Rules of Bankruptcy Procedure and to all other known claimants against
the Seller was adequate, and approving this Agreement, the Transaction and the
Interim Services Agreement of even date.
SECTION 4.2 REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties of Seller contained herein, in the other
Acquisition Documents and in all certificates and other documents delivered by
Seller to Purchaser pursuant hereto and thereto or in connection with the
Transaction shall be true and accurate in all material respects as of the
Closing Date as if made on the Closing Date.
SECTION 4.3 PERFORMANCE. Seller shall have performed and complied
in all material respects with all agreements and obligations required by this
Agreement to be performed or complied with by Seller on or prior to the Closing
Date.
SECTION 4.4 SERVICES AGREEMENT. Seller and Purchaser shall have
entered into that certain Services Agreement dated of even date herewith
substantially in the form of Exhibit 4 attached hereto, and Seller shall have
obtained all necessary authorization from the Court, if any, to perform under
such agreement.
SECTION 4.5 SUCCESSFUL BIDDER. Purchaser shall be the successful
bidder in the auction pursuant to Article 8.
SECTION 4.6 FINDING OF GOOD FAITH PURCHASER. On the date of the
auction held pursuant to Article 8, the Court shall have entered a finding of
fact that Purchaser constitutes a good faith purchaser within the meaning of
Section 363(m) of the Bankruptcy Code.
SECTION 4.7 EMPLOYMENT MATTERS. On the Closing Date, the following
persons shall be employed by the Seller: (i) eighty percent (80%) of the
persons identified on the schedule referenced in Section 3.1 (the "Sales
Employee Schedule"), (ii) such persons who are responsible for at least eighty
percent (80%) of the corporate sales listed on the Sales Employee Schedule and
(iii) those persons identified on a Key Employee Schedule attached hereto as
Schedule 4.7 as key employees. Purchaser shall have no obligation to hire or
retain any of Seller's employees.
SECTION 4.8 FINANCING. Purchaser shall have received the approval
of Deutsche Financial to assume (or otherwise finance) the outstanding debt
owed by Seller to Deutsche Financial as of the Closing on terms acceptable to
the Purchaser.
SECTION 4.9 CONSENTS. (a) All required governmental authorizations,
approvals, exemptions, notices and filings (including, without limitation, the
expiration or termination of the waiting period under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976) relating to the Transaction shall have
become effective and (b) no administrative or judicial order or decision shall
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contain or impose on Purchaser (i) any material conditions or provisions for
labor or environmental protection applicable to Purchaser which conditions or
provisions would not be imposed on Purchaser but for this Agreement and the
Transaction of (ii) a material financial obligations beyond those contemplated
by this Agreement which conditions or provisions would not be imposed on
Purchaser but for this Agreement and the Transaction.
ARTICLE 5
CONDITIONS TO SELLER'S OBLIGATIONS
The obligation of Seller to consummate the Transaction on the
Closing Date shall be subject to the satisfaction, on or before the Closing
Date, of each of the following conditions, any of which may be waived in
writing by Seller by notice to the Purchaser, without the necessity for further
order of the Court or notice to any other party.
SECTION 5.1 REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties of Purchaser contained herein, in the other
Acquisition Documents and in all certificates and other documents delivered by
Purchaser to Seller pursuant hereto and thereto or in connection with the
Transaction shall be true and accurate in all material respects as of the
Closing Date as if made on the Closing Date.
SECTION 5.2 PERFORMANCE. Purchaser shall have performed and
complied in all material respects with all agreements and obligations required
by this Agreement to be performed or complied with by Purchaser on or prior to
the Closing Date.
SECTION 5.3 SERVICES AGREEMENT. Seller and Purchaser shall have
entered into that certain Services Agreement dated of even date herewith
substantially in the form of Exhibit 4 attached hereto, and Seller shall have
obtained all necessary authorization from the Court, if any, to perform under
such agreement.
SECTION 5.4 CONSENTS. (a) All required governmental authorizations,
approvals, exemptions, notices and filings (including, without limitation, the
expiration or termination of the waiting period under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976) relating to the Transaction shall have
become effective and (b) no administrative or judicial order or decision shall
contain or impose on Seller (i) any material conditions or provisions for labor
or environmental protection applicable to Seller which conditions or provisions
would not be imposed on Seller but for this Agreement and the Transaction of
(ii) an material financial obligations beyond those contemplated by this
Agreement which conditions or provisions would not be imposed on Seller but for
this Agreement and the Transaction.
SECTION 5.5 COURT ORDER. Entry of the Approval Order shall have
occurred and there shall be no stay in effect precluding the consummation of
the Transaction and the Approval Order shall have become a Final Order.
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SECTION 5.6 SUCCESSFUL BIDDER. Purchaser shall be the successful
bidder in the auction pursuant to Article 8.
ARTICLE 6
CLOSING
Subject to the satisfaction or waiver of the conditions specified in
Articles 4 and 5, the parties hereto covenant and agree to consummate the
closing (the "Closing" or "Closing Date") of the Transaction within three (3)
days of the Entry of the Approval Order, or as otherwise agreed by the parties,
without the necessity for Court approval or notice to any other party. The
Closing shall occur at such offices as the parties shall mutually agree. At
the Closing, the documents and other items referred to in this Agreement will
be delivered by the parties and Purchaser will pay to Seller the cash portion
of Purchase Price and fully fund the Escrow.
ARTICLE 7
AMENDMENT, TERMINATION AND WAIVER
SECTION 7.1 AMENDMENT AND MODIFICATION. This Agreement may be
amended, modified and supplemented only by written agreement signed by both
parties hereto, subject to Court approval to the extent necessary.
SECTION 7.2 TERMINATION.
(a) This Agreement may be terminated at any time prior to the
Closing Date by mutual written consent of Purchaser and Seller.
(b) This Agreement may be terminated by either Seller or Purchaser
if the Transaction has not been consummated by October 24, 1997,
provided that neither Seller nor Purchaser will be entitled to terminate
this Agreement pursuant to this clause if such party's material breach of
this Agreement has prevented the consummation of the Transaction.
(c) This Agreement shall automatically terminate if Purchaser is not
the successful bidder in the auction held pursuant to Article 8.
(d) This Agreement shall automatically terminate upon the Entry of
an order by the Court appointing a trustee in the Bankruptcy Case prior
to the Closing.
(e) If this Agreement is terminated because the Seller, in
accordance with the auction procedures described in Exhibit 2 attached
hereto, sells substantially all of the Transferred Assets or the
Business, in whole or in part, whether directly or indirectly, through
purchase, merger, consolidation or otherwise, then immediately upon the
closing of
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such transaction, the Seller will pay to the Purchaser the sum of
$1,500,000; provided Purchaser shall be ready, willing and able to
perform under this Agreement.
SECTION 7.3 EXTENSION WAIVER. At any time prior to the Closing
Date, each party hereto may, without notice to any other party (a) extend
the time for the performance of any of the obligations or other acts of the
other party hereto, (b) waive any inaccuracies in any Schedule or Exhibit
hereto or in the other party's representations and warranties contained herein
or in any document delivered pursuant hereto and (c) waive compliance with any
of the agreements or conditions contained herein. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party and if by Seller,
shall also have been made or given pursuant to any necessary approval of the
Court. The waiver by any party hereto of a breach of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.
ARTICLE 8
AUCTION
SECTION 8.1 COMPETITIVE PROCESS. Seller and Purchaser agree that
Seller shall make available to other prospective purchasers of the Business or
the Transferred Assets the opportunity to acquire the Transferred Assets only
through the procedures set forth in Exhibit 2 or as the Court may otherwise
order.
SECTION 8.2 PLAN OF REORGANIZATION. Nothing herein shall be
construed to limit the right of any party in interest in the Bankruptcy Case
to file a plan of reorganization and to initiate proceedings to obtain
confirmation thereof.
ARTICLE 9
MISCELLANEOUS PROVISIONS
SECTION 9.1 FEES AND EXPENSES. Except as otherwise expressly
provided in this Agreement, each of the parties hereto will pay its own
fees and expenses (including attorneys', accountants' and investment bankers'
fees and expenses) incurred in connection with the Transaction.
SECTION 9.2 TRANSFER TAXES.
(a) Seller shall be responsible for liabilities for all state or
local sales, transfer, recording, filing or documentary stamp taxes or
similar taxes (not including income or gains taxes of Seller), fees or
governmental charges imposed on the sale or transfer of any personal
property included in the Transferred Assets.
SECTION 9.3 NOTICES.
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(a) All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and shall be deemed to
have been given if delivered by hand, by facsimile or deposited with a
same day or overnight courier service:
If to Seller:
Elek-Tek, Inc.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Tel. (000) 000-0000
Fax (000) 000-0000
Attn: Xxxxxxx Xxxxxxxxx
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with a copy to:
Lord, Bissell & Brook
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Tel. (000) 000-0000
Fax (000) 000-0000
Attn: Xxxxxxxx X. Xxxxxxxx
If to Purchaser:
Creative Computers, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Tel. (000) 000-0000
Fax (000) 000-0000
Attn: Xxxxx X. Xxxxxxx
with a copy to:
Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P.
0000 XxXxxxx Xxxxx
000 XxXxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Tel. (000) 000-0000
Fax (000) 000-0000
Attn: Xxxxx X. Xxxxxxx
Any party may from time to time change its address for the purpose of
notices to that party by a similar notice specifying a new address, but no such
change shall be deemed to have been given until it is actually received by the
party sought to be charged with its contents.
(b) All notices and other communications required or permitted under
this Agreement which are addressed as provided in this Section, shall be
effective upon delivery if delivered personally or by facsimile and one
day after delivery by overnight courier.
SECTION 9.4 PUBLIC ANNOUNCEMENTS. Subject to any order of the
Court, all press releases and other public announcement and all announcements
to Seller's creditors, customers, suppliers or employees relating to the
Transaction will be prepared jointly by Purchaser and Seller, unless such
disclosure is required by applicable law or governmental regulations, in which
case, to the extent reasonably practicable, prior to making such disclosure,
the party shall give written notice to the other party describing in reasonable
detail the proposed content of such disclosure and shall permit the other party
to review and comment upon the form and substance of such disclosure.
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SECTION 9.5 CONFIDENTIALITY. Except for such documents, reports,
information and data (including financial statements) which are of a public
nature, pending the Closing (and, if this Agreement is terminated, at all times
after the date hereof), Purchaser shall treat as confidential and, except as
otherwise required by law or in connection with the consummation of the
Transaction (including seeking approval for the financing of the Transaction),
will not use, submit or disclose to, or file with, others, or permit any
person, firm, corporation or entity under its respective control to use, submit
or disclose to, or file with others, any documents, reports, information or
data (including financial statements) concerning Seller or the Business which
Purchaser may obtain or have obtained from Seller, and, except for such
documents, reports and other written materials (including financial statements)
concerning the Business as the Seller may reasonably request. This Section
shall be cumulative of, and not abrogated or subsumed by, any other
confidentiality agreements of the parties hereto.
SECTION 9.6 ASSIGNMENT. Purchaser shall have the right to assign
this Agreement to a wholly-owned subsidiary provided that Purchaser funds
the subsidiary in an amount sufficient to satisfy its obligations hereunder and
remains liable for its obligations under this Agreement.
SECTION 9.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware,
without regard to conflicts of laws, rules and principles.
SECTION 9.8 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original (including executed copies sent via facsimile), and all of which
together shall constitute one and the same instrument.
SECTION 9.9 INTERPRETATION. The headings contained in this
Agreement are inserted for convenience only and shall not constitute a part
hereof. The language used in this Agreement is language developed and chosen
by both parties to express their mutual intent and no rule of strict
construction shall be applied against either party hereto. The use of the
masculine, feminine or neuter gender and the use of the singular and plural
shall not be given the effect of any exclusion or limitation herein.
SECTION 9.10 ENTIRE AGREEMENT. This Agreement, together with Interim
Services Agreement of even date and the documents referred to herein which form
a part hereof, embody the entire agreement and understanding of the parties
hereto in respect of the subject matter hereof and supersede all prior
agreements and understandings between the parties with respect to such subject
matter. The parties agree the confidentiality agreements previously executed
in connection with this Transaction shall remain in full force and effect.
SECTION 9.11 SEVERABILITY. Each term and provision of this Agreement
constitutes a separate and distinct undertaking, covenant, term and/or
provision. In the event that any term or provision of this Agreement shall be
determined to be unenforceable, invalid or illegal in any respect, such
unenforceability, invalidity or illegality shall not affect any other term or
provision of
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this Agreement, but this Agreement shall be construed as if such unenforceable,
invalid or illegal term or provision had never been contained herein.
SECTION 9.12 NO THIRD PARTY BENEFICIARIES. It is not intended that
this Agreement benefit, and it shall not be construed that the provisions
hereof benefit or are enforceable by any third parties.
SECTION 9.13 EXHIBITS. Except as otherwise provided in this
Agreement, all Exhibits not attached hereto upon execution hereof shall be
attached no later than the hearing or such later date as Purchaser and Seller
may agree; provided, however, that such Exhibits as are attached hereto as of
the date hereof may be amended from time to time, if at Purchaser's request, at
Seller's reasonable discretion, and if at Seller's request, at Purchaser's
reasonable discretion; provided, further, that to the extent such amendments
are material, the party requesting such amendment shall bear all costs, if any,
relating to notification of interested partes, and all such amendments shall be
available for inspection by interested parties at any time prior to the date of
the auction.
SECTION 9.14 NAME CHANGE. Seller agrees that as soon as practical
after Closing, Seller will change its corporate name to a name approved by
the Buyer which shall not be similar to, or subject to confusion with, Seller's
corporate name.
SECTION 9.15 ACCESS. After the Closing, so long as Purchaser has
possession of Seller's headquarters, Seller and its authorized representatives
shall have access to the headquarters as Seller and its authorized
representatives may reasonably request for the purpose of removing or reviewing
the items relating to Section 2.2(b) of this Agreement.
SECTION 9.16 SURVIVAL. The representations and warranties made
herein by the parties to this Agreement shall not survive the Closing
Date; provided however, the representations and warranties made in Section
3.1(d) and (e) shall survive until ninety (90) days from the Closing Date.
* * * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on the day and year first above stated.
"SELLER"
ELEK-TEK, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
---------------------------------
Xxxxxxx X. Xxxxxxxxx
President and Chief Executive Officer
"PURCHASER"
CREATIVE COMPUTERS, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Xxxxx X. Xxxxxxx
President and Chief Executive Officer
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