EXHIBIT 10.20
STOCK PURCHASE AGREEMENT
dated as of
April 29, 1997
among
XXXXXX MICRO INC. as Buyer,
INTELLIGENT ELECTRONICS, INC. as Seller
and
XLSOURCE, INC. as Guarantor
relating to the purchase and sale
of
100% of the outstanding Capital Stock
of
each of
RND, INC.
INTELLIGENT ADVANCED SYSTEMS, INC.
INTELLIGENT DISTRIBUTION SERVICES, INC.
INTELLIGENT EXPRESS, INC.
INTELLIGENT SP, INC.
constituting
THE RESELLER NETWORK
TABLE OF CONTENTS
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PAGE
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ARTICLE 1DEFINITIONS
SECTION 1.01. Definitions 1
ARTICLE 2PURCHASE AND SALE
SECTION 2.01. Purchase and Sale 5
SECTION 2.02. Closing 6
SECTION 2.03. Certain Adjustments 6
SECTION 2.04. Closing Balance Sheet 6
SECTION 2.05. Adjustment of Purchase Price 8
ARTICLE 3REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 3.01. Corporate Existence and Power 10
SECTION 3.02. Corporate Authorization 11
SECTION 3.03. Governmental Authorization 11
SECTION 3.04. Noncontravention 11
SECTION 3.05. Required and Other Consents 11
SECTION 3.06. Capitalization 12
SECTION 3.07. Ownership of Shares and Seller RN Assets 12
SECTION 3.08. Financial Statements 13
SECTION 3.09. Absence of Certain Changes 13
SECTION 3.10. No Undisclosed Material Liabilities 15
SECTION 3.11. Intercompany Accounts 15
SECTION 3.12. Material Contracts 16
SECTION 3.13. Litigation 17
SECTION 3.14. Compliance with Laws and Court Orders 18
SECTION 3.15. Properties 18
SECTION 3.16. Intellectual Property 19
SECTION 3.17. Insurance Coverage 20
SECTION 3.18. Licenses and Permits 21
SECTION 3.19. Inventories 21
SECTION 3.20. Receivables 22
SECTION 3.21. Product Liability; Product Warranty 22
SECTION 3.22. Selling Documents 23
SECTION 3.23. Finders' Fees 23
SECTION 3.24. Employees 23
SECTION 3.25. Labor Matters 23
SECTION 3.26. Environmental Matters 24
SECTION 3.27. Bank Accounts 26
SECTION 3.28. Suppliers and Licensors 26
SECTION 3.29. Reseller Loans 26
SECTION 3.30. Seller Proxy Materials 26
ARTICLE 4REPRESENTATIONS AND WARRANTIES OF XLSOURCE
SECTION 4.01. Corporate Existence and Power 27
SECTION 4.02. Corporate Authorization 27
SECTION 4.03. Government Authorization 27
SECTION 4.04. Noncontravention 27
ARTICLE 5REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 5.01. Corporate Existence and Power 28
SECTION 5.02. Corporate Authorization 28
SECTION 5.03. Governmental Authorization 28
SECTION 5.04. Noncontravention 29
SECTION 5.05. Financing 29
SECTION 5.06. Purchase for Investment 29
SECTION 5.07. Litigation 29
SECTION 5.08. Finders' Fees 29
ARTICLE 6COVENANTS OF SELLER
SECTION 6.01. Conduct of Reseller Network and Each Company 30
SECTION 6.02. Access to Information; Confidentiality 30
SECTION 6.03. Notices of Certain Events 32
SECTION 6.04. Resignations 32
SECTION 6.05. Noncompetition 32
SECTION 6.06. Intercompany Accounts 34
SECTION 6.07. Stockholder Meeting; Proxy Materials 35
SECTION 6.08. Other Offers 35
SECTION 6.09. Transfer of Intelevest 36
SECTION 6.10. Transfer of Seller RN Assets and Liabilities 36
SECTION 6.11. Consents 37
SECTION 6.12. Capital Contribution 37
ARTICLE 7COVENANTS OF SELLER AND XLSOURCE
SECTION 7.01. Guarantee of Guaranteed Obligations 38
SECTION 7.02. Guarantee Unconditional 38
SECTION 7.03. Waivers 39
SECTION 7.04. Discharge; Reinstatement in Certain Circumstances 39
SECTION 7.05. Subrogation 39
SECTION 7.06. Limit of Liability 39
ARTICLE 8COVENANTS OF BUYER
SECTION 8.01. Access 40
SECTION 8.02. Seller Guarantees 40
SECTION 8.03. Other Matters 40
ARTICLE 9COVENANTS OF BUYER, SELLER AND XLSOURCE
SECTION 9.01. Commercially Reasonable Efforts; Further Assurances 41
SECTION 9.02. Certain Filings 41
SECTION 9.03. Public Announcements 41
SECTION 9.04. Confidentiality 41
SECTION 9.05. Segregation of Certain Sales Proceeds 42
SECTION 9.06. Supply Agreement 43
SECTION 9.07. Certain Litigation 44
ARTICLE 10TAX MATTERS
SECTION 10.01. Tax Definitions 44
SECTION 10.02. Tax Representations 46
SECTION 10.03. Covenants 48
SECTION 10.04. Release From and Termination of Existing Tax
Sharing Agreements 50
SECTION 10.05. State Taxes Resulting from Section 338(h)(10)
Election 50
SECTION 10.06. Cooperation on Tax Matters 50
SECTION 10.07. Tax Indemnification 51
SECTION 10.08. Purchase Price Adjustment and Interest 54
SECTION 10.09. Survival 54
ARTICLE 11EMPLOYEE BENEFITS
SECTION 11.01. Employee Benefits Definitions 54
SECTION 11.02. Employee Benefit Plans Representations 55
SECTION 11.03. Retained and Transferred Employees 57
SECTION 11.04. Severance, COBRA and WARN Obligations 59
SECTION 11.05. 401(k), Option, Stock Purchase and Incentive Plans 60
SECTION 11.06. Certain Employee Services 61
SECTION 11.07. Sharing of Benefits-related Information 61
SECTION 11.08. No Third Party Beneficiaries 61
ARTICLE 12CONDITIONS TO CLOSING
SECTION 12.01. Conditions to Obligations of Buyer and Seller 61
SECTION 12.02. Conditions to Obligation of Buyer 62
SECTION 12.03. Conditions to Obligation of Seller 64
ARTICLE 13SURVIVAL; INDEMNIFICATION
SECTION 13.01. Survival 65
SECTION 13.02. Indemnification 66
SECTION 13.03. Procedures 68
ARTICLE 14TERMINATION
SECTION 14.01. Grounds for Termination 70
SECTION 14.02. Effect of Termination 71
ARTICLE 15MISCELLANEOUS
SECTION 15.01. Notices 71
SECTION 15.02. Amendments and Waivers 73
SECTION 15.03. Fees and Expenses 73
SECTION 15.04. Successors and Assigns 75
SECTION 15.05. Governing Law 75
SECTION 15.06. Jurisdiction 75
SECTION 15.07. WAIVER OF JURY TRIAL 75
SECTION 15.08. Counterparts; Third Party Beneficiaries 75
SECTION 15.09. Entire Agreement 76
SECTION 15.10. Definition of Knowledge 76
SECTION 15.11. Specific Performance 76
SECTION 15.12. Captions 76
SELLER DISCLOSURE LETTER SCHEDULES
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3.01 Qualifications as Foreign Corporation
3.03 Other Governmental Authorization
3.05 Required Consents
3.06 Capitalization of the Companies
3.07 Ownership of RN Shares and Seller RN Assets
3.09 Certain Changes
3.10 Liabilities
3.11 Intercompany Accounts
3.12 Material Contracts
3.13 Litigation
3.14 Compliance with Laws and Court Orders
3.15 Liens
3.16 RN Intellectual Property Rights
3.17 Insurance Coverage
3.18 Permits
3.21(a) Product Liability and Warranty Claims
3.21(c) Product Warranties
3.24 Employees
3.25 Labor Matters
3.26 Environmental Matters
3.27 Bank Accounts
3.28 Suppliers
3.29 Reseller Loans
6.02 Potential Buyers
6.11(a) Other Consents
8.02 Seller Guarantees
10.02(a) Tax Matters
10.02(b) Tax Jurisdictions and Returns
11.02(a) Employee Plan
11.02(e) Benefit Arrangements
11.02(j) Other Benefits
15.10 Persons with Knowledge
OTHER SCHEDULES
2.04 Calculation of Net Liabilities Assumed
11.04(a)(i) Certain Reimbursement Obligations relating to Company
Employees and Second Employees
11.04(a)(iii) Certain Reimbursement Obligations relating to Scheduled
Employees
11.06 Certain Employee Transition Services
STOCK PURCHASE AGREEMENT
AGREEMENT dated as of April 29, 1997 among Xxxxxx Micro Inc., a
Delaware corporation ("Buyer"), Intelligent Electronics, Inc., a
Pennsylvania corporation ("Seller"), and XLSource, Inc., an Arkansas
corporation ("XLSource").
W I T N E S S E T H :
WHEREAS, RND, Inc., a Colorado corporation, Intelligent Advanced
Systems, Inc., a Delaware corporation, Intelligent Distribution Services,
Inc., a Delaware corporation, Intelligent Express, Inc., a Pennsylvania
corporation, and Intelligent SP, Inc., a Colorado corporation, each of
which is a wholly-owned, direct Subsidiary of Seller (each such Subsidiary,
a "Company" and collectively, the "Companies"), collectively constitute,
together with the Seller RN Assets and Liabilities, the Reseller Network
("Reseller Network");
WHEREAS, Seller is the record and beneficial owner of all of the
outstanding capital stock of each Company (collectively, the "RN Shares")
and desires to sell the RN Shares to Buyer, and Buyer desires to purchase
the RN Shares from Seller, upon the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, Seller shall transfer the Seller RN Assets and Liabilities to
one or more of the Companies immediately prior to the Closing;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1DEFINITIONSSECTION 1.1. DefinitionsSECTION 1.1. 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 Person; provided that none of the Companies shall be considered
an Affiliate of Seller.
"Balance Sheet" means the unaudited combined balance sheet of Reseller
Network as of February 1, 1997.
"Balance Sheet Date" means February 1, 1997.
"Buyer Indemnitee" means Buyer, any of its Affiliates and, effective
upon the Closing, each Company.
"Closing Date" means the date of the Closing.
"Escrow Account" means the escrow account set up pursuant to the
Escrow Agreement.
"Escrow Agent" means the Person identified as such in the Escrow
Agreement.
"Escrow Agreement" means an escrow agreement in form and substance
satisfactory to Buyer and Seller.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Intellectual Property Right" means any trademark, service xxxx, trade
name, patent, copyright, mask work, invention, trade secret, know-how
(including any registrations or applications for registration of any of the
foregoing) or any other similar type of proprietary intellectual property
right.
"Lien" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest or encumbrance. For the purposes
of this Agreement, a Person shall be deemed to own subject to a Lien any
property or asset which it has acquired or holds subject to the interest of
a vendor or lessor under any conditional sale agreement, capital lease or
other title retention agreement relating to such property or asset.
"Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), business, assets, results of operations
or prospects of Reseller Network taken as whole, other than those resulting
from one or more of the following: (i) a deterioration in sales or margins
or an increase in interest expense of Reseller Network; (ii) the amount of
the severance and retention bonuses paid to the Scheduled Employees or
pursuant to the arrangements listed on Schedule 3.09 of the Seller
Disclosure Letter; (iii) changes in general economic conditions; or (iv)
changes affecting the market for microcomputers and related products
generally which have been reported publicly prior to the date hereof, or
which are otherwise generally known throughout the microcomputer and
related products industry on the date hereof.
"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.
"SEC" means the Securities and Exchange Commission.
"Seller RN Assets and Liabilities" means certain assets and
liabilities of Seller relating to Reseller Network, including without
limitation the items set forth on Schedule 3.07 of the Seller Disclosure
Letter.
"Subsidiary"of a Person means any other Person 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 the time directly or indirectly owned by such Person; provided that as
used herein, (i) none of the Companies shall be considered a Subsidiary of
Seller and (ii) Intelevest shall not be considered a Subsidiary of Reseller
Network or any Company.
"Transaction" means the transactions contemplated by this Agreement.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Accounting Referee 10.07
Acquisition Proposal 6.08
Assumed Employee 11.03
Adjusted Guaranteed Minimum Revenue 9.06
Base Net Liabilities Assumed 2.05
Base Purchase Price 2.01
Benefit Arrangement 11.01
Business 6.05
CERCLA 3.26
Claim Notice 13.02
Closing 2.02
Closing Balance Sheet 2.04
Closing Net Liabilities Assumed 2.04
COBRA Coverage 11.04
Code 10.01
Combined State Tax 10.01
Company Employee 11.03
Company Securities 3.06
Damages 13.02
Designated Percentage 9.05
DOJ 14.01
Employee Plan 11.01
Environmental Laws 3.26
ERISA 11.01
ERISA Affiliate 11.01
Exchange Act 3.03
Federal Tax 10.01
Final Determination 10.01
Final Net Liabilities Assumed 2.05
Financial Statements 3.08
FTC 14.01
Guaranteed Obligations 7.01
Hazardous Substances 3.26
Indemnified Party 13.03
Indemnifying Party 13.03
Information 6.02
Initial Determination 10.03
Intelevest 6.09
Intercompany Payable 6.06
Intercompany Receivable 6.06
Interest Rate 2.05
International Plan 11.01
Xxxx Xxxxx 3.22
Loss 10.07
Modified Aggregate Deemed Sales Price 10.03
Multiemployer Plan 11.01
Offering Memorandum 3.22
OSHA 3.25
Other Consents 6.11
PBGC 11.01
Permits 3.18
Post-Closing Tax Period 10.03
Potential Buyer 6.02
Pre-Closing Tax Period 10.01
Price Allocation 10.03
Principal Vendors 3.28
Purchase Price 2.01
Receivables 3.20
Required Consents 3.05
Returns 10.02
RN Intellectual Property Rights 3.16
RN Products 3.21
Scheduled Employee 11.03
Seconded Employee 11.03
Section 338(h)(10) Election 10.03
Section 338 Tax 10.01
Seller Consolidated Group 10.01
Seller Disclosure Letter 3.01
Seller Employees 11.03
Seller Group Allocation Tax Agreement 10.01
Seller Proxy Materials 3.30
Tax 10.01
Tax Asset 10.01
Tax Indemnification Period 10.01
Taxing Authority 10.01
Tax Sharing Agreements 10.01
Title IV Plan 11.01
Transfer Event 9.06
Transferred Employee 11.03
Transferred Percentage 9.06
WARN Obligations 11.04
XLSource Sale 9.05
XLSource Supply Agreement 12.02
ARTICLE 2
PURCHASE AND SALE
2PURCHASE AND SALESECTION 2.1. Purchase and SaleSECTION 2.1.
Purchase and Sale. Upon the terms and subject to the conditions of this
Agreement, Seller agrees to sell to Buyer, and Buyer agrees to purchase
from Seller, the RN Shares at Closing for an aggregate purchase price in
cash of $78 million less the Base Net Liabilities Assumed, after giving
effect to any capital contribution required pursuant to Section 6.12 (the
"Base Purchase Price"), subject to adjustment as provided in Sections 2.03
and 2.05 (the Base Purchase Price, as so adjusted being hereinafter
referred to as the "Purchase Price"). Except to the extent of the amount
delivered to the Escrow Agent as provided in Section 2.02 and subject to
adjustment as provided in Sections 2.03 and 2.05, the Base Purchase Price
shall be paid at Closing as provided in Section 2.02.
SECTION 2.2. ClosingSECTION 2.2. Closing. The closing (the
"Closing") of the purchase and sale of the RN Shares 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 12, or at
such other time or place as Buyer and Seller may agree. At the Closing:
(a Buyer shall deliver to:
(i the Escrow Agent, $10 million in immediately available
funds by wire transfer for deposit pursuant to the Escrow
Agreement; and
(ii Seller, any portion of the Base Purchase Price, as
adjusted pursuant to Section 2.03, remaining after giving effect
to the payment referred to in Section 2.02(a)(i), in immediately
available funds by wire transfer to an account of Seller with a
bank designated by Seller, by notice to Buyer, not later than two
business days prior to the Closing Date (or if not so designated,
then by certified or official bank check payable in immediately
available funds to the order of Seller in such amount).
(b Seller shall deliver to Buyer certificates for the RN
Shares duly endorsed or accompanied by stock powers duly endorsed in blank,
with any required transfer stamps affixed thereto.
SECTION 2.3. Certain AdjustmentsSECTION 2.3. Certain Adjustments.
Notwithstanding anything herein to the contrary, the Base Purchase Price
shall be reduced by $10 for each $1 that the average daily sales (net of
returns) by Reseller Network to all customers of Reseller Network other
than XLSource, during the period of twenty business days ending on or
immediately prior to the Friday immediately prior to the Closing Date, is
less than $6,730,596; provided that the Base Purchase Price shall not be
reduced pursuant to the above adjustment by more than an aggregate of the
sum of (i) $5,000,000 plus (ii) $1,000,000 for each Monday during the
period commencing on July 18, 1997 and ending on the Closing Date (the
aggregate amount of any reduction pursuant to this clause (ii) not to
exceed $5,000,000).
SECTION 2.4. Closing Balance SheetSECTION 2.4. Closing Balance
Sheet. (a As promptly as practicable, but no later than 60 days, after
the Closing Date, Buyer will cause to be prepared and delivered to Seller
the combined balance sheet of Reseller Network as of the Closing Date (the
"Closing Balance Sheet") and a certificate based on such Closing Balance
Sheet setting forth Buyer's calculation of Closing Net Liabilities Assumed.
Buyer will, and will request its independent accountants to, make
available to Seller copies of all customary accounting workpapers in their
respective possession that were prepared in connection with the preparation
of the Closing Balance Sheet and the calculation of Closing Net Liabilities
Assumed. As used herein, "Closing Net Liabilities Assumed" means the net
liabilities of Reseller Network as of the close of business on the Closing
Date, which net liabilities shall be calculated based on the Closing
Balance Sheet and in the manner set forth in Schedule 2.04. The Closing
Balance Sheet shall (x) fairly present the combined financial position of
Reseller Network as at the close of business on the Closing Date in
accordance with generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the Balance Sheet, (y)
include line items (including the constituent components thereof)
consistent with those in the Balance Sheet and (z) be subject to adjustment
as set forth on Schedule 2.04. The Closing Balance Sheet (i) shall not
reflect any accruals for the disposal of leases of real property, for
severance payments or obligations made or incurred pursuant to agreements
or arrangements disclosed in Schedule 3.09(k) of the Seller Disclosure
Letter or otherwise approved by Buyer, or for obligations with respect to
the Indemnity Agreement with ITT Hartford referred to in the letter
agreement dated February 9, 1996 between Seller, Pacific OnLine Computers,
Inc., Xxxxxxx Xxxxxxx and Xxxxxxxxx Xxxxxxx and (ii) shall not reflect any
reserves with respect to reseller loans.
(b If Seller disagrees with Buyer's calculation of
Closing Net Liabilities Assumed delivered pursuant to Section 2.04(a),
Seller may, within 20 days after delivery of the documents referred to in
Section 2.04(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 Balance Sheet and the
calculation of Closing Net Liabilities Assumed delivered pursuant to
Section 2.04(a). Notwithstanding the foregoing, the 20-day period referred
to in the first sentence of this subsection (b) shall not apply to the
extent that Buyer has not complied with its obligations under Section 8.01
of this Agreement, as it relates to Seller's access to books and records
for the purpose of this Section 2.04.
(c If a notice of disagreement shall be duly delivered
pursuant to Section 2.04(b), Buyer and Seller shall, during the 15 days
following such delivery, use their best efforts to reach agreement on the
disputed items or amounts in order to determine, as may be required, the
amount of Closing Net Liabilities Assumed. If, during such period, Buyer
and Seller are unable to reach such agreement, they shall promptly
thereafter cause Deloitte & Touche LLP or such other firm of nationally
recognized independent public accountants as may be agreed by Buyer and
Seller (the "Accounting Referee") promptly to review this Agreement and the
disputed items or amounts for the purpose of calculating Closing Net
Liabilities Assumed. In making such calculation, the Accounting Referee
shall follow the methodologies and procedures described in clauses (x), (y)
and (z) of subsection (a) above and may consider not only those items or
amounts reflected in the Closing Balance Sheet or Buyer's calculation of
Closing Net Liabilities Assumed as to which Seller has disagreed but also
any other items or amounts reflected in the Closing Balance Sheet. 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 equally by Buyer and Seller. As used herein, "Final
Net Liabilities Assumed" means the Closing Net Liabilities Assumed (i) as
shown in Buyer's calculation delivered pursuant to Section 2.04(a), if no
notice of disagreement with respect thereto is duly delivered pursuant to
Section 2.04(b); or (ii) if such a notice of disagreement is delivered,
(A) as agreed by Buyer and Seller pursuant to Section 2.04(c) or (B) in the
absence of such agreement, as shown in the Accounting Referee's calculation
delivered pursuant to Section 2.04(c); provided that in no event shall
Final Net Liabilities Assumed be more than Buyer's calculation of Closing
Net Liabilities Assumed delivered pursuant to Section 2.04(a) or less than
Seller's calculation of Closing Net Liabilities Assumed delivered pursuant
to Section 2.04(b)
(d Buyer and Seller agree that they will, and will
request their respective independent accountants to, and Buyer will cause
each Company to, cooperate and assist in the preparation of the Closing
Balance Sheet and the calculation of Closing Net Liabilities Assumed and in
the conduct of the audits and reviews referred to in this Section 2.04,
including without limitation, the making available to the extent reasonably
necessary their respective books, records, work papers and personnel.
SECTION 2.5. Adjustment of Purchase PriceSECTION 2.5. Adjustment of
Purchase Price. (a If Final Net Liabilities Assumed exceeds Base Net
Liabilities Assumed, Seller shall owe to Buyer, as an adjustment to the
Purchase Price, the amount of such excess, which amount shall be payable in
the manner and with interest as provided in Section 2.05(b). If Base Net
Liabilities Assumed exceeds Final Net Liabilities Assumed, Buyer shall owe
to Seller the amount of such excess, which amount shall be payable in the
manner and with interest as provided in Section 2.05(b). As used herein,
"Base Net Liabilities Assumed" means the amount calculated as such in the
manner provided in Schedule 2.04 using information from the unaudited
combined balance sheet of Reseller Network for the fiscal month-end that is
most recently available as of the Closing Date, which balance sheet shall
(x) fairly present the combined financial position of Reseller Network as
at the close of business on the date of such fiscal month-end in accordance
with generally accepted accounting principles applied on a basis consistent
with those used in the preparation of the Balance Sheet, (y) include line
items (including the constituent components thereof) consistent with those
in the Balance Sheet, and (z) be prepared in accordance with accounting
policies and practices consistent with those used in the preparation of the
Balance Sheet. Such balance sheet (i) shall not reflect any accruals for
the disposal of leases of real property, for severance payments or
obligations made or incurred pursuant to agreements or arrangements
disclosed in Schedule 3.09(k) of the Seller Disclosure Letter or otherwise
approved by Buyer, or for obligations with respect to the Indemnity
Agreement with ITT Hartford referred to in the letter agreement dated
February 9, 1996 between Seller, Pacific OnLine Computers, Inc., Xxxxxxx
Xxxxxxx and Xxxxxxxxx Xxxxxxx and (ii) shall not reflect any reserves with
respect to reseller loans.
(b Any payment pursuant to Section 2.05(a) shall be made
to Buyer or Seller, as the case may be, within 10 days after the Final Net
Liabilities Assumed has been determined, by delivery of immediately
available funds to Buyer or Seller, respectively. If such payment shall be
made to Buyer, it shall be made pursuant to the terms of the Escrow
Agreement out of funds contained in the Escrow Account; provided that, the
amount of such payment to be made out of funds contained in the Escrow
Account shall be limited to an amount so that the remaining balance of the
Escrow Account would not be less than $2 million (plus interest earned
thereon) and the remaining portion of such payment required to be made
pursuant to Section 2.05 shall be made directly by Seller to Buyer or the
Companies, as Buyer may elect. Any amounts in excess of $2 million (plus
interest earned thereon) remaining in the Escrow Account after making such
payment shall be released to Seller, net of the aggregate amount of claims
with respect to which Buyer is seeking indemnification pursuant to Article
10 or 13. If such payment shall be made to Seller, it shall be made
directly by Buyer to Seller and, simultaneously therewith, all of the funds
contained in the Escrow Account, other than an amount equal to $2 million
(plus interest earned thereon), shall be released to Seller pursuant to the
terms of the Escrow Agreement. If the Final Net Liabilities Assumed equals
the Base Net Liabilities Assumed, then the funds contained in the Escrow
Agreement, other than an amount equal to $2 million (plus interest earned
thereon), shall be released to Seller pursuant to the terms of the Escrow
Agreement. The amount of any payment to be made pursuant to this Section
2.05 directly by Buyer or Seller rather than from the Escrow Account shall
bear interest from and including the Closing Date to but excluding the date
of payment at a rate per annum equal to the Interest Rate in effect from
time to time during the period from the Closing Date to the date of
payment. 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. As used herein, "Interest
Rate" for any day means (i) the London Interbank Offered Rate for deposits
in U.S. dollars for a 30 day period which is published in the Wall Street
Journal (Eastern Edition) under the caption "Money Rates - London Interbank
Offered Rates (LIBOR)" on such day; or (ii) if the Wall Street Journal does
not publish such rate, the offered rate for deposits in U.S. dollars for a
30 day period which appears on the Reuters Screen LIBO Page as of 10:00
a.m., New York time, on such day; provided that if at least two rates
appear on the Reuters Screen LIBO Page, the "London Interbank Offered Rate"
shall be the arithmetic mean of such rates.
(c For purpose of avoidance of doubt, Buyer and Seller
agree that, in the event and to the extent that any payment by Seller
causes or will cause the Purchase Price to be less than zero (0), such
payment shall nonetheless be treated by the parties hereto for all relevant
Tax purposes as an adjustment to the Modified Aggregate Deemed Sales Price
(as defined in Section 10.03(a)) (or, if otherwise required by applicable
law, by treating such payment as a contribution to the capital of the
Companies for such purposes).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
3REPRESENTATIONS AND WARRANTIES OF SELLERSeller represents and
warrants to Buyer as of the date hereof and as of the Closing Date that:
SECTION 3.1. Corporate Existence and PowerSECTION 3.1. Corporate
Existence and Power. Each of Seller and each Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers and all material
governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted. Each Company 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
those jurisdictions where failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. Each
jurisdiction in which each Company is duly qualified to do business as a
foreign corporation and is in good standing is set forth in Schedule 3.01
of the disclosure letter of Seller dated the date hereof and delivered to
Buyer in connection with this Agreement (the "Seller Disclosure Letter").
Seller has heretofore delivered to Buyer true and complete copies of the
certificate of incorporation and bylaws of Seller and each Company as
currently in effect. The Companies have no Subsidiaries.
SECTION 3.2. Corporate AuthorizationSECTION 3.2. Corporate
Authorization. The execution, delivery and performance by Seller of this
Agreement and the Escrow Agreement and the consummation by Seller of the
Transaction and the transactions contemplated by the Escrow Agreement are
within its corporate powers and, except for any required approval by
Seller's stockholders, have been duly authorized by all necessary corporate
action on the part of Seller. This Agreement constitutes, and when
executed and delivered pursuant to its terms the Escrow Agreement will
constitute, a valid and binding agreement of Seller, enforceable against
Seller in accordance with its terms, except as the enforcement thereof may
be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally.
SECTION 3.3. Governmental AuthorizationSECTION 3.3. Governmental
Authorization. The execution, delivery and performance by Seller of this
Agreement and the Escrow Agreement and the consummation by Seller of the
Transaction and the transactions contemplated by the Escrow Agreement
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) compliance with any applicable
requirements of the Exchange Act; and (iii) such other matters as are set
forth in Schedule 3.03 of the Seller Disclosure Letter. As used herein,
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
SECTION 3.4. NoncontraventionSECTION 3.4. Noncontravention. The
execution, delivery and performance by Seller of this Agreement and the
Escrow Agreement and the consummation by Seller of the Transaction and the
transactions contemplated by the Escrow Agreement do not and will not (i)
violate the certificate of incorporation or bylaws of Seller or any
Company, (ii) assuming compliance with the matters referred to in Section
3.03, violate any law, rule, or regulation applicable to Seller, any
Company or Reseller Network or any, judgment, injunction, order or decree
which, expressly by its terms, is binding upon Seller, any Company or
Reseller Network, (iii) require any consent (except as disclosed in
Schedule 3.05 of the Seller Disclosure Letter or in the list to be
delivered pursuant to Section 6.11(b)) or other action by any Person under,
constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Seller or any
Company or to a loss of any benefit to which Seller or any Company is
entitled under any provision of any agreement or other instrument binding
upon Seller or any Company or (iv) result in the creation or imposition of
any Lien on any asset of any Company.
SECTION 3.5. Required and Other ConsentsSECTION 3.5. Required and
Other Consents. (a Schedule 3.05 of the Seller Disclosure Letter, as such
Schedule may be updated pursuant to Section 6.11(b), sets forth each
agreement, contract or other instrument binding upon any of Seller,
Reseller Network or any Company and each Permit requiring a consent as a
result of the execution, delivery and performance of this Agreement, except
such consents as would not, individually or in the aggregate, have a
Material Adverse Effect if not received by the Closing Date (each such
consent, a "Required Consent" and together, the "Required Consents").
SECTION 3.6. CapitalizationSECTION 3.6. Capitalization. (a
Schedule 3.06 of the Seller Disclosure Letter sets forth a complete and
accurate list of (i) the number of shares of each type of the authorized
capital stock of each Company and (ii) the number of shares of each such
type outstanding as of the date hereof and to be outstanding as of the
Closing Date.
(b All outstanding shares of capital stock of each Company
have been duly authorized and validly issued and are fully paid and
non-assessable. Except as set forth in Schedule 3.06 of the Seller
Disclosure Letter, there are no outstanding (i shares of capital stock or
voting securities of any Company, (ii securities of any Company
convertible into or exchangeable for shares of capital stock or voting
securities of such Company or any other Company or (iii options or other
rights to acquire from any Company, or other obligation of any Company to
issue, any capital stock, voting securities or securities convertible into
or exchangeable for capital stock or voting securities of such Company or
any other Company (the items in clauses 3.06(b)(i), 3.06(b)(ii) and
3.06(b)(iii) being referred to collectively as the "Company Securities").
There are no outstanding obligations of any Company to repurchase, redeem
or otherwise acquire any Company Securities.
SECTION 3.7. Ownership of Shares and Seller RN AssetsSECTION 3.7.
Ownership of Shares and Seller RN Assets. (a Seller is the record and
beneficial owner of the RN Shares, free and clear of any Lien and any other
limitation or restriction (other than those set forth on Schedule 3.07 of
the Seller Disclosure Letter, but including any restriction on the right to
vote, sell or otherwise dispose of the RN Shares), and will transfer and
deliver to Buyer at the Closing valid title to the RN Shares free and clear
of any Lien and any such limitation or restriction.
(b Seller has good title to, or in the case of leased
property has valid leasehold interests in, all of the Seller RN Assets,
free and clear of any Lien and any other limitation or restriction (other
than those set forth on Schedule 3.07 of the Seller Disclosure Letter and
other than those relating to Seller RN Assets that are not, individually or
in the aggregate, material to the business of Reseller Network), and will
transfer and deliver to the Companies prior to Closing marketable title to
the Seller RN Assets free and clear of any Lien and any such limitation or
restriction.
(c The Seller RN Assets set forth on Schedule 3.07 of the
Seller Disclosure Letter, together with the RN Shares, constitute (or, in
the case of the RN Shares, will convey to Buyer ownership of or the right
to use) all of the property and assets held for use or used in connection
with the business of Reseller Network as currently conducted by Reseller
Network.
SECTION 3.8. Financial StatementsSECTION 3.8. Financial Statements.
The unaudited combined balance sheet as of February 1, 1997, and the
unaudited combined statement of operations for each of the eight fiscal
quarters ended February 1, 1997, and the unaudited interim combined balance
sheets as of November 2, 1996 and April 5, 1997 and the related unaudited
interim combined statement of operations for the two fiscal months ended
April 5, 1997 of Reseller Network (collectively, the "Financial
Statements") and, to the best knowledge of Seller, the other financial
records and reports of Reseller Network and each Company provided to Buyer
during its due diligence investigation, represent actual bona fide
transactions, have been prepared from the books and records of the
Companies in accordance with generally accepted accounting principles
consistently applied throughout the periods involved and reflect adequate
accruals of all current liabilities, except for any liabilities with
respect to capital stock or currently payable or deferred income taxes, of
Reseller Network to the extent known as of the date of preparation and to
the extent required to be set forth therein in accordance with generally
accepted accounting principles consistently applied (subject, in the case
of interim financial statements, to normal quarterly adjustments primarily
related to accruals for vendor programs, including special promotions,
marketing-development funds, sales-out objectives and returns incentives).
The Financial Statements provided to Buyer fairly present the combined
financial position of Reseller Network as of the dates thereof and its
combined results of operations for the periods then ended. The books and
records of the Companies represent actual bona fide transactions.
SECTION 3.9. Absence of Certain ChangesSECTION 3.9. Absence of
Certain Changes. Since the Balance Sheet Date, the business of Reseller
Network has been conducted in the ordinary course consistent with past
practices and, except as set forth in Schedule 3.09 of the Seller
Disclosure Letter, 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 a Material Adverse Effect;
(b any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital stock
of any Company, or any repurchase, redemption or other acquisition by any
Company of any outstanding shares of capital stock or other securities of,
or other ownership interests in, such Company or any other Company;
(c any amendment of any material term of any outstanding
security of any Company;
(d any incurrence, assumption or guarantee by Seller (with
respect to the business of Reseller Network), Reseller Network or any
Company of any indebtedness for borrowed money;
(e any creation or other incurrence by Seller (with
respect to the business of Reseller Network), Reseller Network or any
Company of any Lien;
(f any acquisition by Seller (with respect to the business
of Reseller Network), Reseller Network or any Company of quantities of
inventory that are not reasonably likely to be disposed of in the ordinary
course of business at xxxx-ups which are consistent with the current
practices of Reseller Network;
(g any making of any loan, advance or capital
contributions to or investment in any Person, except to a Company;
(h any damage, destruction or other casualty loss (whether
or not covered by insurance) affecting the business or assets of Seller
(with respect to the business of Reseller Network), Reseller Network or any
Company which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect;
(i any transaction or commitment made, or any contract or
agreement entered into, by Seller, Reseller Network or any Company relating
to the assets or business of Reseller Network (including the acquisition or
disposition of any assets) or any relinquishment by Seller, Reseller
Network or any Company of any contract or other right, in either case,
material to Reseller Network, taken as a whole, other than transactions and
commitments in the ordinary course of business consistent with past
practices and those contemplated by this Agreement;
(j any change in any method of accounting or accounting
practice by Seller (with respect to the business of Reseller Network),
Reseller Network or any Company, except for any such change after the date
hereof required by reason of a concurrent change in generally accepted
accounting principles;
(k any (i) employment, deferred compensation, severance,
retirement or other similar agreement entered into with any director,
officer or employee of any Company (or any amendment to any such existing
agreement), (ii) grant of any severance or termination pay to any director,
officer or employee of any Company, or (iii) change in compensation or
other benefits payable to any director, officer or employee of any Company
pursuant to any severance or retirement plans or policies thereof, other
than raises in the ordinary course of business; or
(l any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of any Company, which
employees were not subject to a collective bargaining agreement at the
Balance Sheet Date, or any lockouts, strikes, work stoppages or, to the
knowledge of Seller, any slow-downs or threats with respect to any of the
foregoing by or with respect to any employees of any Company.
SECTION 3.10. No Undisclosed Material LiabilitiesSECTION 3.10. No
Undisclosed Material Liabilities. There are no liabilities of Seller (with
respect to the business of Reseller Network), Reseller Network or any
Company of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, 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 provided for in the Balance Sheet or
disclosed in the notes thereto;
(b liabilities disclosed on Schedule 3.10 of the Seller
Disclosure Letter; and
(c liabilities incurred since the Balance Sheet Date in
the ordinary course of business consistent with past practice, which
liabilities, if not discharged prior to the Closing Date, will appear on
the Closing Balance Sheet, to the extent required by generally accepted
accounting principles (including without limitation the materiality
principles thereof) consistently applied.
SECTION 3.11. Intercompany AccountsSECTION 3.11. Intercompany
Accounts. Schedule 3.11 of the Seller Disclosure Letter contains a
complete list of all intercompany balances as of the Balance Sheet Date
between Seller and its Affiliates, on the one hand, and the Companies, on
the other hand. Since the Balance Sheet Date there has not been any
accrual of liability by any Company to Seller or any of its Affiliates or
other transaction between any Company, on the one hand, and Seller and any
of its Affiliates, on the other hand, except, with respect to the period
prior to the date of this Agreement, in the ordinary course of business of
Reseller Network consistent with past practice, and thereafter, as provided
in Schedule 3.11 of the Seller Disclosure Letter (which Schedule shall
identify each category or type of such transaction and a brief description
thereof).
SECTION 3.12. Material ContractsSECTION 3.12. Material Contracts.
(a) Except as disclosed in Schedule 3.12 of the Seller Disclosure Letter,
none of Seller (with respect to the business of Reseller Network), Reseller
Network or any Company is a party to or bound by:
(i) any lease (whether of real or personal property) providing
for annual rentals of $100,000 or more;
(ii) any agreement for the purchase by Reseller Network or one or
more of the Companies of materials, supplies, goods, services, equipment or
other assets (excluding inventory) providing for either (A) annual payments
by Reseller Network or the Companies of $50,000 or more or (B) aggregate
payments by Reseller Network or the Companies of $100,000 or more;
(iii) any sales, distribution or other similar agreement
(including any bulk sales contracts) providing for the sale by Reseller
Network or one or more of the Companies of materials, supplies, goods,
services, equipment or other assets that provides for either (A) annual
payments to Reseller Network or the Companies of $5,000,000 or more or (B)
aggregate payments to Reseller Network or the Companies of $10,000,000 or
more;
(iv) any partnership, joint venture or other similar agreement or
arrangement;
(v) any agreement relating to the acquisition or disposition of
any portion of Reseller Network or any Company (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);
(vii) any option, license, franchise or similar agreement or any
agency, dealer, sales representative, marketing or other similar agreement;
provided that Schedule 3.12(a)(vii) of the Seller Disclosure Letter is not
required to include such agreements with more than the 100 largest
ownership groups, calculated on the basis of sales by Reseller Network;
(viii) any agreement that restricts any Company or Reseller
Network from competing in any line of business or with any Person or in any
area or which would so restrict Reseller Network or any Company after the
Closing Date other than protected territories granted in franchise
agreements, which territories are set forth on Schedule 3.12(a)(viii) of
the Seller Disclosure Letter;
(ix) any agreement or arrangement with (A) Seller or any of its
Affiliates, (B) any Person directly or indirectly owning, controlling or
holding with power to vote, 5% or more of the outstanding voting securities
of Seller or any of its Affiliates, (C) any Person 5% or more of whose
outstanding voting securities are directly or indirectly owned, controlled
or held with power to vote by Seller or any of its Affiliates or (D) any
director or officer of Seller or any of its Affiliates or any "associates"
or members of the "immediate family" (as such terms are respectively
defined in Rule 12b-2 and Rule 16a-1 of the Exchange Act) of any such
director or officer;
(x) any agreement or arrangement with any director or officer of
any Company or with any "associate" or any member of the "immediate family"
(as such terms are respectively defined in Rules 12b-2 and 16a-1 of the
Exchange Act) of any such director or officer; or
(xi) any other agreement, commitment, arrangement or plan not
made in the ordinary course of business that is material to Reseller
Network, taken as a whole.
(b) Except as set forth on Schedule 3.12(b) of the Seller
Disclosure Letter, each agreement, contract, plan, lease, arrangement or
commitment disclosed in any Schedule to the Seller Disclosure Letter or
required to be disclosed pursuant to this Section is a valid and binding
agreement of Seller, Reseller Network or the Company which is a party
thereto, as the case may be, and is in full force and effect, and none of
Seller, Reseller Network or any such Company is nor, to the knowledge of
Seller, is any other party thereto in default or breach in any material
respect under the terms of any such agreement, contract, plan, lease,
arrangement or commitment, nor, to the knowledge of Seller, has any event
or circumstance occurred that, with notice or lapse of time or both, would
constitute any event of default thereunder. True and complete copies of
each such agreement, contract, plan, lease, arrangement or commitment have
been made available to Buyer.
SECTION 3.13. LitigationSECTION 3.13. Litigation. Except as set
forth in Schedule 3.13 of the Seller Disclosure Letter, there is no action,
suit, or proceeding pending against, or to the knowledge of Seller,
threatened against or affecting, Seller, Reseller Network, any Company or
any of their respective properties before any court or arbitrator or any
governmental body, agency or official, nor to the knowledge of Seller, is
there any investigation by any governmental authority of or relating to the
operation of the business of Reseller Network or any Company (i) where the
aggregate damages sought exceed $50,000 (provided that, with respect to
Seller, this clause (i) shall be limited to actions, suits, investigations
or proceedings in connection with the business of the Reseller Network),
(ii) which, individually or in the aggregate, if determined or resolved
adversely in accordance with the plaintiff's demands, could reasonably be
expected to have a Material Adverse Effect or (iii) which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
Transaction. In no event will any judgment, order, decree, settlement or
other disposition of Xxxxxxxx Consulting LLP vs. Intelligent Electronics,
Inc. (No. 96CV962645, Xxxxxxxx Xxxxx, Xxxx xxx Xxxxxx xx Xxxxxx, Xxxxxxxx)
or Intelligent Electronics, Inc. vs. Xxxxxxxx Consulting LLP (No. 9604673,
Common Pleas Court, Xxxxxxx County, PA) result in any liability to the
Companies or Reseller Network.
SECTION 3.14. Compliance with Laws and Court OrdersSECTION 3.14.
Compliance with Laws and Court Orders. Except as set forth in Schedule
3.14 of the Seller Disclosure Letter, none of Seller (with respect to
business of Reseller Network), any Company or Reseller Network is in
violation of, or has since January 1, 1994 violated, or to the knowledge of
Seller is under investigation with respect to or has been threatened to be
charged with or given notice of any violation of, any applicable law, rule,
regulation, judgment, injunction, order or decree, except for violations
that have not had and could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
SECTION 3.15. PropertiesSECTION 3.15. Properties. (a) Reseller
Network or one or more of the Companies has good and marketable title to,
or in the case of leased property and assets has valid leasehold interests
in, all property and assets (whether real, personal, tangible or
intangible) used in the business of Reseller Network, all of which property
and assets are reflected on the Balance Sheet (to the extent acquired on or
prior to the Balance Sheet Date and to the extent required to be reflected
on the Balance Sheet by generally accepted accounting principles), except
for properties and assets sold since the Balance Sheet Date in the ordinary
course of business consistent with past practices. None of such property
or assets is subject to any Lien, except:
(i) Liens disclosed in the February 1, 1997 financial statements
referred to in Section 3.08;
(ii) Liens for taxes not yet due or being contested in good faith
(and for which adequate accruals or reserves have been established on the
Balance Sheet);
(iii) Liens which do not materially detract from the value or
materially interfere with any present or intended use of such property or
assets; or
(iv) Liens set forth on Schedule 3.15 of the Seller Disclosure
Letter.
(b) The facilities, buildings, structures and equipment used
by Seller (with respect to the business of Reseller Network), Reseller
Network or one or more of the Companies in the operation of the business of
Reseller Network as currently conducted are in all material respects
adequate and suitable for their current uses in the ordinary course of
business as conducted by Reseller Network. The equipment used by Reseller
Network or one or more of the Companies in the operation of the business of
Reseller Network as currently conducted has no material defects, is in good
operating condition and repair and has 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).
(c) The Seller RN Assets, and the property and assets owned
or leased by Reseller Network or one or more of the Companies, constitute
all of the property and assets used or held for use in connection with the
businesses of Reseller Network.
(d) None of Seller (with respect to the business of
Reseller Network), Reseller Network or any Company owns (or holds other
than pursuant to a lease set forth on Schedule 3.12(a)(i) of the Seller
Disclosure Letter) any real property.
SECTION 3.16. Intellectual PropertySECTION 3.16. Intellectual
Property. (a) Schedule 3.16 of the Seller Disclosure Letter contains a
list of all Intellectual Property Rights owned or licensed and used or held
for use by Seller (with respect to the business of Reseller Network),
Reseller Network or any Company which are material to the operation of the
business of Reseller Network as currently conducted, but excluding any
Intellectual Property of manufacturers of products sold by Reseller Network
("RN Intellectual Property Rights"), specifying as to each, if applicable:
(i) the nature of such Intellectual Property Right, (ii) the owner or
licensor of such Intellectual Property Right, (iii) if owned, the
jurisdictions by or in which such Intellectual Property Right has been
issued or registered or in which an application for such issuance or
registration has been filed, (iv) if owned, the registration or application
numbers and (v) if owned, the termination or expiration dates.
(b) Schedule 3.16 of the Seller Disclosure Letter sets forth
a list of all licenses, sublicenses and other agreements as to which Seller
(with respect to the business of Reseller Network), Reseller Network or any
Company is a party and pursuant to which any Person is authorized to use
any RN Intellectual Property Right (excluding the right to use RN
Intellectual Property Rights pursuant to franchise agreements or program
agreements, including any renewals thereof or successor agreements
thereto), including (i) the identity of all parties thereto, (ii) a
description of the nature and subject matter thereof, (iii) the applicable
royalty and (iv) the term thereof.
(c) (i) Since January 1, 1994, neither Seller (with
respect to the business of Reseller Network), Reseller Network nor any
Company has been a defendant in any action, suit or proceeding or, to the
knowledge of Seller, any investigation relating to, or otherwise has been
notified of, any alleged claim of infringement of any Intellectual Property
Right, and Seller has no knowledge of any other such infringement by Seller
(with respect to the business of Reseller Network), Reseller Network or any
Company and (ii) except as set forth in Schedule 3.16 of the Seller
Disclosure Letter, neither Seller nor any Company has an outstanding claim
or suit for, and Seller has no knowledge of, any continuing infringement by
any other Person of any RN Intellectual Property Rights. No RN
Intellectual Property Right is subject to any outstanding judgment,
injunction, order, decree or agreement restricting the use thereof by
Reseller Network or any Company or restricting the licensing thereof by
Reseller Network or any Company to any Person. Except as set forth in
Schedule 3.16 of the Seller Disclosure Letter, neither Reseller Network nor
any Company has entered into any agreement to indemnify any other Person
against any charge of infringement of any Intellectual Property Right other
than pursuant to a vendor agreement entered into in the ordinary course of
business.
(d) None of the processes and formulae, research and
development results and other know-how of Seller (with respect to the
business of Reseller Network), Reseller Network or any Company, the value
of which to Seller (with respect to the business of Reseller Network),
Reseller Network or any Company is contingent upon maintenance of the
confidentiality thereof, has been disclosed by Reseller Network or any
Company or any of its Affiliates to any Person other than employees,
representatives and agents of Reseller Network or any Company, all of whom
are bound by written confidentiality provisions set forth in the employee
handbook used by the Reseller Network, a copy of which was previously
provided to Buyer.
SECTION 3.17. Insurance CoverageSECTION 3.17. Insurance Coverage.
Seller has furnished to Buyer a list of, and true and complete copies of,
all insurance policies and fidelity bonds relating to the assets, business,
operations, employees, officers or directors of Reseller Network or any
Company. Except as set forth on Schedule 3.17 of the Seller Disclosure
Letter, there is no claim by Seller (with respect to the business of
Reseller Network), Reseller Network or any Company pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds or in respect of
which such underwriters have reserved their rights. All premiums payable
under all such policies and bonds have been timely paid and Seller,
Reseller Network and each Company have otherwise complied in all material
respects with the terms and conditions of all such policies and bonds.
Such policies of insurance and bonds (or other policies and bonds providing
substantially similar insurance coverage) have been in effect since January
1, 1994 and remain in full force and effect. Such policies and bonds are
of the type and in amounts customarily carried by Persons conducting
businesses similar to those of Reseller Network. Seller does not know of
any threatened termination of, premium increase with respect to, or
material alteration of coverage under, any of such policies or bonds.
Except as disclosed in Schedule 3.17 of the Seller Disclosure Letter,
Reseller Network and each Company shall after the Closing continue to have
coverage under such policies and bonds with respect to events occurring
prior to the Closing.
SECTION 3.18. Licenses and PermitsSECTION 3.18. Licenses and
Permits. Schedule 3.18 of the Seller Disclosure Letter correctly describes
each license, franchise, permit, certificate, approval or other similar
authorization affecting, or relating in any way to, the assets or business
of Reseller Network or any Company and the absence of which would have a
Material Adverse Effect (the "Permits") together with the name of the
government agency or entity issuing such Permit. Except as set forth on
Schedule 3.18 of the Seller Disclosure Letter, (i) the Permits are valid
and in full force and effect, (ii) neither Reseller Network nor any Company
is in default under, 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 be terminated or become terminable, in whole or in part
as a result of the Transaction.
SECTION 3.19. InventoriesSECTION 3.19. Inventories. (a) All
inventory owned by Seller (with respect to the business of Reseller
Network), Reseller Network or any Company reflected on the Balance Sheet or
to be reflected on the Closing Balance Sheet are in the original packaging
of the supplier. Each item of inventory reflected on the Balance Sheet is,
and each item of inventory to be reflected on the Closing Balance Sheet is
required to be, so reflected on the basis of a complete physical count and
is valued at the lesser of cost or fair market value in accordance with
generally accepted accounting principles consistently applied.
(b) The items referred to in Section 3.19(a) are in good
condition and saleable in the ordinary course of business of Reseller
Network as currently conducted. None of the items referred to in Section
3.19(a) is obsolete, discontinued, damaged, overaged or of below standard
quality or merchantability, except for items that have been written down to
realizable market value or for which adequate reserves have been provided.
SECTION 3.20. ReceivablesSECTION 3.20. Receivables. All accounts,
notes receivable, employee advances, accrued interest receivable, amounts
due from vendors and other receivables ("Receivables") (other than
receivables collected since the Balance Sheet Date) reflected on the
Balance Sheet are, and all Receivables arising from or otherwise relating
to the business of Reseller Network as of the Closing Date will be, valid
and genuine. All Receivables arising out of or relating to such business
of Reseller Network as of the Balance Sheet Date have been included in the
Balance Sheet, in accordance with generally accepted accounting principles
applied on a consistent basis.
SECTION 3.21. Product Liability; Product WarrantySECTION 3.21.
Product Liability; Product Warranty. (a) Except as set forth in Schedule
3.21(a) of the Seller Disclosure Letter, there are no claims, actions,
suits, inquiries or proceedings by or before any court or governmental or
other regulatory or administrative authority, agency or commission
asserted, pending or, to the best knowledge of Seller, threatened against,
or to the knowledge of Seller any investigations, involving Seller (to the
extent related to the business of Reseller Network), Reseller Network or
any Company that (i) relate to the ownership, possession or use of any
product alleged to have been manufactured, assembled, configured,
distributed or sold by Seller (to the extent related to the business of
Reseller Network), Reseller Network or any Company (the "RN Products") and
alleged to have been defective or improperly designed or manufactured, (ii)
state a claim under any warranty, guarantee or indemnification made by
Seller, Reseller Network or any Company or (iii) arise from or are alleged
to arise from actual or alleged injury to Persons or property as a result
of the conduct of Seller (to the extent related to the business of Reseller
Network), Reseller Network or any Company.
(b) To the best knowledge of Seller, there are no recalls pending
or threatened with respect to any of the RN Products. No filing has been
made by Seller (to the extent related to the business of Reseller Network),
Reseller Network or any Company under any applicable rule, regulation or
statute with respect to any product defects or hazards in connection with
any of the RN Products and there have been, to the best knowledge of
Seller, no material recurring defects therein which create such a defect or
hazard.
(c) Schedule 3.21(c) of the Seller Disclosure Letter sets forth
the standard forms of product warranties issued by Seller (to the extent
related to the business of Reseller Network), Reseller Network or any
Company and copies of all other material product warranties issued by
Seller (to the extent related to the business of Reseller Network),
Reseller Network or any Company. Except as set forth in Schedule 3.21(c)
of the Seller Disclosure Letter or reflected or reserved for in the Balance
Sheet, since January 1, 1992, no product warranty or similar claims have
been made against Seller (to the extent related to the business of Reseller
Network), Reseller Network or any Company, except claims as to which in the
aggregate losses and expenses in respect of repair or replacement of
products have not exceeded $50,000.
SECTION 3.22. Selling DocumentsSECTION 3.22. Selling Documents.
None of the information (other than financial projections and other than
the financial statements as to which representations are made in Section
3.08) contained in the Confidential Descriptive Memorandum (the "Offering
Memorandum") dated as of February 1997, prepared by Xxxx Xxxxx Xxxx Xxxxxx
Incorporated ("Xxxx Xxxxx") in connection with the sale of Reseller
Network, contains any untrue statement of a material fact or omits to state
a material fact necessary in order to make the statements contained therein
not misleading. The financial projections relating to Reseller Network
delivered to Buyer were made in good faith and were based upon assumptions
that were reasonable at the time such projections were delivered to Buyer.
Without limiting the representations and warranties made in Section 3.08,
Seller has disclosed to Buyer the financial results of Reseller Network up
to and including April 5, 1997 which are materially different from those
set forth in such projections.
SECTION 3.23. Finders' FeesSECTION 3.23. Finders' Fees. Except for
Xxxx Xxxxx 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, Reseller Network or any Company
who might be entitled to any fee or commission in connection with the
Transaction.
SECTION 3.24. EmployeesSECTION 3.24. Employees. Schedule 3.24 of
the Seller Disclosure Letter sets forth a true and complete list of (a) the
names, titles, annual salaries and other compensation of all officers of
each Company and all other employees of each Company whose annual base
salary exceeds $100,000 and (b) the wage rates and number of employees of
each Company (by classification).
SECTION 3.25. Labor MattersSECTION 3.25. Labor Matters. (a) Seller
(with respect to the business of Reseller Network), Reseller Network and
each Company are in compliance with all currently applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and are not engaged in any unfair labor
practice, failure to comply with which or engagement in which, as the case
may be, would reasonably be expected to have a Material Adverse Effect.
There is no unfair labor practice complaint pending or, to the knowledge of
Seller, threatened against Reseller Network or any Company before the
National Labor Relations Board.
(b) except as set forth in Schedule 3.25 of the Seller
Disclosure Letter, there is no pending or, to the knowledge of Seller,
Reseller Network or any Company, threatened labor dispute, strike or
lockout, or work stoppage, unfair labor practice complaint, grievance
procedure or arbitration proceeding, nor to the knowledge of Seller is
there any slowdown, relating to Seller, Reseller Network or any Company.
No employees of Seller, Reseller Network or any Company are subject to any
collective bargaining agreement or labor contracts. No question now exists
respecting proposed union representation of the employees of any Company
and no collective bargaining agreement is currently being negotiated.
(c) Each Company and Reseller Network have made available to
Buyer copies of all Occupational Safety and Health Administration ("OSHA")
reports having to do with any Company or Reseller Network, their operations
or their business and received by Seller, Reseller Network or any Company.
No other oral or written complaints or notices have been received from
OSHA, or any other regulatory agencies or offices having jurisdiction over
health or safety matters relating to Seller, Reseller Network or any
Company. All matters noticed in such reports have been resolved or cured.
SECTION 3.26. Environmental MattersSECTION 3.26. Environmental
Matters. (a) The following terms, as used herein, have the following
meanings:
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and the rules and regulations
promulgated thereunder.
"Environmental Laws" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, regulation, rule,
judgment, order, injunction, permit or governmental restriction or
requirement or any agreement with any governmental authority, whether now
or hereafter in effect, relating to human health and safety, the
environment or to pollutants, contaminants, wastes or chemicals or any
hazardous substances, wastes or materials.
"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 any of the foregoing
characteristics, including, without limitation, petroleum, its derivatives,
by-products and other hydrocarbons, and any substance, waste or material
regulated under any Environmental Law.
(b) Except as disclosed on Schedule 3.26 of the Seller
Disclosure Letter,
(i) there are no liabilities of or relating to the business of
Reseller Network or any Company of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, arising under
or relating to any Environmental Law, and there are no facts, conditions,
situations or set of circumstances which could reasonably be expected to
result in or be the basis for any such liability;
(ii) no notice, notification, demand, request for information,
citation, summons, order or complaint has been received, no penalty has
been assessed and no action, suit or proceeding is pending, or to Seller's
knowledge, threatened (nor to Seller's knowledge is there any investigation
or review pending) by any governmental entity or other Person with respect
to any matters relating to Seller (with respect to the business of Reseller
Network), Reseller Network or any Company and relating to or arising out of
any Environmental Law;
(iii) no polychlorinated biphenyls, radioactive material, lead,
asbestos-containing material, incinerator, landfill, septic, wastewater
treatment or other disposal system or underground storage tank (active or
inactive) is or has been present at, on or under any property now or
previously owned, leased or operated by Seller (with respect to the
business of Reseller Network), Reseller Network or any Company;
(iv) no Hazardous Substance has been discharged, disposed of,
deposited, spilled, leaked or released at, on or under any property now or
previously owned, leased or operated by Seller (with respect to the
business of Reseller Network), Reseller Network or any Company; and
(v) no property now or previously owned, leased or operated by
Seller (with respect to the business of Reseller Network), Reseller Network
or any Company or any property to which Reseller Network or any Company has
transported or arranged for the transportation of any Hazardous Substances
is listed or, to Seller's knowledge, proposed for listing, on the National
Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in
CERCLA) or on any similar federal, state or foreign list of sites requiring
investigation or clean-up.
(c) There has been no environmental investigation, study,
audit, test, review or other analysis conducted which Seller has in its
possession in relation to the current or prior business of Reseller Network
or any Company or any property or facility now or previously owned, leased
or operated by Reseller Network or any Company which has not been made
available to Buyer at least ten days prior to the date hereof.
SECTION 3.27. Bank AccountsSECTION 3.27. Bank Accounts. Set forth
on Schedule 3.27 of the Seller Disclosure Letter hereof is the name and
address of each bank in which Seller (to the extent related to the business
of Reseller Network), Reseller Network or any Company has an account or a
safe deposit box, the account numbers and the names of all Persons
authorized to draw on such accounts or to have access thereto.
SECTION 3.28. Suppliers and LicensorsSECTION 3.28. Suppliers and
Licensors. Schedule 3.28 of the Seller Disclosure Letter (i) lists the
suppliers of inventory of Reseller Network and the Companies by purchase
volume for the year ended February 1, 1997 and the two fiscal month period
ended April 5, 1997 and (ii) identifies each contract or agreement with
each such supplier that is currently in effect, other than letters
periodically received from vendors, including but not limited to those
addressing special promotions, marketing-development funds, sales-out
objectives and returns incentives. The five largest such suppliers so
listed by purchase volume shall collectively be referred to herein as the
"Principal Vendors" and each such supplier, a "Principal Vendor". Except as
indicated in Schedule 3.28 of the Seller Disclosure Letter, no such
supplier has any right to terminate its contract with Seller (with respect
to the business of Reseller Network), Reseller Network or any Company due
to the consummation of the Transaction.
SECTION 3.29. Reseller LoansSECTION 3.29. Reseller Loans. Schedule
3.29 of the Seller Disclosure Letter sets forth the name of each reseller
to which Seller or any Company has made an outstanding loan in connection
with the business of Reseller Network. A true and complete copy of each
loan agreement related to such reseller loans has been made available to
Buyer prior to the date hereof. To the best knowledge of Seller based on
information of which it is currently aware, all of such reseller loans are
fully collectible.
SECTION 3.30. Seller Proxy MaterialsSECTION 3.30. Seller Proxy
Materials. Each document filed by Seller with the SEC in connection with
the meeting of the stockholders of Seller referred to in Section 12.01(d)
including, without limitation, the proxy or information statement of Seller
and any amendments or supplements thereto (the "Seller Proxy Materials")
will, when filed, comply as to form in all material respects with the
applicable requirements of the Exchange Act. Each time any Seller Proxy
Materials are distributed to stockholders of Seller or any other
solicitation of stockholders of Seller is made by or on behalf of Seller or
any Affiliate of Seller, and at the time such stockholders vote on approval
of the Transaction, the Seller Proxy Materials (as supplemented and
amended, if applicable), in the light of the circumstances under which the
statements contained in the Seller Proxy Materials or any other
solicitations are made, will not contain an untrue statement of a material
fact or omit to state any material fact necessary (i) in order to make the
statements made therein not false or misleading, or (ii) to correct any
statement in any earlier communication with respect to the solicitation of
a proxy for the same meeting or subject matter which has become false or
misleading. The representations and warranties contained in this Section
will not apply to statements or omissions included in the Seller Proxy
Materials based upon information furnished to Seller in writing by Buyer
specifically for use therein.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF XLSOURCE
4REPRESENTATIONS AND WARRANTIES OF XLSOURCE XLSource represents and
warrants to Buyer as of the date hereof and as of the Closing Date that:
SECTION 4.1. Corporate Existence and PowerSECTION 4.1. Corporate
Existence and Power. XLSource is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all corporate powers and all material governmental
licenses, authorizations, permits, consents and approvals required to carry
on its business as now conducted. XLSource has heretofore made available
to Buyer true and complete copies of its certificate of incorporation and
bylaws as currently in effect.
SECTION 4.2. Corporate AuthorizationSECTION 4.2. Corporate
Authorization. The execution, delivery and performance by XLSource of this
Agreement and the XLSource Supply Agreement and the consummation by
XLSource of the Transaction and the transactions contemplated by the
XLSource Supply Agreement are within its corporate powers and have been
duly authorized by all necessary corporate action on the part of XLSource.
Each of this Agreement and the XLSource Supply Agreement constitutes a
valid and binding agreement of XLSource, enforceable against XLSource in
accordance with its terms, except as the enforcement thereof may be limited
by applicable bankruptcy, insolvency, fraudulent conveyance, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally.
SECTION 4.3. Government AuthorizationSECTION 4.3. Government
Authorization. The execution, delivery and performance by XLSource of
this Agreement and the XLSource Supply Agreement and the consummation of
the Transaction and the transactions contemplated by the XLSource Supply
Agreement require no action by or in respect of, or filing with, any
governmental body, agency or official.
SECTION 4.4. NONCONTRAVENTIONSection 4.4. NONCONTRAVENTION. THE
EXECUTION, DELIVERY AND PERFORMANCE BY XLSOURCE OF THIS AGREEMENT AND THE
XLSOURCE SUPPLY AGREEMENT AND THE CONSUMMATION BY XLSOURCE OF THE
TRANSACTION AND THE TRANSACTIONS CONTEMPLATED BY THE XLSOURCE SUPPLY
AGREEMENT DO NOT AND WILL NOT VIOLATE ITS CERTIFICATE OF INCORPORATION OR
BYLAWS, VIOLATE ANY APPLICABLE LAW, RULE, REGULATION, JUDGMENT,
INJUNCTION, ORDER OR DECREE OR REQUIRE ANY CONSENT OR OTHER ACTION BY ANY
PERSON UNDER, CONSTITUTE A DEFAULT UNDER, OR GIVE RISE TO ANY RIGHT OF
TERMINATION, CANCELLATION OR ACCELERATION OF ANY RIGHT OR OBLIGATION OF
XLSOURCE OR TO A LOSS OF ANY BENEFIT TO WHICH XLSOURCE IS ENTITLED UNDER
ANY PROVISION OF ANY AGREEMENT OR OTHER INSTRUMENT BINDING UPON XLSOURCE.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
5REPRESENTATIONS AND WARRANTIES OF BUYERBuyer represents and warrants to
Seller as of the date hereof and as of the Closing Date that:
SECTION 5.1. Corporate Existence and PowerSECTION 5.1. Corporate
Existence and Power. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws 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 5.2. Corporate AuthorizationSECTION 5.2. Corporate
Authorization. The execution, delivery and performance by Buyer of this
Agreement, the Escrow Agreement and the XLSource Supply Agreement and the
consummation of the Transaction and the transactions contemplated by the
Escrow Agreement and the XLSource Supply Agreement are within the corporate
powers of Buyer and have been duly authorized by all necessary corporate
action on the part of Buyer. Each of this Agreement and the XLSource
Supply Agreement constitutes and, when executed and delivered pursuant to
its terms the Escrow Agreement will constitute, a valid and binding
agreement of Buyer, enforceable against Buyer in accordance with its terms,
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, moratorium or other similar laws
affecting the enforcement of creditors' rights generally.
SECTION 5.3. Governmental AuthorizationSECTION 5.3. Governmental
Authorization. The execution, delivery and performance by Buyer of this
Agreement, the Escrow Agreement and the XLSource Supply Agreement and the
consummation of the Transaction and the transactions contemplated by the
Escrow Agreement and the XLSource Supply Agreement require no material
action by or in respect of, or material filing with, any governmental body,
agency or official other than (i) compliance with any applicable
requirements of the HSR Act and (ii) compliance with any applicable
requirements of the Exchange Act.
SECTION 5.4. NoncontraventionSECTION 5.4. Noncontravention. The
execution, delivery and performance by Buyer of this Agreement, the Escrow
Agreement and the XLSource Supply Agreement and the consummation of the
Transaction and the transactions contemplated by the Escrow Agreement and
the XLSource Supply Agreement 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 5.03, violate any applicable
material law, rule, regulation, judgment, injunction, order or decree or
(iii) require any consent or other action by any Person under any provision
of any agreement or other instrument binding upon Buyer.
SECTION 5.5. FinancingSECTION 5.5. Financing. Buyer has sufficient
cash, available lines of credit or other sources of immediately available
funds to enable it to make payment of the Purchase Price and any other
amounts to be paid by it hereunder.
SECTION 5.6. Purchase for InvestmentSECTION 5.6. Purchase for
Investment. Buyer is purchasing the RN Shares for investment for its own
account and not with a view to, or for sale in connection with, any
distribution thereof. Buyer (either alone or together with its advisors)
has sufficient knowledge and experience in financial and business matters
so as to be capable of evaluating the merits and risks of its investment in
the RN Shares and is capable of bearing the economic risks of such
investment.
SECTION 5.7. LitigationSECTION 5.7. Litigation. There is no
action, suit, investigation or proceeding pending against, or to the
knowledge of Buyer threatened against or affecting, Buyer before any court
or arbitrator or any governmental body, agency or official which in any
manner challenges or seeks to prevent, enjoin, alter or materially delay
the Transaction.
SECTION 5.8. Finders' FeesSECTION 5.8. Finders' Fees. Except for
Xxxxxx Xxxxxxx & Co. Incorporated whose fees will be paid by Buyer, there
is no investment banker, broker, finder or other intermediary which has
been retained 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 Transaction.
ARTICLE 6
COVENANTS OF SELLER
6COVENANTS OF SELLERSeller agrees that:
SECTION 6.1. Conduct of Reseller Network and Each CompanySECTION
6.1. Conduct of Reseller Network and Each Company. From the date hereof
until the Closing Date, Seller shall cause Reseller Network and each
Company to conduct its businesses in the ordinary course consistent with
past practice and to use its commercially reasonable efforts to preserve
intact its business organizations, relationships with third parties and,
except as set forth on Schedule 3.09(k) of the Seller Disclosure Letter, to
keep available the services of its present officers and employees. Without
limiting the generality of the foregoing, from the date hereof until the
Closing Date, Seller will not permit Reseller Network or any Company to:
(a) adopt or propose any change in the certificate of
incorporation or bylaws of any Company;
(b) merge or consolidate with any other Person or, except
for purchases of inventory in the ordinary course of business consistent
with past practices, acquire a material amount of assets from any other
Person;
(c) sell, lease, license or otherwise dispose of any assets
or property except (i) pursuant to existing contracts or commitments and
(ii) in the ordinary course consistent with past practice; or
(d) agree or commit to do any of the foregoing.
Seller will not, and will not permit Reseller Network or any Company to,
(i) take or agree or commit to take any action that would make any
representation and warranty of Seller hereunder inaccurate in any respect
at, or as of any time prior to, the Closing Date or (ii) knowingly omit or
agree or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any respect at any such
time.
SECTION 6.2. Access to Information; ConfidentialitySECTION 6.2.
Access to Information; Confidentiality. (a) From the date hereof until the
Closing Date, Seller will (i) give, and will cause Reseller Network and
each Company to give, Buyer, its counsel, financial advisors, auditors and
other authorized representatives full access to the offices, properties,
books and records of Reseller Network and each Company and to the books and
records of Seller and each Company relating to Reseller Network, (ii)
furnish, and will cause Reseller Network and each Company to furnish, to
Buyer, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information
relating to Reseller Network and each Company as such Persons may
reasonably request, (iii) instruct the employees, counsel and financial
advisors of Seller, Reseller Network and each Company to cooperate with
Buyer in its investigation of Reseller Network and (iv) allow Buyer and its
representatives to be present during any physical count of inventory
performed. Any investigation pursuant to this Section shall be conducted in
such manner as not to interfere unreasonably with the conduct of the
business of Reseller Network, Seller or any Company. 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.
(b) Schedule 6.02 of the Seller Disclosure Letter sets forth
(to the extent that Seller is permitted to do so consistent with its
contractual obligations to third parties) the name of each Potential Buyer.
Seller shall promptly request that each Potential Buyer either return all
of such Information (and copies thereof) to Seller or destroy all of such
Information (and copies thereof) and deliver a written certification of
such destruction to Seller. Seller shall use its best efforts to cause
each such Potential Buyer to comply with such request and shall notify
Buyer promptly following compliance by each Potential Buyer with such
request. As used herein, "Potential Buyer" means each Person (other than
Buyer) to whom any confidential documents or information (including but not
limited to the Offering Memorandum) concerning Seller (to the extent
related to the business of Reseller Network), Reseller Network or any
Company ("Information") was disclosed by Seller or any agent acting on
Seller's behalf since January 1, 1997 for the purpose of discussing a
possible change in control transaction for Reseller Network.
(c) Seller hereby assigns to Buyer, effective as of the
Closing Date, its rights to enforce the confidentiality provisions
contained in any and all confidentiality agreements which Seller has
entered into with, or received from, each Potential Buyer, but solely to
the extent that it relates to information with respect to the business of,
or solicitation of employees of, Reseller Network and the Companies. To
the extent such rights are not assignable, Seller shall, at Buyer's
request, enforce such rights at Buyer's expense.
(d) After Closing, Seller and its Affiliates will hold, and
will use their commercially reasonable 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 Reseller Network or any Company,
except to the extent that such information can be shown to have been (i)
previously known on a nonconfidential basis by Seller, (ii) in the public
domain through no fault of Seller or its Affiliates or (iii) later lawfully
acquired by Seller from sources other than those related to its prior
ownership of Reseller Network. 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.
(e) On and after the Closing Date, Seller will afford
promptly to Buyer and its agents reasonable access to its books of account,
financial and other records and information in the possession of Seller
relating to Reseller Network and the Companies and to Seller's employees,
and will request that its auditors provide to Buyer and its agents
reasonable access to its employees and workpapers relating to Reseller
Network and the Companies, in each case to the extent necessary or useful
for Buyer in connection with any audit, investigation, dispute or
litigation relating to Reseller Network or any of the Companies or any
other reasonable business purpose relating to Reseller Network; provided
that any such access by Buyer shall not unreasonably interfere with the
conduct of the business of Seller; and provided further, in no event shall
Seller be required to disclose any information which would waive an
attorney-client privilege.
SECTION 6.3. Notices of Certain EventsSECTION 6.3. Notices of
Certain Events. Seller shall promptly notify Buyer 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 Transaction;
(b) any notice or other communication from any governmental
or regulatory agency or authority in connection with the Transaction; and
(c) any actions, suits, claims or proceedings commenced or,
to its knowledge threatened (or, to its knowledge, any investigations)
against, relating to or involving or otherwise affecting Seller (to the
extent related to the business of Reseller Network), Reseller Network or
any Company that, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 3.13 or that relate to
the consummation of the Transaction.
SECTION 6.4. ResignationsSECTION 6.4. Resignations. At or prior to
the Closing Date, Seller will deliver to Buyer the resignations of all
corporate officers and directors of each Company who will be officers,
directors or employees of Seller or any of its Affiliates after the Closing
Date from their positions with such Company.
SECTION 6.5. NoncompetitionSECTION 6.5. Noncompetition. (a) Seller
agrees that for a period of three (3) full years from the Closing Date,
neither it nor any of its Subsidiaries shall engage, either directly or
indirectly, as a principal or for its own account or solely or jointly with
others, or as stockholders or equity owners in any Person, manage, operate,
join, lend money or render financial or other assistance to, or participate
(as a director, officer, employee, partner, stockholder, founder,
consultant or otherwise), in any business that competes with either of the
following businesses (the "Business") as they exist on the Closing Date
within the United States, Canada and Mexico:
(i) any business that distributes and sells to resellers
(both retail and otherwise) branded microcomputers and related
equipment; or
(ii) any business that, in connection with the distribution
and sale to resellers (both retail and otherwise) of branded
microcomputers and related equipment, (x) offers to such resellers
value-added services, including but not limited to product selection,
technical support, cost-efficient marketing programs and promotions,
national service network, SKU-able services, financing programs and
product delivery services and (y) performs "built-to-order"
configuring of branded microcomputers and related equipment and light
manufacturing in connection therewith.
Notwithstanding anything herein to the contrary, nothing in this Section
6.05(a) shall prohibit Seller or any of its Subsidiaries from (1) making
isolated sales of branded microcomputers and related equipment to such
resellers to the extent and in the circumstances such sales are currently
made by Seller's Subsidiaries, (2) providing information technology
services in the areas of (i) internetworking (the consulting, design and
implementation of local area networks and wide area networks), (ii)
applications development (the customization and adaption of proven software
as well as training and education to support applications and
internetworking solutions), (iii) telecommunications (including data, video
and voice transmission) or (iv) managed services (such as install, add,
move and change services, break fix, help desk, network management and
asset management), (3) manufacturing, assembling or configuring
microcomputers if the XLSource Supply Agreement has been terminated due to
Buyer's breach of the performance standards contained therein, (4)
acquiring a diversified company having not more than 5% of its sales (based
on its latest published annual audited financial statements) attributable
to the Business or (5) owning, individually or in the aggregate, less than
1% of a company listed or traded on a national securities exchange or in an
over-the-counter securities market.
(b) Seller agrees that for a period of three (3) full years
from the Closing Date, neither it nor any of its Subsidiaries shall without
Buyer's consent, knowingly employ or solicit (other than through general
advertisement), or knowingly receive or accept the performance of services
by any then current employee of Reseller Network or any Company, or any
then current employee of Buyer or its Affiliates employed by Reseller
Network or any Company as of the date hereof or as of the Closing Date.
(c) If any provision contained in this Section shall for
any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provisions of this Section, but this Section shall be construed as if such
invalid, illegal or unenforceable provision had never been contained
herein. It is the intention of the parties that if any of the restrictions
or covenants contained herein is held to cover a geographic area or to be
for a length of time which is not permitted by applicable law, or in any
way construed to be too broad or to any extent invalid, such provision
shall not be construed to be null, void and of no effect, but to the extent
such provision would be valid or enforceable under applicable law, a court
of competent jurisdiction shall construe and interpret or reform this
Section to provide for a covenant having the maximum enforceable geographic
area, time period and other provisions (not greater than those contained
herein) as shall be valid and enforceable under such applicable law.
Seller acknowledges that Buyer would be irreparably harmed by any breach of
this Section and that there would be no adequate remedy at law or in
damages to compensate Buyer for any such breach. Seller agrees that Buyer
shall be entitled to injunctive relief requiring specific performance by
Seller of this Section, and Seller consents to the entry thereof.
SECTION 6.6. Intercompany AccountsSECTION 6.6. Intercompany
Accounts. (a) If the aggregate amount of the payables (collectively, the
"Intercompany Payable") owing by the Companies to Seller or its
Subsidiaries is less than $10 million greater than the aggregate amount of
the receivables (collectively, the "Intercompany Receivable") owing to the
Companies by Seller or its Subsidiaries, Seller shall, and shall cause its
Subsidiaries to, increase the amount of the Intercompany Payable or
decrease the Intercompany Receivable (in either event through one or more
cash transactions) on or immediately prior to the Closing Date such that,
after giving effect to such increase or decrease, the amount of the
Intercompany Payable shall be at least $10 million more than the amount of
the Intercompany Receivable. For purposes of this Section, the
Intercompany Receivable and the Intercompany Payable each shall be
calculated as closely as reasonably possible to the Closing Date, but in
any event not earlier than the Friday immediately prior to the Closing
Date.
(b) Subject to Section 6.06(c) and Section 6.06(d), effective at
the Closing the Intercompany Payable and the Intercompany Receivable as
determined pursuant to Section 6.06(a) shall be settled in cash and none
shall be outstanding and (except as the parties may otherwise agree) any
agreements relating to the Intercompany Payable and Intercompany Receivable
shall have been terminated and neither Reseller Network nor any Company
shall have any obligation with respect to the Intercompany Payable on or
after the Closing.
(c) Notwithstanding anything in this Agreement to the contrary,
if, as a result of any reconciliation or adjustment performed during the
preparation of the Closing Balance Sheet, the Closing Balance Sheet
includes any amounts that would constitute an Intercompany Receivable or an
Intercompany Payable, such amounts shall be reflected in the Closing Net
Liabilities Assumed in the manner set forth in Schedule 2.04.
(d) Notwithstanding anything in this Agreement to the contrary,
to the extent that the Base Purchase Price, as adjusted pursuant to Section
2.03, is less than $10 million, that portion of the payment made by Buyer
pursuant to Section 2.02(a)(i) shall be made in full satisfaction of any
obligation of Buyer pursuant to Section 6.06(b) with respect to a
corresponding portion of the Intercompany Payable.
SECTION 6.7. Stockholder Meeting; Proxy MaterialsSECTION 6.7.
Stockholder Meeting; Proxy Materials. Seller shall use its best efforts to
cause a meeting of its stockholders to be duly called and held as soon as
reasonably practicable for the purpose of approving the Transaction. The
board of directors of Seller shall, subject to its fiduciary duties under
applicable law as advised by counsel, recommend approval of the Transaction
by Seller's stockholders. In connection with such meeting Seller (i) will
promptly prepare and file with the SEC, will use its best efforts to have
cleared by the SEC and will thereafter mail to its stockholders as promptly
as practicable a proxy statement and all other Seller Proxy Materials for
such meeting as may be required under applicable law, (ii) will use its
best efforts to obtain the necessary approval of the Transaction by its
stockholders and (iii) will otherwise comply with all legal requirements
applicable to such meeting.
SECTION 6.8. Other OffersSECTION 6.8. Other Offers. Seller, its
Affiliates, the Companies, and the officers, directors, employees and other
agents of Seller, its Affiliates or the Companies, will not, directly or
indirectly, (i) take any action to solicit, initiate or encourage an
Acquisition Proposal or (ii) except for actions as may be required to
discharge the fiduciary duties of their boards of directors under
applicable law based upon written advice of counsel, engage in negotiations
with, or disclose any nonpublic information relating to Reseller Network or
any of the Companies or afford access to the properties, books or records
of Seller (with respect to the business of Reseller Network), Reseller
Network or any of the Companies to, any Person that Seller has reason to
believe may be considering making, or has made, an Acquisition Proposal.
Seller will promptly notify Buyer after receipt by Seller, its Affiliates
or any Company of any Acquisition Proposal or any indication that any
Person is considering making an Acquisition Proposal or any request for
nonpublic information relating to Seller (with respect to the business of
Reseller Network), Reseller Network or any Company or for access to the
properties, books or records of Seller (with respect to the business of
Reseller Network), Reseller Network or any Company by any Person that
Seller has reason to believe may be considering making, or has made, an
Acquisition Proposal, and Seller will keep Buyer fully informed of the
status and details of such Acquisition Proposal, indication or request. As
used herein, "Acquisition Proposal" means any offer or proposal for, or any
indication of interest in, any transaction involving the transfer (by way
of merger, sale, other business combination or otherwise) of a material
portion of the business of Reseller Network or the Companies (including any
capital stock of the Companies or any material portion of the assets of the
Companies or Reseller Network).
SECTION 6.9. Transfer of IntelevestSECTION 6.9. Transfer of
Intelevest. Prior to the Closing, Seller shall cause Intelevest to be
transferred to Seller or one of its Affiliates on terms reasonably
satisfactory to Buyer. As used herein, "Intelevest" means Intelevest
Holdings, Inc., a Delaware corporation, which is a wholly-owned indirect
Subsidiary of Seller and a wholly-owned direct Subsidiary of Intelligent
Distribution Services, Inc.
SECTION 6.10. Transfer of Seller RN Assets and LiabilitiesSECTION
6.10. Transfer of Seller RN Assets and Liabilities. (a) Seller shall
sell, transfer, assign and deliver, or cause to be sold, transferred,
assigned and delivered, to the Companies prior to the Closing, free and
clear of all Liens, other than Liens referred to in clauses (i) through
(iv) of Section 3.15(a), all of Seller's right, title and interest in, to
and under the Seller RN Assets. Seller agrees to cause the Companies to
assume the Seller RN Liabilities prior to the Closing.
(b) In connection with the transfer of the Seller RN Assets
and the assumption of the Seller RN Liabilities referred to in Section
6.10(a), Seller and the Companies shall enter into one or more Assignment
and Assumption Agreements in form and substance reasonably acceptable to
Buyer, and, subject to the provisions hereof, Seller shall deliver to the
Companies such bills of sale, endorsements, consents, assignments and other
good and sufficient instruments of conveyance and assignment as the parties
and Buyer shall deem reasonably necessary or appropriate to vest in the
Companies all right, title and interest in, to and under the Seller RN
Assets.
(c) Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign
any Seller RN Asset or any claim or right or any benefit arising thereunder
or resulting therefrom if an attempted assignment thereof, 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 the
Companies or Seller thereunder. Seller will use its commercially
reasonable efforts to obtain the consent of the other parties to any such
Seller RN Asset or any claim or right or any benefit arising thereunder for
the assignment thereof to the Companies as Buyer may request. If such
consent is not obtained, or if an attempted assignment thereof would be
ineffective or would adversely affect the rights of Seller thereunder so
that the Companies would not in fact receive all such rights, Seller and
Buyer will cooperate in a mutually agreeable arrangement under which Buyer
or the Companies would obtain the benefits and assume the obligations
thereunder in accordance with this Agreement, including sub-contracting,
sub-licensing, or sub-leasing to Buyer or the Companies, or under which
Seller would enforce for the benefit of Buyer or the Companies. Seller
will promptly pay to Buyer when received all monies received by Seller
under any Seller RN Asset or any claim or right or any benefit arising
thereunder.
SECTION 6.11. ConsentsSECTION 6.11. Consents. (a) As promptly as
practicable, but in no event later than 10 business days following the date
hereof, Seller shall deliver to Buyer a list setting forth every consent
other than the Required Consents (each such consent, an "Other Consent" and
together, the "Other Consents") under such agreements, contracts or other
instruments or such Permits that is necessary with respect to the
execution, delivery and performance of this Agreement.
(b) Notwithstanding anything in this Agreement to the
contrary, Buyer may notify Seller in writing, within 15 days following its
receipt of the list referred to in Section 6.11(a), that Buyer has made a
reasonable good faith determination that one or more of the Other Consents
described on such list satisfy the criteria in Section 3.05 for Required
Consents. Such notice shall state in reasonable detail the basis for such
good faith determination. In such event, such Other Consents shall be
deemed Required Consents for all purposes of this Agreement.
SECTION 6.12. Capital ContributionSECTION 6.12. Capital
Contribution. At or immediately prior to the Closing, Seller shall make a
capital contribution to the Companies (whether through the forgiveness of
part of the Intercompany Payable or otherwise) in an amount at least equal
to the amount by which the Base Net Liabilities Assumed is greater than $78
million, as adjusted pursuant to Section 2.03.
ARTICLE 7
COVENANTS OF SELLER AND XLSOURCE
7COVENANTS OF SELLER AND XLSOURCEEach of Seller and XLSource agrees that:
SECTION 7.1. Guarantee of Guaranteed ObligationsSECTION 7.1.
Guarantee of Guaranteed Obligations. Seller hereby irrevocably and
unconditionally guarantees to Buyer the prompt and full discharge by
XLSource of all of XLSource's covenants, agreements, obligations and
liabilities contained in the XLSource Supply Agreement and in Section 9.06
of this Agreement, including without limitation the due and punctual
payment of all amounts which may become due and payable by XLSource under
such agreement and such Section when and as the same shall become due and
payable. XLSource hereby irrevocably and unconditionally guarantees to
Buyer the prompt and full discharge by Seller of all of Seller's covenants,
agreements, obligations and liabilities under this Agreement, including
without limitation the due and punctual payment of all amounts which may
become due and payable by Seller hereunder when and as the same shall
become due and payable. The obligations of each of Seller and XLSource
guaranteed by XLSource and Seller, respectively, referred to in the two
preceding sentences shall be hereinafter referred to collectively as the
"Guaranteed Obligations" of XLSource and Seller, respectively; provided
that the Guaranteed Obligations of Seller shall be reduced, in connection
with each XLSource Sale to a Person approved by Buyer pursuant to the
provisions of the XLSource Supply Agreement, by an amount equal to the
Designated Percentage applicable to such XLSource Sale. Each of Seller and
XLSource agrees that, with respect to all of its Guaranteed Obligations to
pay money, such guarantee shall be a guarantee of payment and performance
and not of collection.
SECTION 7.2. Guarantee UnconditionalSECTION 7.2. Guarantee
Unconditional. The obligations of each of Seller and XLSource under this
Article7 are unconditional and absolute and, without limiting the
generality of the foregoing, shall not be affected by any amendment,
modification or waiver of the obligations of XLSource or of Seller and its
Affiliates under this Agreement, except in accordance with the terms of
such amendment, modification or waiver, any change in the corporate
existence of XLSource or Seller, respectively, or any of their respective
Affiliates or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting XLSource or Seller, respectively, or any of their
respective Affiliates or their respective assets or resulting in any
release or discharge of any obligations of XLSource or Seller,
respectively, or their respective Affiliates under the XLSource Supply
Agreement or this Agreement, the existence of any claim, set-off or other
right which Seller or XLSource may have at any time against one another,
any of such other's Affiliates, Buyer or any Person (provided that nothing
herein shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim) or any other act or omission to act or delay of
any kind by such other Person, any of its Affiliates, Buyer or any other
Person or any other circumstance which might, but for the provisions of
this paragraph, constitute a legal or equitable discharge of the
obligations of Seller or of XLSource under this Article 7.
SECTION 7.3. WaiversSECTION 7.3. Waivers. Each of Seller and
XLSource hereby waives any right, whether legal or equitable, statutory or
non-statutory, to require Buyer to proceed against or take any action
against or pursue any remedy with respect to XLSource or Seller,
respectively, or any other Person or make presentment or demand for
performance or give any notice of nonperformance before Buyer may enforce
its rights hereunder against Seller or XLSource, respectively.
SECTION 7.4. Discharge; Reinstatement in Certain
CircumstancesSECTION 7.4. Discharge; Reinstatement in Certain
Circumstances. The obligations of XLSource under this Article 7 shall
remain in full force and effect until the earlier of (i) the time that its
Guaranteed Obligations shall have been performed in full and (ii) the sale
by Seller of all of the equity securities of XLSource to a Person other
than an Affiliate of Seller or XLSource; provided that the obligations of
XLSource hereunder shall terminate if, prior to the Closing, Seller shall
obtain for the benefit of Buyer an irrevocable letter of credit, in the
amount of $7,500,000 and otherwise reasonably satisfactory to Buyer, for
the purpose of securing the payment of the Guaranteed Obligations
hereunder. Any such letter of credit shall remain in full force and effect
until (i) the third anniversary of the Closing Date or (ii) the second
anniversary of the Closing Date if, prior to such anniversary, all of the
equity securities of XLSource have been sold in one or more XLSource Sales.
Except as provided in the immediately preceding sentence with respect to
the obligation of Seller to provide a letter of credit, the obligations of
Seller under this Article 7 shall remain in full force and effect until the
time that its Guaranteed Obligations shall have been performed in full.
If, at any time, any performance by any Person of any Guaranteed Obligation
is rescinded or must be otherwise restored or returned, whether upon the
insolvency, bankruptcy or reorganization of Seller, XLSource or otherwise,
the obligations of Seller or XLSource hereunder with respect to such
Guaranteed Obligation shall be reinstated at such time as though such
Guaranteed Obligation had become due and had not been performed.
SECTION 7.5. SubrogationSECTION 7.5. Subrogation. Upon performance
by Seller or XLSource of any of its Guaranteed Obligations, Seller and
XLSource, respectively, shall be subrogated to the rights of Buyer against
XLSource, in the case of Seller, or against Seller, in the case of
XLSource, with respect to such Guaranteed Obligations; provided that
neither Seller nor XLSource shall enforce any of its Guaranteed Obligations
by way of subrogation against one another while any Guaranteed Obligation
is due and unperformed by such other party.
SECTION 7.6. Limit of LiabilitySECTION 7.6. Limit of Liability.
The obligations of each of XLSource and Seller under this Article 7 shall
be limited to an aggregate amount equal to the largest amount that would
not render its obligations hereunder subject to avoidance under Section 548
of the United States Bankruptcy Code or any comparable provisions of any
applicable state law.
ARTICLE 8
COVENANTS OF BUYER
8COVENANTS OF BUYERBuyer agrees that:
SECTION 8.1. AccessSECTION 8.1. Access. On and after the Closing
Date, Buyer will give, and will cause Reseller Network and each Company to
give, Seller, and it agents reasonable access to its books of account,
financial and other records, information and employees, and will request
that its independent accountants provide to Seller and its agents
reasonable access to its employees and workpapers, and the right to be
present during any reconciliation of the physical count of inventory
performed in connection with the preparation of the Closing Balance Sheet,
in each case to the extent necessary or useful for Seller in connection
with any audit, investigation, dispute or litigation relating to Reseller
Network or any other reasonable business purpose relating to Reseller
Network; provided that any such access by, or right to be present of,
Seller shall not unreasonably interfere with the conduct of the business of
Buyer.
SECTION 8.2. Seller GuaranteesSECTION 8.2. Seller Guarantees.
Buyer and its Affiliates will use commercially reasonable efforts to cause
Seller to be released in full from its obligations under and pursuant to
the liabilities, agreements and guarantees set forth on Schedule 8.02 of
the Seller Disclosure Letter to the extent, and only to the extent, that
such liabilities, agreements and guarantees were entered into directly and
solely for the benefit of the Companies or Reseller Network.
SECTION 8.3. Other MattersSECTION 8.3. Other Matters. If any final
judgment, order or adjudication determines that any Damages incurred by a
Buyer Indemnitee or by Seller or any of its Affiliates that are referred to
in Section 13.02(b)(ii) were so incurred as a result of an action taken by
Buyer or its Subsidiaries (other than any action taken by any Company prior
to the Closing), Buyer will promptly reimburse Seller for the amount of any
final judgment, order or adjudication (within the meaning of Section
13.02(b)(ii)) rendered in such matter against Seller or any Affiliate of
Seller in connection with any such action, suit, investigation or
proceeding.
ARTICLE 9
COVENANTS OF BUYER, SELLER AND XLSOURCE
9COVENANTS OF BUYER, SELLER AND XLSOURCEEach party agrees that:
SECTION 9.1. Commercially Reasonable Efforts; Further Assurances
SECTION 9.1. Commercially Reasonable Efforts; Further Assurances .
Subject to the terms and conditions of this Agreement, such party will use
its commercially reasonable 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 Transaction. Each
party agrees, and Seller, prior to the Closing, and Buyer, after the
Closing, agree, to cause each Company 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 Transaction.
SECTION 9.2. Certain FilingsSECTION 9.2. 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 Transaction 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 9.3. Public AnnouncementsSECTION 9.3. 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 Transaction and, except as may be required by applicable law or any
listing agreement with any national securities exchange, will not issue any
such press release or make any such public statement prior to such
consultation.
SECTION 9.4. ConfidentialitySECTION 9.4. Confidentiality. The
parties agree that (i) the Confidentiality Letter Agreement dated February
7, 1997 between Seller and Buyer shall remain in full force and effect
prior to the Closing Date and after any termination of this Agreement (it
being understood that confidential information provided to Buyer pursuant
to Section 6.02(a) or 6.02(e) shall be deemed "Proprietary Information"
within the meaning of such Confidentiality Letter Agreement) and (ii) such
Confidentiality Letter Agreement shall terminate as of the Closing Date
without further action by any party; provided, that such Confidentiality
Letter Agreement shall remain in full force and effect in accordance with
its terms as to any information relating to the Seller and its Affiliates
(other than information relating to Reseller Network or any Company).
SECTION 9.5. Segregation of Certain Sales ProceedsSECTION 9.5.
Segregation of Certain Sales Proceeds. (a) In connection with each
XLSource Sale that occurs prior to the termination in full of the
obligations of XLSource pursuant to Article 7, Seller and XLSource will
enter into arrangements reasonably satisfactory to Buyer pursuant to which
an amount in cash equal to the product of the Designated Percentage and
$7,500,000 will be deposited prior to or in conjunction with the
consummation of such XLSource Sale for the benefit of Buyer in a segregated
account for the purposes specified in Section9.05(c). Notwithstanding
anything herein to the contrary, in no event shall the aggregate amount so
segregated in connection with one or more XLSource Sales exceed $7,500,000.
(b) In lieu of segregating any amounts pursuant to Section
9.05(a) in connection with an XLSource Sale, Seller and XLSource may elect
to obtain for the benefit of Buyer an irrevocable letter of credit in an
amount equal to the product of the Designated Percentage and $7,500,000 and
otherwise reasonably satisfactory to Buyer for the purposes specified in
Section 9.05(c).
(c) Without limiting the obligations of Seller or XLSource
under this Agreement or the XLSource Supply Agreement, any amounts that are
segregated pursuant to Section 9.05 and any letter of credit obtained
pursuant to such Section shall be used by Seller and/or XLSource to secure
and satisfy the repayment of obligations of Seller and/or XLSource that are
owing to Buyer pursuant to the terms of this Agreement and the XLSource
Supply Agreement.
(d) The obligations of Seller and XLSource pursuant to this
Section 9.05 shall terminate and be of no further force or effect on (i)
the third anniversary of the Closing Date or (ii) the second anniversary of
the Closing Date if, prior to such anniversary, all of the equity
securities of XLSource have been sold in one or more XLSource Sales and
funds have been segregated, or letters of credit have been obtained, in
connection with such XLSource Sales pursuant to this Section 9.05. On the
date of such termination, any amounts so segregated, net of the aggregate
amount of claims with respect to which Buyer is seeking indemnification
pursuant to Article 10 or 13, may be released from such account.
(e) As used herein, the following words shall have the
following meanings:
"Designated Percentage", with respect to any XLSource Sale, means the
greatest of the following percentages:
(i) the percentage of the aggregate revenues of XLSource for
the four full fiscal quarters immediately preceding the date of such
XLSource Sale generated by or attributable to the assets or business
being sold in such XLSource Sale;
(ii) the percentage of the aggregate book value of the
assets of XLSource represented by the book value of the assets sold in
such XLSource Sale; or
(iii) the percentage of the outstanding capital stock of
XLSource sold in such XLSource Sale.
"XLSource Sale" means any sale, transfer, conveyance or disposition
(directly or indirectly, in one transaction or a series of related
transactions, by operation of law or otherwise), to a Person other than an
Affiliate of Seller or XLSource, of (i) any of the assets of XLSource or
(ii) any of the equity securities of XLSource other than in the ordinary
course of business.
SECTION 9.6. Supply AgreementSECTION 9.6. Supply Agreement. (a)
Upon the consummation of an XLSource Sale of the type described in clause
(i) of the definition thereof, the purchase commitment of XLSource
contained in Paragraph 4 of the XLSource Supply Agreement shall be reduced
by an amount equal to the Transferred Percentage.
(b) Upon the occurrence of a Transfer Event, XLSource shall
pay to Buyer, no later than five business days following such Transfer
Event, an amount in immediately available funds equal to 1% of the present
value (discounted annually to the date of such payment at a rate of 10%) of
the aggregate Adjusted Guaranteed Minimum Revenue for the period commencing
on the effective date of such Transfer Event and ending on the last day of
the term of the XLSource Supply Agreement (as such term may be extended
pursuant to the provisions thereof). Each party agrees that (i) the amount
set forth in this Section 9.06 is the estimate by the parties of the
damages that Buyer would suffer as a result of the occurrence of a Transfer
Event, (ii) it would be difficult for the parties to prove the actual
amount of such damages, (iii) such amount is not a penalty and (iv) such
amount shall be the full and liquidated damages of Buyer arising as a
result of such Transfer Event.
(c) The following terms, as used herein, have the following
meanings:
"Adjusted Guaranteed Minimum Revenue" means, with respect to any XLSource
Sale resulting in a Transfer Event, the product of (A) the sum of (x) the
remainder of the "Guaranteed Minimum Revenue" and (y) the "Remaining
Guaranteed Minimum Revenue" (each as defined in the XLSource Supply
Agreement) in each case as of the date of such Transfer Event and (B) the
Transferred Percentage applicable to such Transfer Event.
"Transfer Event" means the consummation of any XLSource Sale of the type
described in clause (i) of the definition thereof, other than any such
XLSource Sale to a Person approved by Buyer.
"Transferred Percentage" means, with respect to any XLSource Sale, the
percentage of the aggregate revenues of XLSource for the four full fiscal
quarters immediately preceding the date of such XLSource Sale generated by
or attributable to the assets being sold in such XLSource Sale.
SECTION 9.7. Certain LitigationSECTION 9.7. Certain Litigation.
The parties hereby agree that Seller will control the prosecution of any
action, suit or proceeding (whether or not such action, suit or preceding
is referred to on Schedule 3.13 of the Seller Disclosure Letter) instituted
prior to the Closing Date by Seller (with respect to the business of
Reseller Network) or any Company. Buyer agrees, and agrees to cause the
Companies to, cooperate with Seller in connection with the matters referred
to in this Section 9.07. The Companies hereby assign to Seller, effective
as of the Closing Date, all of their right, title and interest in and to
any such action, suit or proceeding, including without limitation any
recoveries in respect thereof. Notwithstanding anything contained in
Section 2.04, no amount relating to the actions, suits and proceedings
referred to above shall appear as an asset on the Closing Balance Sheet.
ARTICLE 10
TAX MATTERS
10TAX MATTERSSECTION 10.1. Tax DefinitionsSECTION 10.1. Tax Definitions.
The following terms, as used herein, have the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"Combined State Tax" means, with respect to each such state or any local
taxing jurisdiction, any income, franchise or other Tax payable to any
state or any local taxing jurisdiction in which any Company files Returns
with a member of the Seller Consolidated Group on a consolidated, combined
or unitary basis for purposes of such income, franchise or other Tax.
"Federal Tax" means any Tax imposed under Subtitle A of the Code.
"Pre-Closing Tax Period" means any Tax period (or portion thereof) ending
on or before the close of business on the Closing Date.
"Return" is defined in Section 10.02(a).
"Section 338(h)(10) Election" is defined in Section 10.03(a).
"Section 338 Tax" means any Tax of any Company resulting from any income,
gain, deduction, deferred gain or recapture of deductions or credits
against Tax which would not have been due but for the making of the Section
338(h)(10) Election or as a consequence of Section 338 as applied by any
state, local or foreign jurisdiction.
"Seller Consolidated Group" means, with respect to Federal Taxes, the
affiliated group of corporations (as defined in Section 1504(a) of the
Code) of which Seller is the common parent, and with respect to Combined
State Taxes, the consolidated, combined or unitary group of which Seller or
any of its Affiliates is a member.
"Tax" means (i) any tax imposed under Subtitle A of the Code and any net
income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, profits, license,
withholding on amounts paid to or by any Company, payroll, employment,
excise, severance, stamp, capital stock, occupation, property,
environmental or windfall profit tax, premium, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
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, (ii) liability of any Company for the
payment of any amounts of the type described in clause (i) above as a
result of being a member of an affiliated, consolidated, combined or
unitary group, and (iii) liability of any Company for the payment of any
amounts as a result of being party to any Tax Sharing Agreement or with
respect to the payment of any amounts of the type described in clause (i)
or (ii) above as a result of any express or implied obligation to indemnify
any other Person, provided, however, that with respect to this clause
(iii), the amount of any such liability shall be reduced by the actual Tax
benefit, if any, received by the payor as a result of paying such
liability.
"Tax Asset" means any net operating loss, net capital loss, investment tax
credit, foreign tax credit, charitable deduction or any other credit or tax
attribute which could reduce Taxes (including without limitation deductions
and credits related to alternative minimum Taxes).
"Tax Indemnification Period", means (i) with respect to any Tax described
in clause (i) of the definition of "Tax", any Pre-Closing Tax Period of any
Company, (ii) with respect to any Tax described in clause (ii) of the
definition of "Tax", any Pre-Closing Tax Period of any Company and the Tax
year of any member of a group described in such clause (ii) which includes
(but does not end on) the Closing Date, and (iii) with respect to any Tax
described in clause (iii) of the definition of "Tax", the survival period
of the obligation under the applicable contract or arrangement.
"Tax Sharing Agreements" means all agreements or arrangements (whether or
not written) that relate to the allocation or sharing of liabilities for
Taxes and that bind any Company (including without limitation the Tax
Allocation Agreement among Seller, the Companies and certain other
Subsidiaries of Seller effective as of January 29, 1995) (the "Seller Group
Tax Allocation Agreement").
SECTION 10.2. Tax RepresentationsSECTION 10.2. Tax Representations.
Seller represents and warrants to Buyer as of the date hereof and as of the
Closing Date that:
(a) except as set forth on Schedule 10.02(a) of the Seller
Disclosure Letter, (i) all Tax returns, statements, reports and forms
(including estimated tax or information returns and reports) required to be
filed with any Taxing Authority with respect to any Pre-Closing Tax Period
by or on behalf of any Company (each a "Return" and collectively, the
"Returns"), have, to the extent required to be filed on or before the date
hereof, been filed when due (taking into account any permitted extension
under applicable law) in accordance with all applicable laws; (ii) as of
the time of filing, the Returns correctly reflected the facts regarding the
income, business, assets, operations, activities and status of each Company
and any other information required to be shown therein, except to the
extent that the failure to correctly reflect any such facts or information
will not have a Material Adverse Effect; (iii) all Taxes shown as due and
payable on the Returns that have been filed have been timely paid, or
withheld and remitted to the appropriate Taxing Authority; (iv) the
accruals and reserves for Taxes with respect to each Company for any
Pre-Closing Tax Period (including any Pre-Closing Tax Period for which no
Return has yet been filed) reflected on the books of each Company and on
the Balance Sheet and which will appear on the Closing Balance Sheet
(excluding any provision for deferred income taxes) are adequate under
generally accepted accounting principles to cover such Taxes except for any
Taxes arising from the Section 338 Election; (v) no Company is delinquent
in the payment of any Tax or has requested any extension of time within
which to file any Return and has not yet filed such Return; (vi) no Company
(or any member of any affiliated, consolidated, combined or unitary group
of which such Company is or has been a member) has granted any extension or
waiver of the statute of limitations period applicable to any Return, which
period (after giving effect to such extension or waiver) has not yet
expired; (vii) there is no claim, audit, action, suit, proceeding, or
investigation now pending or threatened against or with respect to (a) any
Company in respect of any Tax or Tax Asset or (b) Seller or any other
member of the Seller Consolidated Group in respect of any Tax for which the
Company is or could become liable in any manner (including primarily,
secondarily or otherwise); (viii) there are no requests for rulings or
determinations in respect of any Tax or Tax Asset pending between any
Company and any Taxing Authority; (ix) no Company owns any interest in real
property in the State of New York or in any other jurisdiction in which a
Tax is imposed on the transfer of a controlling interest in an entity that
owns any interest in real property; (x) none of the property owned or used
by any Company is subject to a tax benefit transfer lease executed in
accordance with Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended; (xi) none of the property owned or used by any Company is subject
to a lease, other than a "true" lease for federal income tax purposes;
(xii) none of the property owned by any Company is "tax-exempt use
property" within the meaning of Section 168(h) of the Code; (xiii) neither
Seller nor any Company, nor any other Person on behalf of any Company, has
entered into nor will it enter into any agreement or consent pursuant to
Section 341(f) of the Code; (xiv) there are no Liens for Taxes upon the
assets of any Company except Liens for current Taxes not yet due; (xv)
Seller is not subject to withholding under Section 1445 of the Code with
respect to any transaction contemplated hereby; (xvi) no Company has been a
member of an affiliated, consolidated, combined or unitary group other than
a Seller Consolidated Group, and no Company has filed Returns separately
from the Returns filed by Seller for the respective Seller Consolidated
Group; and (xvii) except with respect to the Seller Group Tax Allocation
Agreement, no Company is currently under any contractual obligation to pay
any amounts of the type described in clause (ii) or (iii) of the definition
of "Tax" or is or has been a party to any Tax Sharing Agreement other than
the Seller Group Tax Allocation Agreement.
(b) Schedule 10.02(b) of the Seller Disclosure Letter
contains (i) a list of all jurisdictions to which any Tax is properly
payable by any Company , and (ii) a list of all federal, state, local and
foreign income tax Returns filed with respect to each Company for taxable
periods ended on or after January 29, 1994, which list indicates those
Returns that have been examined and closed or are Returns with respect to
which the applicable period for assessment under applicable law, after
given effect to extensions or waivers, has expired, and indicates those
Returns that currently are the subject of examination or audit. The
applicable period for assessment under applicable law, after giving effect
to extensions or waivers, has expired with respect to all federal, state,
local and foreign income tax Returns with respect to every Company for
taxable periods ending prior to January 29, 1994.
SECTION 10.3. CovenantsSECTION 10.3. Covenants. (a) Seller agrees
to make a timely, effective and irre vocable election under Section
338(h)(10) of the Code and under any comparable statutes in any other
jurisdiction with respect to each Company (the "Section 338(h)(10)
Election"), and to file such election in accordance with applicable
regulations. The Section 338(h)(10) Election shall properly reflect the
Price Allocation (as hereinafter defined). Within 90 days after the
determination of Final Net Liabilities Assumed pursuant to Section 2.04,
Buyer shall provide to Seller a written statement setting forth (i) Buyer's
determination of the modified ADSP (as such term is defined in Treasury
Regulations Section 1.338(h)(10)-1) (the "Modified Aggregate Deemed Sales
Price"), and (ii) the allocation of the Modified Aggregate Deemed Sales
Price to the assets of the Companies in accordance with the Treasury
regulations promulgated under Section 338(h)(10) (the "Initial
Determination"). Buyer shall provide or make available to Seller such
workpapers, appraisals and other documents, if any, used by Buyer in
preparing the Initial Determination as Seller may reasonably request. Such
Initial Determination shall be a final determination binding and conclusive
on Buyer and Seller unless Seller objects by written notice to Buyer within
30 days of receipt of the Initial Determination, which notice shall state
with reasonable particularity Seller's objections to such Initial
Determination and the basis therefor. If Seller so objects, Buyer and
Seller shall negotiate in good faith to resolve such objections, but if no
agreement is reached within 15 days after Seller provides such notice,
Buyer and Seller shall retain the Accounting Referee to resolve any such
objections on which Buyer and Seller have been unable to reach agreement.
The costs of engaging the Accounting Referee for such purpose shall be
borne equally by Buyer and Seller. The determination of the Accounting
Referee shall be a final determination binding and conclusive on Buyer and
Seller. Such final determination (whether by agreement or as determined by
the Accounting Referee) shall be the "Price Allocation" and shall be
binding on the parties hereto. Seller and Buyer agree to act in accordance
with the Price Allocation in the preparation, filing and audit of any Tax
return. Buyer and Seller agree that each will provide to the other, upon
request (including prior to filing), the portions of any Tax return for the
Tax period that includes the Closing Date that reflect or are based on the
Price Allocation.
(b) Seller agrees that, without the prior written consent of
Buyer (which shall not be unreasonably withheld), neither Seller nor any
Company, or any Affiliate of Seller shall, to the extent it may affect or
relate to any Company, (i) make any new Tax election (other than the
Section 338(h)(10) Election), (ii) change any Tax election, (iii) change an
annual tax accounting period, (iv) adopt or change any method of Tax
accounting, (v) file any amended Tax return, (vi) enter into any closing
agreement, (vii) settle any Tax claim or assessment, (viii) surrender any
right to claim a Tax refund, (ix) consent to any extension or waiver of the
limitations period applicable to any Tax claim or assessment or (x) take or
omit to take any other action, if, in the case of any such action or
omission described in clauses (i) through (x), such action or omission
would have or could reasonably be expected to have the effect of increasing
the Tax liability or reducing any Tax Asset of any Company, Buyer or any
Affiliate of Buyer in any Post-Closing Tax Period (as defined in Section
10.03(c)).
(c) If, as a result of any adjustment with respect to the
Tax liability of any Company for any Pre-Closing Tax Period, (i) any
deduction, amortization, exclusion from income or other allowance becomes
allowable to Buyer, any of its Affiliates or, effective upon the Closing,
any Company in any Tax period (or portion thereof) beginning after the
Closing Date (a "Post-Closing Tax Period") which would not, but for such
adjustment, be allowable, Buyer shall pay to Seller the amount of the Tax
benefit actually received by Buyer, any of its Affiliates, or, effective
upon the Closing, any Company from such deduction, amortization, exclusion
or allowance in any Post-Closing Tax Period within 10 days after the date
such Tax benefit is actually received, and (ii) any deduction,
amortization, exclusion from income or other allowance ceases to become
available to Buyer, any of its Affiliates, or, effective upon Closing, any
Company in any Post-Closing Tax Period which would have, but for such
adjustment, been allowable, Seller shall pay to Buyer the amount of the Tax
benefit that would otherwise have been received by Buyer, any of its
Affiliates or, effective upon the Closing, any Company in any Post-Closing
Tax Period.
(d) All Tax returns not required to be filed on or before
the date hereof (i) will be filed when due (taking into account any
permitted extension under applicable law) in accordance with all applicable
laws and (ii) as of the time of filing, will correctly reflect in all
material respects the facts regarding the income, business, assets,
operations, activities and status of the Companies and any other
information required to be shown therein.
(e) Seller shall include the Companies in its consolidated
Federal Tax return and in any Combined State Tax return through the close
of business on the Closing Date.
(f) Seller agrees that no Company shall reserve any amount
for or make any payment of Taxes to any Person or any Taxing Authority,
except for such Taxes as are due or payable or have been properly estimated
in accordance with applicable law as applied in a manner consistent with
the past practice of such Company.
(g) All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement
(including any real property transfer Tax and any similar Tax) shall be
paid by Seller when due, and Seller will, at its own expense, file all
necessary Tax returns and other documentation with respect to all such
Taxes and fees, and, if required by applicable law, Buyer will, and will
cause its Affiliates to, join in the execution of any such Tax returns and
other documentation.
SECTION 10.4. Release From and Termination of Existing Tax Sharing
AgreementsSECTION 10.4. Release From and Termination of Existing Tax
Sharing Agreements. The Companies shall be released from any and all
existing Tax Sharing Agreements, and any and all existing Tax Sharing
Agreements shall be terminated with respect to the Companies, as of the
Closing Date. After the Closing Date, no Company shall have any further
rights or liabilities thereunder.
SECTION 10.5. State Taxes Resulting from Section 338(h)(10) Election
SECTION 10.5. State Taxes Resulting from Section 338(h)(10) Election .
With respect to any state Tax that would not be borne by Buyer or any of
its Affiliates (including, after the Closing Date, the Companies) but for
the Section 338(h)(10) Election made pursuant to Section 10.03(a) hereof,
Seller shall estimate the amount of each such Tax and shall pay such amount
to the relevant Company immediately prior to Closing. The amount paid
pursuant to the preceding sentence shall be adjusted to reflect the actual
amounts of such Taxes paid by Buyer or any of its Affiliates within 10 days
after Buyer or such Affiliate (as the case may be) files the relevant
return and Seller shall pay Buyer, or Buyer shall pay Seller, as
appropriate, the amount of any underpayment or overpayment. Buyer shall
deliver to Seller a copy of each relevant return within 10 days of the date
on which Buyer or any of its Affiliates (as the case may be) files the
relevant return.
SECTION 10.6. Cooperation on Tax MattersSECTION 10.6. Cooperation
on Tax Matters. (a) Buyer and Seller shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the
preparation and filing of any Tax or information return, statement, report
or form (including any report required pursuant to Section 6043 of the Code
and all Treasury Regulations promulgated thereunder), any audit, litigation
or other proceeding with respect to Taxes. Such cooperation shall include
the retention and (upon the other party's request) the provision of records
and information which are reasonably relevant to any such audit, litigation
or other proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder. After the Closing, each Company and Seller agree (i) to
retain all books and records (including accounting records) either in the
possession of such Company or Seller, as the case may be, at the Closing
Date or that thereafter come into the possession of a Company or Seller, as
the case may be, in the ordinary course of business with respect to Tax
matters pertinent to the Companies relating to any Pre-Closing Tax Period,
and to abide by all record retention agreements entered into with any
Taxing Authority, and (ii) to give the other party reasonable written
notice prior to destroying or discarding any such books and records and, if
the other party so requests, each Company or Seller, as the case may be,
shall allow the other party to take possession of such books and records.
(b) Buyer and Seller further agree that each of them, upon
request from the other party, shall use all reasonable efforts to obtain
any certificate or other document from any governmental authority or
customer of any Company as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including but not limited to with
respect to the Transaction).
SECTION 10.7. Tax IndemnificationSECTION 10.7. Tax Indemnification.
(a) Seller hereby indemnifies each Buyer Indemnitee against and agrees to
hold each Buyer Indemnitee harmless from any (w) Tax of any Company related
to the Tax Indemnification Period, (x) Tax of any Company resulting from a
breach of any covenant of Seller contained in this Article 10, (y) Section
338 Tax, and (z) costs, fees and expenses (including reasonable attorneys
and accounting fees and expenses) incurred in the contest in good faith in
appropriate proceedings relating to the imposition, assessment or assertion
of any such Tax prior to the assumption, if any, by Seller of the defense
of such contest in accordance with Section 10.07(e) and any liability as
transferee (the sum of clauses (w), (x), (y), and (z) above being referred
to herein as a "Loss").
(b) For purposes of this Section 10.07, in the case of any
Taxes that are imposed on a periodic basis and are payable for a Tax period
that includes (but does not end on) the Closing Date, the portion of such
Tax related to the portion of such Tax period ending on and including the
Closing Date shall (x) in the case of any Taxes other than gross receipts,
sales or use Taxes and Taxes based upon or related to income, be deemed to
be the amount of such Tax for the entire Tax period multiplied by a
fraction the numerator of which is the number of days in the Tax period
ending on and including the Closing Date and the denominator of which is
the number of days in the entire Tax period, and (y) in the case of any Tax
based upon or related to income or gross receipts, sales or use Taxes, be
deemed equal to the amount which would be payable if the relevant Tax
period ended on and included the Closing Date. The portion of any credits
relating to a Tax period that begins before and ends after the Closing Date
shall be determined as though the relevant Tax period ended on and included
the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior
practice of the Companies.
(c) Subject to the provisions of this Section 10.07, upon
payment or incurrence by any Buyer Indemnitee of any Loss, Seller shall
discharge its obligation to indemnify the Buyer Indemnitee against such
Loss by paying to Buyer an amount equal to the amount of such Loss.
(d) Any payment pursuant to this Section 10.07 shall be made
not later than 30 days after receipt by Seller of written notice from Buyer
stating that any Loss has been paid by a Buyer Indemnitee and the amount
thereof and of the indemnity payment requested.
(e) Buyer agrees to give prompt written notice to Seller of
any Loss or the assertion of any claim, or the commencement of any suit,
action or proceeding in respect of which Buyer reasonably believes
indemnity may be sought under this Section 10.07 (specifying with
reasonable particularity the basis therefor) and will give Seller such
information with respect thereto as Seller may reasonably request. Except
as otherwise provided by Section 10.07(f), following receipt of written
notice from Seller, Buyer shall permit Seller to assume, manage and control
the defense of such suit, action or proceeding (including any Tax audit) as
it relates to any issue or item in respect of which indemnity may be sought
under this Section 10.07; provided that (x) Seller's counsel is reasonably
satisfactory to Buyer, (y) Seller shall thereafter consult with Buyer upon
Buyer's reasonable request for such consultation from time to time with
respect to such suit, action or proceeding (including any Tax audit) and
shall provide Buyer with copies of all written correspondence relating
thereto and (z) Seller shall not, without Buyer's consent (which shall not
be unreasonably withheld), agree to any settlement with respect to any Tax
if such settlement could adversely affect the Tax liability of Buyer, any
of its Affiliates or, upon the Closing, any Company. If Seller assumes such
defense, (i) Buyer shall have the right (but not the duty) to participate
in the defense thereof and to employ counsel, at its own expense,
reasonably satisfactory to Seller separate from the counsel employed by
Seller and (ii) Seller shall not assert that the Loss, or any portion
thereof, with respect to which Buyer seeks indemnification is not within
the ambit of this Section 10.07. If Seller elects not to assume such
defense, Buyer may pay, compromise or contest the Tax at issue; provided
that Buyer shall not settle any contest relating to such Tax without
Seller's prior written consent (which shall not be unreasonably withheld);
provided further that (i) Seller's prior written consent shall not be
required with respect to any such settlement unless Seller agrees not to
assert that the Loss, or any portion thereof, with respect to which Buyer
seeks indemnification is not within the ambit of this Section 10.07, and
(ii) in any case in which Seller provides such written consent, Seller
shall be deemed to have agreed that it will not assert that any Loss, or
any portion thereof, with respect to which Buyer seeks indemnification is
not within the ambit of this Section 10.07. Seller shall be liable for the
fees and expenses of counsel employed by Buyer for any period during which
Seller has not assumed the defense thereof. Whether or not Seller chooses
to defend or prosecute any claim, all of the parties hereto shall cooperate
in the defense or prosecution thereof, including by providing upon
reasonable request all necessary books and records then in such party's
possession on a timely basis. Notwithstanding anything in this Agreement
to the contrary, Seller shall not be entitled to assume or maintain control
of the defense of any claim, litigation or proceeding in respect of any
claim, litigation or proceeding in respect of which indemnification may be
sought under Section 10.07 if (i) such claim, litigation or proceeding
relates to or arises in connection with any criminal proceeding, action,
indictment, allegation or investigation, (ii) such claim, litigation or
proceeding seeks an injunction or equitable relief against Seller, (iii)
Seller has failed or is failing to prosecute or defend vigorously such
claim, litigation or proceeding or (iv) Seller (x) makes a general
assignment for the benefit of creditors, (y) commences any case, proceeding
or other action seeking to have an order for relief entered on its behalf
as a debtor or to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all of any
substantial part of its property, or (z) become the subject of any
proceeding referred to in clause (x) or (y) which is not dismissed within
60 days of its filing or entry.
(f) Buyer shall control the defense of any claim that
relates to Taxes described in Section 10.07(b).
(g) Seller shall not be liable under this Section 10.07 with
respect to any Tax resulting from (i) a claim or demand the defense of
which Seller was not offered the opportunity to assume as provided under
Section 10.07(e) or (ii) a breach by any Company of its covenant in the
third sentence of Section 10.06(a), in each case to the extent Seller's
liability under this Section 10.07 is adversely affected as a result
thereof. No investigation by Buyer or any of its Affiliates at or prior to
the Closing Date shall relieve Seller of any liability hereunder.
(h) Any claim of any Buyer Indemnitee (other than Buyer)
under this Section may be made and enforced by Buyer on behalf of such
Buyer Indemnitee.
(i) With respect to all suits, actions or proceedings
(including any Tax audits) relating to the Tax liability of any Company in
existence as of the date hereof, Buyer shall be deemed to have (i) provided
written notice of such suits, actions or proceedings to Seller in
accordance with Section 10.07(e), and (ii) permitted Seller to assume,
manage and control the defense of such suits, actions or proceedings in
accordance with and subject to Section 10.07(e).
(j) Except insofar as it relates to any claim the defense
of which Buyer is in control pursuant to Section 10.07(f), Buyer shall not
extend the statute of limitations with respect to any Company for any Pre-
Closing Tax Period without the written consent of Seller (which consent
shall not be unreasonably withheld).
SECTION 10.8. Purchase Price Adjustment and InterestSECTION 10.8.
Purchase Price Adjustment and Interest. Buyer and Seller agree that any
amount paid by Seller or Buyer under this Article 10 or Article 13 shall be
treated as an adjustment to the Modified Aggregate Deemed Sales Price
unless otherwise required by applicable law. Any payment required to be
made by Buyer or Seller under this Article 10 that is not made when due
shall bear interest at the rate per annum determined, from time to time,
under the provision of Section 6621(a)(2) of the Code for each day until
paid.
SECTION 10.9. SurvivalSECTION 10.9. Survival. Notwithstanding
anything in this Agreement to the contrary, the provisions of this Article
10 shall survive until six months following the end of the applicable
statutes of limitations (giving effect to any waiver, mitigation or
extension thereof).
ARTICLE 11
EMPLOYEE BENEFITS
11EMPLOYEE BENEFITSSECTION 11.1. Employee Benefits DefinitionsSECTION
11.1. Employee Benefits Definitions. The following terms, as used herein,
have the following meanings:
"Benefit Arrangement" means any employment, severance or similar contract
or arrangement (whether or not written) or any plan, policy, fund, program,
arrangement or contract(whether or not written) providing for compensation,
bonus, profit-sharing, stock option or other stock related rights or other
forms of incentive or deferred compensation, vacation benefits, insurance
coverage (including any self-insured arrangements), health or medical
benefits, disability benefits, worker's compensation, supplemental
unemployment benefits, severance benefits and post-employment or retirement
benefits (including compensation, pension, health, medical or life
insurance or other benefits) that (i) is not an Employee Plan, (ii) is
entered into, maintained, administered or contributed to, as the case may
be, by Seller, any of its Affiliates or any Company and (iii) covers any
employee or former employee of any Company employed in the United States.
"Employee Plan" means any "employee benefit plan", as defined in Section
3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is
maintained, administered or contributed to, as the case may be, by Seller,
any of its Affiliates or any Company and (iii) covers any employee or
former employee of any Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" of any entity means any other entity which, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
"International Plan" means any employment, severance or similar contract or
arrangement (whether or not written) or any plan, policy, fund, program, or
arrangement or contract (whether or not written) that (i) is not an
Employee Plan or a Benefit Arrangement, (ii) is entered into, maintained,
administered or contributed to, as the case may be, by Seller, any of its
Affiliates or any Company and (iii) covers any employee or former employee
of any Company.
"Multiemployer Plan" means each Employee Plan that is a multiemployer plan,
as defined in Section 3(37) of ERISA.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Title IV Plan" means an Employee Plan subject to Title IV of ERISA other
than any Multiemployer Plan.
SECTION 11.2. Employee Benefit Plans RepresentationsSECTION 11.2.
Employee Benefit Plans Representations. Seller represents and warrants to
Buyer as of the date hereof and as of the Closing Date that:
(a) Schedule 11.02(a) of the Seller Disclosure Letter
identifies each Employee Plan that any Company has at any time sponsored,
maintained or contributed (or been obligated to sponsor, maintain or
contribute to). Seller has furnished to Buyer copies of such Employee
Plans (and, if applicable, related trust agreements) and all amendments
thereto and written interpretations thereof together with the three most
recent annual reports (Form 5500 including, if applicable, Schedule B
thereto) and the most recent actuarial valuation report prepared in
connection with any such Employee Plan. Schedule 11.02(a) of the Seller
Disclosure Letter identifies each such Employee Plan which is maintained in
connection with any trust described in Section 501(c)(9) of the Code.
(b) No Employee Plan is a Title IV Plan, Multiemployer Plan
or International Plan and neither Seller, Reseller Network nor any Company
has at any time sponsored, maintained or contributed to or been under any
obligation to sponsor, maintain or contribute to a Title IV Plan,
Multiemployer Plan or International Plan.
(c) No transaction prohibited by Section 406 of ERISA or
Section 4975 of the Code has occurred with respect to any employee benefit
plan or arrangement which is covered by Title I of ERISA, which transaction
has caused or will cause any of the Companies to incur any liability under
ERISA, the Code or otherwise, excluding transactions effected pursuant to
and in compliance with a statutory or administrative exemption.
(d) Each Employee Plan listed on Schedule 11.02(a) of the
Seller Disclosure Letter that is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the
period since its adoption; each trust created under any such Plan is exempt
from tax under Section 501(a) of the Code and has been so exempt since its
creation. Seller has provided Buyer with the most recent determination
letter of the Internal Revenue Service relating to each such Employee Plan.
Each such Employee Plan has been maintained in substantial compliance with
its terms and with the requirements prescribed by any and all applicable
statutes, orders, rules and regulations, including but not limited to ERISA
and the Code.
(e) Schedule 11.02(e) of the Seller Disclosure Letter
identifies each Benefit Arrangement that any Company has at any time
sponsored, maintained or contributed to (or been obligated to sponsor,
maintain or contribute to). Seller has furnished to Buyer copies or
descriptions of each such Benefit Arrangement (and, if applicable, related
trust agreements) and all amendments thereto and written interpretations
thereof. Each such Benefit Arrangement has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and
all applicable statutes, orders, rules and regulations and has been
maintained in good standing with applicable regulatory authorities.
(f) Except as set forth on Schedule 11.02(f) of the Seller
Disclosure Letter, neither Reseller Network nor any Company has any current
or projected liability in respect of post-employment or post-retirement
health or medical or life insurance benefits for retired, former or current
employees of Reseller Network or any Company, except as required to avoid
excise tax under Section 4980B of the Code.
(g) All contributions and payments accrued under each
Employee Plan and Benefit Arrangement (each as disclosed in Schedules
11.02(a) and 11.02(e), respectively, of the Seller Disclosure Letter),
determined in accordance with prior funding and accrual practices, as
adjusted to include proportional accruals for the period ending on the
Closing Date, will be discharged and paid on or prior to the Closing Date
except to the extent reflected as a liability on the Closing Balance Sheet
or retained by Seller. Except as set forth on Schedule 11.02(f) of the
Seller Disclosure Letter, there has been no amendment to, written
interpretation of or announcement (whether or not written) by the Seller or
any of its Affiliates or Reseller Network or any Company relating to, or
change in employee participation or coverage under, any such Employee Plan
or such Benefit Arrangement that would increase materially the expense of
maintaining such Employee Plan or Benefit Arrangement above the level of
the expense incurred in respect thereof for the most recent fiscal year
ended prior to the date hereof.
(h) There is no contract, plan or arrangement (written or
otherwise) covering any employee or former employee of Reseller Network or
any Company that, individually or collectively, could give rise to the
payment of any amount that would not be deductible pursuant to the terms of
Section 280G of the Code.
(i) There has been no material failure of a group health
plan (as defined in Section 5000(b)(1) of the Code) to meet the
requirements of Code Section 4980B(f) with respect to a qualified
beneficiary (as defined in Section 4980B(g)). To the best knowledge of
Seller, neither Reseller Network nor any Company has contributed to a
nonconforming group health plan (as defined in Section 5000(c)) and no
ERISA Affiliate of Reseller Network or any Company has incurred a tax under
Section 5000(a) which is or could become a liability of Reseller Network or
any Company.
(j) Except as set forth in Schedule 11.02(j) of the Seller
Disclosure Letter, no employee or former employee of Reseller Network or
any Company will become entitled to any bonus, retirement, severance, job
security or similar benefit or enhanced such benefit (including
acceleration of vesting or exercise of an incentive award) as a result of
the Transaction.
SECTION 11.3. Retained and Transferred EmployeesSECTION 11.3.
Retained and Transferred Employees. (a) For purposes of this Article 11
(i) "Company Employee" shall mean each individual, other than individuals
subsequently identified by Buyer as Transferred Employees, Scheduled
Employees or Seconded Employees as hereinafter provided, who, on the
Closing Date is, or would be but for subsection 11.03(b) below, actively
employed by Seller or any Subsidiary of Seller (in each case with respect
to the business of Reseller Network), Reseller Network or any Company, on
short-term or long-term disability leave, authorized or unauthorized leave
or absence, including leave under the Family and Medical Leave Act,
military service or lay-off with recall rights as of the Closing Date,
including any other inactive or former employee or any individual who as of
the Closing Date is no longer employed by Seller or any Subsidiary of
Seller (in each case with respect to the business of Reseller Network),
Reseller Network or a Company for any reason including, without limitation,
death, disability or retirement; (ii) "Transferred Employee" shall mean
each individual identified as such by Buyer on a list to be provided by
Buyer to Seller not less than five business days prior to the Closing Date
who has accepted an offer to become an employee of Buyer and is expected to
report for work with Buyer or any of its Subsidiaries immediately following
the Closing Date; (iii) "Scheduled Employee" shall mean each individual
identified as such on a list to be agreed upon by Buyer and Seller; (iv)
"Seconded Employee" shall mean each individual identified as such by Buyer
on a list to be provided by Buyer to Seller, not less than five business
days prior to the Closing Date who is expected to be available to provide
transition services to Buyer pursuant to Section 11.06 hereof; and (v)
"Assumed Employee" shall mean each individual identified as such by Buyer
on a list to be provided by Buyer to Seller from time to time not more than
90 days following the Closing Date. It is intended that Assumed Employees
shall be selected from Seconded Employees and Scheduled Employees prior to
their actual termination date. If an Assumed Employee or Seconded Employee
is terminated prior to hire by Buyer, Buyer shall reimburse Seller for all
costs associated with such termination to the extent provided in Section
11.04(a) hereof. Company Employees, Transferred Employees, Scheduled
Employees, Seconded Employees and Assumed Employees are hereinafter
collectively referred to as "Seller Employees". Seller will not take and
will cause each Company not to take any action which would impede, hinder,
interfere or otherwise compete with Buyer's effort to interview or
otherwise determine those Seller Employees that Buyer may identify as
Transferred Employees, Seconded Employees or Assumed Employees; provided,
however, that Buyer's efforts hereunder will not materially interfere with
the operations of Seller's business or the business of the Companies prior
to the Closing Date, and that any offers of employment to any of the Seller
Employees shall be contingent upon the Closing and shall not become
effective until the Closing Date.
(b) (i) Seller will, and will cause each Company to, take
such action as is required to ensure that prior to the Closing Date (i) all
Seller Employees will be employees of a Subsidiary of Seller and (ii) none
of the Companies shall have any employees.
(ii) When and if Buyer has or is expected to have any
obligation to reimburse Seller for any employment-related expense to the
extent provided in Sections 11.03(a), 11.04, and 11.06 hereof, Seller shall
give reasonable notice to Buyer of the date that such expense is expected
to be incurred, and of the amount thereof, itemized and otherwise
substantiated as Buyer may reasonably request. Buyer shall deposit the
required amount in a checking account to be established for such purpose in
the name of such Subsidiary (as described in paragraph (i)), which checking
account shall be used solely for the purpose of paying wages and benefits
to or on behalf of Seller Employees hereunder. Buyer shall, in its sole
discretion, have the right to (x) review such information as Seller
provides, (y) request such supporting documentation in respect thereof and
(z) undertake such commercially reasonable verification procedures as Buyer
shall determine and Seller shall cooperate fully with Buyer with respect
thereto.
(c) Except as expressly set forth herein, Seller shall
retain all obligations and liabilities to or in respect of Seller
Employees. Buyer shall not assume any assets or liabilities under any
Employee Plan or Benefit Arrangements.
(d) With respect to each Transferred Employee and Assumed
Employee, service with Seller, any of its Subsidiaries or the Companies
shall be counted for purposes of determining any period of eligibility to
participate or to vest in benefits under Buyer's benefit plans to the same
extent such service was counted under any similar type of Employee Plan
under which such Transferred Employee or Assumed Employee was covered
immediately prior to the Closing Date. Buyer, for purposes of deductible
limits and out-of-pocket annual and lifetime maximums under its welfare
plans, shall credit each Transferred Employee and Assumed Employee with the
amounts so credited with respect to the portion of the calendar year
preceding the Closing Date under the same type of Employee Plan in which
such Transferred Employee or Assumed Employee is participating as of the
Closing Date. With respect to each Transferred Employee and Assumed
Employee, Buyer's group health plans shall not exclude coverage for pre-
existing conditions that were not excluded under similar Employee Plans in
which such Transferred Employee or Assumed Employee is participating as of
the Closing Date.
SECTION 11.4. Severance, COBRA and WARN ObligationsSECTION 11.4.
Severance, COBRA and WARN Obligations. (a)(i) Buyer shall reimburse Seller
to the extent set forth in Schedule 11.04(a)(i) hereto in respect of
Company Employees and Seconded Employees employed immediately prior to the
Closing Date for (x) actual severance payments triggered or incurred on or
after the Closing Date and (y) the actual out of pocket costs incurred by
Seller for the period beginning on the Closing Date and ending 65 days
following the date of the Buyer notice referred to in Section 11.04(b)
below in giving all notices required by, and for compliance with the
applicable requirements of, the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN Obligations"). Seller shall be responsible
for all severance liabilities in respect of Company Employees and Seconded
Employees triggered or incurred prior to the Closing Date; provided that if
a Scheduled Employee is terminated by Seller after the signing of this
Agreement but before the Closing Date, and the costs described in (x) and
(y) above in respect of such terminated Scheduled Employee are equal to or
less than they would have been had the Company Employee or Seconded
Employee been retained to the Closing Date, Buyer shall reimburse Seller as
set forth herein, contingent only upon the Closing.
(ii) Buyer shall not be responsible for any severance payments
or costs incurred by Seller in providing continuation coverage (within the
meaning of Section 4980B of the Code) ("COBRA Coverage") (x) in respect of
all Transferred Employees who accept employment with Buyer or any of its
Subsidiaries and report for work with Buyer or any of its Subsidiaries
immediately following the Closing Date and (y) in respect of all Assumed
Employees who after the Closing Date accept and report for employment with
Buyer or any of its Subsidiaries.
(iii) On and after the Closing Date, Buyer and Seller shall be
responsible to the extent set forth in Schedule 11.04(a)(iii) hereto for
the cost of all severance payments and liabilities to or in respect of
Scheduled Employees and Buyer shall reimburse Seller to the extent set
forth in Schedule 11.04(a)(iii) hereto for the actual out-of-pocket costs
incurred by Seller in providing COBRA Coverage in respect of Scheduled
Employees. This paragraph (iii) will continue to apply (notwithstanding
paragraph (ii) above) if a Scheduled Employee becomes a Transferred
Employee or Assumed Employee, and later becomes entitled to severance
and/or COBRA coverage from Seller under the severance plans and
arrangements listed on Schedule 11.02(a), (e), (f), and (j) of the Seller
Disclosure Letter as a result of subsequent termination of employment with
the Buyer or any of its Subsidiaries.
(b) Buyer shall endeavor to give prior written notice to
Seller, in a commercially reasonable manner, of the date Buyer will no
longer require the services of Seconded Employees as provided in Section
11.06 hereof. Subject to Section 11.04(a)(i) hereof, Seller shall be
responsible for all WARN Obligations in respect of Company Employees,
Scheduled Employees and Seconded Employees in connection with the
Transaction.
SECTION 11.5. 401(k), Option, Stock Purchase and Incentive Plans
SECTION 11.5. 401(k), Option, Stock Purchase and Incentive Plans . Seller
shall retain all obligations and liabilities for, and Buyer shall have no
obligation or liability in respect of the Seller's 401(k) Tax Deferred
Savings Plan, Supplemental 401(k) Plan, Non-qualified Stock Option Plan for
Employees and Directors, Non-qualified Stock Option Plan for Xxxxxxxxxxx,
0000 Long-Term Incentive Plan, 1995 Employee Stock Purchase Plan and any
other Employer Plan or Benefit Arrangement.
SECTION 11.6. Certain Employee ServicesSECTION 11.6. Certain
Employee Services. Subject to Section 11.04(b), during the period
beginning on the Closing Date and ending 90 days thereafter Seller shall
make available to Buyer the Seconded Employees for the purpose of providing
to Buyer, on the terms set forth on Schedule 11.06, such services as Buyer
may reasonably require from time to time to operate the business of
Reseller Network and to assist in the integration of Reseller Network into
the operations of Buyer and its Subsidiaries. All Seconded Employees and
Company Employees shall for all purposes be employees of Seller. Subject
to Section 11.04(b), Buyer shall reimburse Seller for all salaries, wages,
contributions, premiums, taxes, out-of-pocket costs and third party
administrative fees reasonably paid by Seller in respect of such Seconded
Employees as provided by Schedule 11.06 hereto.
SECTION 11.7. Sharing of Benefits-related InformationSECTION 11.7.
Sharing of Benefits-related Information. Buyer and Seller will cooperate
in providing at their own expense employee-related and plan-related data to
facilitate accomplishment of the provisions of this Article 11.
SECTION 11.8. No Third Party BeneficiariesSECTION 11.8. No Third
Party Beneficiaries. Without limiting the generality of Section 15.08, no
provision of this Article 11 shall create any third party beneficiary or
other rights in any Seller Employee (including any beneficiary or dependent
thereof) in respect of continued employment (or resumed employment) with
either Buyer, the Companies or Seller or any of their Affiliates and no
provision of this Article 11 shall create any such rights in any such
Person in respect of any benefits that may be provided, directly or
indirectly, under any Employee Plan or Benefit Arrangement 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 12
CONDITIONS TO CLOSING
12CONDITIONS TO CLOSINGSECTION 12.1. Conditions to Obligations of Buyer
and SellerSECTION 12.1. Conditions to Obligations of Buyer and Seller.
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 Transaction shall have expired or been terminated.
(b) No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of
the Transaction.
(c) All actions by or in respect of or filings with any
governmental body, agency, official or authority required to permit the
consummation of the Closing shall have been taken, made or obtained.
(d) Seller shall have received the requisite approval of its
stockholders in connection with the consummation of the Transaction.
SECTION 12.2. Conditions to Obligation of BuyerSECTION 12.2.
Conditions to Obligation of Buyer. The obligation of Buyer to consummate
the Closing is subject to the satisfaction of the following further
conditions:
(a) (i) Each of Seller and XLSource shall have performed in
all material respects all of its obligations hereunder required to be
performed by it on or prior to the Closing Date, (ii) the representations
and warranties of each of Seller and XLSource contained in this Agreement
and in any certificate or Schedule delivered by each of Seller and XLSource
pursuant hereto shall be true at and as of the Closing Date, as if made at
and as of such date, (iii) 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 and correct with only such exceptions as would not in the aggregate
reasonably be expected to have a Material Adverse Effect and (iv) Buyer
shall have received a certificate signed by the President or any Senior
Vice President of Seller and the President or the Vice President and
Treasurer of XLSource to the foregoing effect.
(b) There shall not be any action or proceeding instituted
or pending by any Person (or threatened by any government or any
governmental authority or agency) before any court or governmental
authority or agency, domestic or foreign, (i) seeking to restrain or
prohibit or otherwise interfere with the ownership or operation by Buyer or
any of its Affiliates of any material portion of the business or assets of
Reseller Network or of Buyer or any of their Affiliates or to compel Buyer
or any of its Affiliates to dispose of any material portion of the business
or assets of Reseller Network or of Buyer or any of their Affiliates,
(ii) seeking to impose or confirm limitations on the ability of Buyer or
any of its Affiliates effectively to exercise full rights of ownership of
any RN Shares, including without limitation, the right to vote any RN
Shares acquired or owned by Seller or any of its Affiliates on all matters
properly presented to the stockholders of any Company or (iii) seeking to
require divestiture by Buyer or any of its Affiliates of any RN Shares.
(c) There shall not be any action taken, or any statute,
rule, regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the purchase of the RN Shares,
by any court, government or governmental authority or agency, domestic or
foreign, other than the application of the waiting period provisions of the
HSR Act to the purchase of the RN Shares, that, in the reasonable judgment
of Buyer, could result in any of the consequences referred to in clauses
12.02(b)(i) through 12.02(b)(iii) above.
(d) Buyer shall have received an opinion of (i) Xxxxxx
Xxxxxxxx & Xxxxxxx LLP, special counsel to Seller, dated the Closing Date
as to the matters specified in Sections 3.01, 3.02, 3.03, 3.06 and 3.13 in
form and substance reasonably satisfactory to Buyer, and (ii) Xxxxxx X.
Xxxxxxxx, General Counsel of Seller, dated the Closing Date as to the
matters specified in Section 3.04 in form and substance reasonably
satisfactory to Buyer.
(e) Buyer shall have received an opinion of (i) Pepper,
Xxxxxxxx & Xxxxxxx LLP, special counsel to XLSource, dated the Closing Date
to the effect specified in Sections 4.01, 4.02 (first sentence only) and
4.03 in form and substance reasonably satisfactory to Buyer, and (ii)
Xxxxxx X. Xxxxxxxx, General Counsel of Seller, dated the Closing Date as to
the matters specified in Section 4.04 in form and substance reasonably
satisfactory to Buyer.
(f) Seller shall have received all Required Consents, in
each case in form and substance reasonably satisfactory to Buyer, and no
such consent, authorization or approval shall have been revoked.
(g) Seller shall have made a capital contribution to the
Companies (whether through the forgiveness of part of the Intercompany
Payable or otherwise) in an amount at least equal to the amount by which
the Base Net Liabilities Assumed is greater than $78 million, as adjusted
pursuant to Section 2.03.
(h) XLSource shall have executed the long-term supply
agreement with Buyer in the form of Exhibit A hereto (the "XLSource Supply
Agreement") and, assuming due execution and delivery by Buyer, the XLSource
Supply Agreement shall be in full force and effect.
(i) Buyer shall have received from XLSource confirmation
that XLSource shall have entered into arrangements, in form and substance
reasonably satisfactory to Buyer, with floor plan finance companies.
(j) Buyer shall have received from each Principal Vendor
confirmation, in form and substance satisfactory to Buyer, that after
Closing such Principal Vendor will (i) continue to supply Buyer, Reseller
Network and each Company on terms and conditions which are the same as or
substantially similar to the terms and conditions under which such
Principal Vendor supplied Reseller Network and each Company during the one-
year period prior to Closing and (ii) maintain inventory allocations by
major product segment at least the same levels as such Principal Vendor
supplied Buyer, Reseller Network and each Company during the six-month
period prior to Closing.
(k) Buyer shall have received all documents it may
reasonably request relating to the existence of Seller, XLSource and each
Company and the authority of Seller and XLSource for this Agreement, all in
form and substance reasonably satisfactory to Buyer.
(l) Buyer shall have received a certificate signed by Seller
and reasonably acceptable to Buyer to the effect that Seller is not a
"foreign person" as defined in Section 1445 of the Code.
(m) Seller shall have executed an effective, irrevocable
election under Section 338(h)(10) of the Code in form and substance
satisfactory to Buyer and Seller shall have delivered all documents in
connection therewith as the Buyer may reasonably request.
(n) Seller shall have executed and delivered the Escrow
Agreement and, assuming due execution and delivery by Buyer, the Escrow
Agreement shall be in full force and effect.
(o) Seller shall have obtained from each lender listed on
Schedule 3.09(d) of the Seller Disclosure Letter an unconditional release
in form and substance satisfactory to Buyer of the obligations of the
Companies under the credit facilities referred to on such Schedule.
(p) Either (i) 100% of the capital stock of TFN, Inc., RCK
Computers, Inc. and E-C Computer Technical Services, Inc. shall have been
transferred or contributed to XLSource in a manner reasonably satisfactory
to Buyer such that such Affiliates of Seller shall be wholly owned
Subsidiaries of XLSource or (ii) this Agreement and the XLSource Supply
Agreement shall have been amended, in a manner reasonably satisfactory to
Buyer, to add such Affiliates as parties to this Agreement and the XLSource
Supply Agreement for the purpose (in the case of this Agreement) of
guaranteeing, on a joint and several basis together with XLSource, the
obligations of Seller hereunder.
SECTION 12.3. Conditions to Obligation of SellerSECTION 12.3.
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, (ii) the representations and warranties of Buyer
contained in this Agreement and in any certificate or Schedule delivered by
Buyer pursuant hereto shall be true at and as of the Closing Date, as if
made at and as of such date and (iii) Seller shall have received a
certificate signed by any one of the following officers of Buyer to the
foregoing effect: the Worldwide Chief Financial Officer, the Chief
Financial Officer (Xxxxxx Micro US), the Worldwide Chief Operating Officer
or the President (Xxxxxx Micro US).
(b) Buyer shall have received all consents, authorizations
or approvals from governmental agencies referred to in Section 5.03, in
each case in form and substance reasonably satisfactory to Seller, and no
such consent, authorization or approval shall have been revoked.
(c) Seller shall have received all documents it may
reasonably request relating to the existence of Buyer and the authority of
Buyer for this Agreement, all in form and substance reasonably satisfactory
to Seller.
(d) Seller shall have received an opinion of Xxxxx Xxxx &
Xxxxxxxx, special counsel to Buyer, dated the Closing Date, to the effect
specified in Section 5.01(as to due incorporation, valid existence and good
standing only) and Section 5.02 (as to this Agreement and the Escrow
Agreement only) in form and substance reasonably satisfactory to Seller.
(e) Buyer shall have executed and delivered the Escrow
Agreement and the XLSource Supply Agreement and, assuming due execution
and delivery by Seller and XLSource, respectively, the Escrow Agreement and
the XLSource Supply Agreement shall be in full force and effect.
ARTICLE 13
SURVIVAL; INDEMNIFICATION
13SURVIVAL; INDEMNIFICATIONSECTION 13.1. SurvivalSECTION 13.1.
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 survive the
Closing until 5:00 p.m. Pacific Time on the second anniversary of the
Closing Date; provided that (i) the representations and warranties
contained in Article 10 shall survive for the period set forth in Section
10.09, (ii) the representations and warranties contained in Section 3.26
shall survive until six months following the end of the applicable statute
of limitations (after giving effect to any waiver, mitigation or extension
thereof), (iii) the representations and warranties contained in
Section 3.07 shall survive indefinitely and (iv) the representations and
warranties contained in Section 3.19(b) shall not survive the Closing. The
covenants and agreements contained in this Agreement or in any other
certificate, Schedule or Exhibit delivered pursuant hereto shall survive in
accordance with their terms (or if no survival period is specified, until
six months following the end of the applicable statute of limitations
(after giving effect to any waiver, mitigation or extension thereof).
Notwithstanding the preceding sentences, any covenant, agreement,
representation or warranty in respect of which indemnity may be sought
under this Agreement shall survive the time at which it would otherwise
terminate pursuant to the preceding sentences, if notice of the inaccuracy
or breach thereof giving rise to such right of indemnity shall have been
given to the party against whom such indemnity may be sought prior to such
time.
SECTION 13.2. IndemnificationSECTION 13.2. Indemnification. (a)
Seller hereby indemnifies each Buyer Indemnitee, without duplication,
against and agrees to hold each Buyer Indemnitee harmless from any and all
damage, loss, liability and expense (including, without limitation,
reasonable expenses of investigation and reasonable attorneys' fees and
expenses in connection with any action, suit or proceeding) ("Damages")
incurred or suffered by each such Buyer Indemnitee arising out of (i) any
misrepresentation or breach of warranty (provided that for purposes of this
clause (i), any representation or warranty contained in Article 11 shall be
deemed made without any qualification for "materiality" or "Material
Adverse Effect") made by Seller pursuant to this Agreement (other than
pursuant to Article 10) or (ii) any covenant or agreement to be performed
by Seller pursuant to this Agreement (other than pursuant to Article 10);
provided that (x) Seller shall not be liable under clause (i) of this
Section 13.02(a) unless the aggregate amount of Damages with respect to all
matters referred to in clause (i) of this Section 13.02(a) (determined
without regard to any materiality qualification contained in any
representation, warranty or covenant giving rise to the claim for indemnity
hereunder) exceeds $500,000, and then only to the extent of such excess;
and (y) Seller's maximum liability under clause (i) of this Section
13.02(a) shall not exceed $10,000,000.
(b) Notwithstanding anything to the contrary in this
Agreement, Seller hereby indemnifies each Buyer Indemnitee, without
duplication, against and agrees to hold each Buyer Indemnitee harmless from
any and all Damages incurred or suffered by each such Buyer Indemnitee
which arise out of or relate to any of the following:
(i) any action, suit, investigation or proceeding (whether or
not such action, suit, investigation or proceeding is referred to on
Schedule 3.13 of the Seller Disclosure Letter) instituted prior to the
Closing Date against Seller (with respect to the business of Reseller
Network), Reseller Network, any Company or any of their respective
properties before any court or arbitrator or any governmental body, agency
or official; or
(ii) any action, suit, investigation or proceeding arising out of
any claim (made at any time, whether prior to or following the Closing
Date) alleging discrimination, harassment or similar charges, which claim
is made by an individual who works or has worked at Reseller Network's
facility in Memphis, Tennessee; provided that no final judgment, order or
adjudication has been obtained which determines that the Damages incurred
by such Buyer Indemnitee as a result of such action, suit, investigation or
proceeding were so incurred primarily as a result of any action taken by
Buyer or its Subsidiaries (other than any action taken by any Company prior
to the Closing). A judgment, order or adjudication shall not be deemed to
be final until the time within which an appeal may be taken therefrom has
expired and no appeal has been taken, or until the entry of a judgment or
order from which no appeal may be taken.
(c) Buyer hereby indemnifies Seller and its Affiliates
against and agrees to hold each of them harmless from any and all Damages
incurred or suffered by Seller or any of its Affiliates arising out of (i)
any misrepresentation or breach of warranty made by Buyer pursuant to this
Agreement (other than pursuant to Article 10) or (ii) any covenant or
agreement to be performed by Buyer pursuant to this Agreement (other than
pursuant to Article 10); provided that (x) Buyer shall not be liable under
clause (i) of this Section 13.02(c) unless the aggregate amount of Damages
with respect to all matters referred to in clause (i) of this Section
13.02(c) (determined without regard to any materiality qualification
contained in any representation, warranty or covenant giving rise to the
claim for indemnity hereunder) exceeds $500,000, and then only to the
extent of such excess; and (y) Buyer's maximum liability under clause (i)
of this Section 13.02(c) shall not exceed $10,000,000.
(d) Buyer hereby indemnifies Seller and its Affiliates
against and agrees to hold each of them harmless from any and all Damages
incurred or suffered by Seller or any of its Affiliates which arise out of
or relate to any of the following:
(i) the liabilities, agreements and guarantees set forth on
Schedule 8.02 of the Seller Disclosure Letter; or
(ii) any action, suit, investigation or proceeding arising out of
any claim made by an individual who works or has worked at Reseller
Network's facilities in Denver, Colorado alleging discrimination,
harassment (to the extent such harassment is alleged to be part of a
pattern of harassment) or similar charges either (x) in connection with the
designation of individuals as Transferred Employees, Seconded Employees and
Assumed Employees or (y) in connection with such individual's employment
by, or provision of services for, Buyer or its Subsidiaries after the
Closing Date.
(e) Notwithstanding anything to the contrary in this
Agreement, Seller hereby indemnifies each Buyer Indemnitee (other than the
Companies), without duplication, against and agrees to hold each such Buyer
Indemnitee harmless from any and all Damages incurred or suffered by each
such Buyer Indemnitee which arise out of or relate to item 1 or 2 listed on
Schedule 3.12(a)(viii) of the Seller Disclosure Letter. In addition,
Seller agrees to promptly reimburse each Company for the full amount of any
legal fees and expenses incurred in connection with any matter arising out
of or relating to such scheduled items.
(f) No investigation by Buyer or any of its Affiliates at or
prior to the Closing Date shall relieve Seller of any liability hereunder.
(g) After the Closing, except as provided pursuant to
Section 15.11 or Article 10, Section 13.02 will provide the exclusive
remedy for any breach of any representation, warranty, covenant or other
agreement or other claim made or to be performed pursuant to this Agreement
and Article 10 will provide the exclusive remedy for any breach of any
representation, warranty covenant or other agreement or other claim made or
to be performed pursuant to Article 10.
SECTION 13.3. ProceduresSECTION 13.3. Procedures. (a) The party
seeking indemnification under Section 13.02 (the "Indemnified Party")
agrees to give notice (but not, in the case of indemnification sought
pursuant to clause (i) of Section 13.02(a) or 13.02(c), until the alleged,
expected or actual Damages for which indemnification is sought,
individually or in the aggregate, under such provisions exceed $500,000) 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
(a "Claim Notice"). The failure to provide such Claim Notice to the
Indemnifying Party shall not relieve the Indemnifying Party of its
obligations hereunder, except to the extent such failure shall have
materially and adversely prejudiced the Indemnifying Party. The
Indemnifying Party may, at its option, participate in and, except as
provided in Section 13.03(b), control the defense of any such suit, action
or proceeding at its own expense with counsel reasonably satisfactory to
the Indemnified Party; provided that such participation may not extend
beyond 120 days after receipt of the Claim Notice unless the Indemnifying
Party shall have waived its right to contest its obligation to indemnify
the Indemnified Party pursuant to this Article 13 for all Damages with
respect to such claim (and any such participation beyond such time shall be
deemed to be such a waiver). The Indemnified Party shall be entitled to
participate in the defense of any claim, litigation or proceeding in
respect of which indemnification may be sought under Section 13.02 and to
employ counsel of its choice for such purpose. The fees and expenses of
such separate counsel shall be borne by the Indemnified Party; provided
that the Indemnifying Party shall pay the fees and expenses of such
separate counsel incurred by the Indemnified Party (i) during the 120-day
period following the delivery of such Claim Notice or, if sooner, (ii)
until such time as the Indemnifying Party has notified the Indemnified
Party that it has waived its right to contest its obligation to indemnify
the Indemnified Party pursuant to this Article 13 for all Damages with
respect to such claim. Subject to the foregoing, if the Indemnifying Party
shall fail to advise the Indemnified Party that it will assume such defense
within 10 business days after receipt of such Claim Notice, then the
Indemnified Party shall have the right to assume the defense with counsel
of its own choosing at the sole cost of the Indemnifying Party. The
Indemnifying Party shall not be liable under Section 13.02 for any
settlement effected without its consent of any claim, litigation or
proceeding in respect of which indemnity may be sought hereunder; provided
that (i) consent of the Indemnifying Party shall not be required with
respect to any such settlement unless the Indemnifying Party agrees not to
assert that the Damages with respect to which indemnification is sought
under Section 13.02 is not within the ambit of Section 13.02, and (ii) in
any case in which the Indemnifying Party provides such written consent, the
Indemnifying Party shall be deemed to have agreed that it will not assert
that any Damages with respect to which indemnification is sought under
Section 13.02 is not within the ambit of Section 13.02. The Indemnifying
Party shall not enter into or consent to any settlement with respect to
which indemnification is sought under Section 13.02 without the prior
written consent of the Indemnified Party, unless such settlement involves
only the payment of money damages concurrently with such settlement, does
not impose any injunction or other equitable relief upon the Indemnified
Party, does not require any admission or acknowledgment of liability or
fact of the Indemnified Party and contains an unconditional release of the
Indemnified Party in respect of such claim.
(b) Notwithstanding anything in this Agreement to the contrary,
the Indemnifying Party shall not be entitled to assume or maintain control
of the defense of any claim, litigation or proceeding in respect of which
indemnification may be sought under Section 13.02 if (i) such claim,
litigation or proceeding relates to or arises in connection with any
criminal proceeding, action, indictment, allegation or investigation, (ii)
such claim, litigation or proceeding seeks an injunction or equitable
relief against the Indemnified Party, (iii) the Indemnifying Party has
failed or is failing to prosecute or defend vigorously such claim,
litigation or proceeding or (iv) the Indemnifying Party (x) makes a general
assignment for the benefit of creditors, (y) commences any case, proceeding
or other action seeking to have an order for relief entered on its behalf
as a debtor or to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all of any
substantial part of its property, or (z) become the subject of any
proceeding referred to in clause (x) or (y) which is not dismissed within
60 days of its filing or entry.
ARTICLE 14
TERMINATION
14TERMINATIONSECTION 14.1. Grounds for TerminationSECTION 14.1.
Grounds for Termination. This Agreement may be terminated prior to the
Closing:
(a) at any time, by mutual written agreement of Seller and
Buyer;
(b) at any time, by Buyer if the Closing shall not have been
consummated on or before August 22, 1997;
(c) at any time, by Seller if the Closing shall not have
been consummated on or before September 15, 1997;
(d) at any time, by either Seller or Buyer if there shall be
any law or regulation that makes consummation of the Transaction illegal or
otherwise prohibited or if consummation of the Transaction would violate
any nonappealable final order, decree or judgment of any court or
governmental body having competent jurisdiction;
(e) at any time, by Buyer if Buyer shall have received any
formal communication from an attorney of the United States Department of
Justice ("DOJ") or the Federal Trade Commission ("FTC") indicating that the
DOJ or FTC has authorized the institution of litigation seeking an order,
decree or injunction that, if entered, would (i) restrain or prohibit the
consummation of the Transaction or (ii) restrain, prohibit or limit the
ownership or operation by Buyer or any of its Affiliates of all or a
material portion of Reseller Network or any of their other assets or
businesses;
(f) at any time, by either Seller or Buyer if an event
referred to in any clause of Section 15.03(b) (other than Section
15.03(b)(v) or 15.03(b)(vi)) or in Section 15.03(c) shall have occurred;
(g) at any time after June 27, 1997, by Seller if an event
referred to in Section 15.03(b)(v) shall have occurred; or
(h) at any time after May 15, 1997, by Buyer if an event
referred to in Section 15.03(b)(vi) shall have occurred.
The party desiring to terminate this Agreement pursuant to Section 14.01
(other than Section 14.01(a)) shall give notice of such termination to the
other party.
SECTION 14.2. Effect of TerminationSECTION 14.2. Effect of
Termination. If this Agreement is terminated as permitted by Section
14.01, such termination shall be without liability of any party (or any
stockholder, director, officer, employee, agent, consultant or
representative of such party) to the other parties to this Agreement,
except as provided in the last sentence of this Section 14.02; provided
that if such termination shall result from the (i) willful failure of any
party to fulfill a condition to the performance of the obligations of the
other parties, (ii) failure to perform a covenant of this Agreement or
(iii) willful breach by any party hereto of any representation or warranty
or agreement contained herein, such party shall be fully liable for any and
all Damages incurred or suffered by the other parties as a result of such
failure or breach. The provisions of Sections 9.04, 15.03, 15.05 through
15.08, and 15.11 shall survive any termination hereof pursuant to
Section 14.01.
ARTICLE 15
MISCELLANEOUS
15MISCELLANEOUSSECTION 15.1. NoticesSECTION 15.1. Notices. All
notices, requests and other communications to any party hereunder shall be
in writing (including facsimile transmission) and shall be given,
if to Buyer, to:
Xxxxxx Micro Inc.
0000 Xxxx Xxxxxx
Xxxxxx Xxxxx
Xxxxx Xxx, XX 00000
Attention: General Counsel
Fax: 000-000-0000
with a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxx, Esq.
Fax: (000) 000-0000
if to Seller, to:
Intelligent Electronics, Inc.
000 Xxxxxxxxx Xxxxxxxxx
Xxxxx, XX 00000
Attention: Chief Executive Officer
Fax: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxxx & Xxxxxxx LLP
3000 Two Xxxxx Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-2799
Attention: Xxxxx X. Xxxxxxx, Esq.
Fax: 000-000-0000
if to XLSource, to:
XLSource, Inc.
000 Xxxxxxxxx Xxxxxxxxx
Xxxxx, XX 00000
Attention: Chief Executive Officer
Fax: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxxx & Xxxxxxx LLP
3000 Two Xxxxx Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-2799
Attention: Xxxxx 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 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 15.2. Amendments and WaiversSECTION 15.2. 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 15.3. Fees and ExpensesSECTION 15.3. Fees and Expenses.
(a) All costs and expenses incurred in connection with this Agreement shall
be paid by the party incurring such cost or expense except as provided in
15.03(b).
(b) If this Agreement is terminated as a result of the
occurrence of any of the events set forth below, Seller agrees to pay to
Buyer a fee in immediately available funds equal to $5,000,000 promptly,
but in no event later than two business days, after such termination within
the time period specified in Section 15.03(d) as a result of the occurrence
of any of the events set forth below:
(i) Seller or an Affiliate of Seller shall have entered into, or
shall have publicly announced its intention to enter into, an agreement or
an agreement in principle with respect to any Acquisition Proposal;
(ii) The Board of Directors of Seller shall have withdrawn or
materially modified its approval or recommendation of the Transaction or
this Agreement;
(iii) Prior to the mailing of the Seller Proxy Materials, Seller
or an Affiliate of Seller shall have received any Acquisition Proposal
which the Board of Directors of Seller has determined is more favorable to
Seller's stockholders than the Transaction;
(iv) The opinion of Xxxx Xxxxx as to the fairness of the
Transaction to the stockholders of Seller from a financial point of view
shall have been revoked;
(v) The absolute value of the Base Purchase Price, as adjusted
pursuant to Section 2.03 (if and only if such adjusted Base Purchase Price
is a negative number), is greater than the sum of (x) $10 million, (y)
$1,000,000 for each Monday, during the period commencing on June 30, 1997
and ending on July 28, 1997, prior to any termination of this Agreement and
(z) $2,000,000 for each Monday thereafter prior to the Closing Date;
provided that solely for purposes of this Section 15.03(b)(v), the Base
Purchase Price shall be calculated (A) excluding the impact of any
retention or severance payments and any interest expense paid or accrued
after Xxxxx 0, 0000, (X) prior to giving effect to any capital contribution
made pursuant to Section 6.12 and (C) assuming that the date of such
calculation is the Closing Date; or
(vi) Seller shall not have obtained prior to May 15, 1997, for
the benefit of Buyer, an irrevocable letter of credit in the amount of
$5,000,000 and otherwise reasonably satisfactory to Buyer for the purpose
of securing the obligations of Seller pursuant to Sections 15.03(b) and
15.03(c).
(c) Seller agrees to pay to Buyer a fee in immediately
available funds equal to $2,500,000 promptly, but in no event later than
two business days, after any termination of this Agreement within the time
period specified in Section 15.03(d) as a result of a failure by the
stockholders of Seller to approve the Transaction by the required vote at a
duly held meeting of stockholders or of any adjournment thereof.
(d) Notwithstanding anything herein to the contrary, if this
Agreement is terminated by Buyer pursuant to Section 14.01(f), no fee shall
be payable pursuant to Section 15.03(b) or 15.03(c) unless such termination
occurs within 10 business days following the date that Seller notifies
Buyer in writing of the occurrence of an event referred to in Sections
15.03(b) or 15.03(c)
SECTION 15.4. Successors and AssignsSECTION 15.4. 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 RN Shares, but no such transfer
or assignment will relieve Buyer of its obligations hereunder.
SECTION 15.5. Governing LawSECTION 15.5. 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 15.6. JurisdictionSECTION 15.6. Jurisdiction. Except as
otherwise expressly provided in this Agreement, 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 Transaction may
be brought in the United States District Court for the Southern District of
New York or any other New York State court sitting in New York City, and
each of the parties hereby 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 objection which 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 15.01 shall be deemed effective service of process on
such party.
SECTION 15.7. WAIVER OF JURY TRIALSECTION 15.7. 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 15.8. Counterparts; Third Party BeneficiariesSECTION 15.8.
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 by facsimile transmission or otherwise 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 15.9. Entire AgreementSECTION 15.9. Entire Agreement. This
Agreement (including the documents, instruments, exhibits, appendices and
schedules attached hereto and referenced herein) constitutes the entire
agreement among the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral
and written, among the parties with respect to the subject matter of this
Agreement.
SECTION 15.10. Definition of KnowledgeSECTION 15.10. Definition of
Knowledge. As used herein, the words "knowledge", "best knowledge" or
"known" shall, with respect to Seller, mean the actual knowledge of the
corporate officers of Seller and each of the Companies, and those
additional persons listed on Schedule 15.10 of the Seller Disclosure
Letter, in each case after such individuals have made due and diligent
inquiry as to the matters which are the subject of the statements which are
"known" by Seller or made to the "knowledge" or "best knowledge" of Seller.
SECTION 15.11. Specific PerformanceSECTION 15.11. Specific
Performance. Each party acknowledges and agrees that remedies at law for a
breach or threatened breach of any of the provisions of this Agreement
would be inadequate and, in recognition of this fact, the parties agree
that, in the event of such a breach or threatened breach, in addition to
any remedies at law, each party, without posting any bond, shall be
entitled to obtain equitable relief in the form of specific performance,
temporary restraining order, temporary or permanent injunction or any other
equitable remedy which may then be available.
SECTION 15.12. CaptionsSECTION 15.12. Captions. The captions
herein are included for convenience of reference only and shall be ignored
in the construction or interpretation hereof.
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.
XXXXXX MICRO INC.
By: ______________________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President,
Worldwide Chief Financial Officer
INTELLIGENT ELECTRONICS, INC.
By: ______________________________________
Name:
Title:
XLSOURCE, INC.
By: _______________________________________
Name:
Title:
SCHEDULE 2.04
Calculation of Net Liabilities Assumed
--------------------------------------
Proforma Adjusted
Balance Sheet Caption 11/2/96 * 2/1/97 *
--------------------- -------- --------
Liabilities
-----------
Accounts Payable $450,077 $401,561
Accrued Liabilities 21,194 18,035
Short-term debt 2,785 2,873
Long-term debt 3,450 3,463
Other long-term liabilities 1,325 1,084
Due to Corporate -- 22,648
$478,831 $449,664
Assets
------
Accounts receivable, net (119,046) (32,891)
Accounts receivable, TFN (XLS) -- (57,520)
Inventory (298,692) (301,433)
Prepaid expenses and other
current assets (1,763) (1,238)
Net Liabilities Assumed $59,330 $56,582
Balance sheet captions not included in calculation of Net Liabilities
Assumed:
Deferred income taxes 7,039 --
Property and equipment 42,548 43,647
Other assets 3,218 5,135
Shareholders' equity (6,525) (7,800)
*Source: Balance Sheet provided by Buyer.
Certain Adjustments:
In the event that the date of the Closing Balance Sheet is other than
Seller's fiscal quarter ending date, the Closing Balance Sheet shall be
subsequently adjusted within 30 days of the end of Seller's then current
fiscal quarter to reflect the pro rata accrual for Reseller Network's net
revenues relating to vendor programs, including special promotions,
marketing-development funds, sales-out objectives and returns incentives.
The pro rata accrual shall be determined based on the actual net revenues
earned by Reseller Network from the vendor program during such period
multiplied by either (as appropriate depending upon the type of vendor
program): (i) the result of Reseller Network's net sales of the vendor's
products for the period from the beginning of the fiscal quarter to the
Closing Date divided by Reseller Network's net sales of the vendor's
products for the entire period of the vendor program or (b) the result of
the number of business days that the vendor's program was in effect during
the period prior to the Closing Date divided by the total number of
business days of such program.
SCHEDULE 11.04
11.04(a)(i)
Buyer shall reimburse Seller, as provided in Section 11.03(b)(ii) of the
Stock Purchase Agreement (hereinafter, the "Agreement") for all severance
payments paid or payable under the severance plans and severance
arrangements listed in Schedule 11.02(a), (e), (f) and (j) of the Seller
Disclosure Letter, and for all actual out-of-pocket costs incurred by
Seller with respect to WARN Obligations, to the extent hereinafter
provided.
Actual out-of-pocket costs incurred by Seller with respect to WARN
Obligations shall be (a) actual cash costs (not including overhead or
related fixed costs) of preparing and mailing (or posting) required
notifications; (b) payment of any damages resulting from a failure to
provide 60 days' notice as required in WARN, unless such failure was due to
a delay by Seller of more than five days in providing notice to affected
employees after the date of the Buyer notice referred to in Section
11.04(b) of the Agreement; and (c) payment of any wages, benefits or
benefit costs that are required to be continued during said 60-day notice
period, if Seller continues affected employees' employment and if Seller
did not delay more than five days in providing notice to such affected
employees after the date of Buyer's notice referred to in Section 11.04(b)
of the Agreement.
For purposes of this Schedule, "benefit costs" shall mean insurance
premiums for any insured benefit plan, contributions to any funded benefit
plan, and with respect to any group medical plan that is subject to Section
601 of ERISA, shall be deemed to be 102% of the "applicable premium" as
defined in Section 604 of ERISA, determined in the same manner as such
applicable premium was determined during the current plan year for Seller's
plan, and subject to increase to the extent permitted under ERISA and in
accordance with past practice. Such amount shall hereinafter be referred
to as the "COBRA Cost." Buyer's obligation to reimburse Seller for its
Actual Out-of-Pocket COBRA Cost with respect to a Qualified Beneficiary (as
defined in ERISA) shall be limited to the Qualified Beneficiary's COBRA
Cost for any applicable month of coverage, reduced by any COBRA premiums
actually received from the Qualified Beneficiary on account of such
coverage during such month. In the case of a Seller Employee who is
continuing as an active participant in Seller's group medical plan pursuant
to a severance agreement or arrangement, the benefit costs related to such
coverage shall be the Actual Out-of-Pocket COBRA Costs that would otherwise
be applicable if such Seller Employee were covered by COBRA at such time.
It is understood that such Seller Employee will be treated as having
incurred a Qualifying Event under COBRA at the conclusion of such severance
period. With respect to any unfunded benefit plan other than a group
medical plan, "benefit costs" shall be determined in a manner comparable to
Actual Out-of-Pocket COBRA Costs.
11.04(a)(iii)
Buyer shall reimburse Seller, as provided in Section 11.03(b)(ii) of the
Agreement, for all severance payments and benefit costs (as defined above)
to or in respect of Scheduled Employees paid under the severance plans and
arrangements listed in respect thereof in Schedule 11.02(a), (e), (f) and
(j) of the Seller Disclosure Letter.
Section 11.06
Buyer shall reimburse Seller for all wages, salaries, contributions,
premiums, taxes, out-of-pocket costs and third-party administrative fees
reasonably paid or payable by Seller or its Subsidiary in respect of the
Seconded Employees providing the services described above. For this
purpose:
"contributions" includes contributions to any Employee Plan or Benefit
Arrangement, including matching contributions under Seller's qualified
savings plan.
"premiums" includes any and all insurance premiums for any Employee Plan or
Benefit Arrangement, and any workers' compensation insurance premiums or
payments to any fund maintained in lieu of such insurance.
"taxes" includes F.I.C.A. and F.U.T.A. taxes payable by Seller or any
Subsidiary on account of such Seconded Employees.
"out-of-pocket costs" includes payments for self-funded or partially-self-
funded Employee Plans or Benefit Arrangements, and shall be calculated in a
manner similar to that described above for Actual out-of-pocket COBRA
costs.
"third-party administrative fees" includes any payments to any payroll
administrator, benefits administrator, or any other entity unrelated to
Seller that assists Seller or its Subsidiary in fulfilling its employment-
related responsibilities with respect to the Seconded Employees.
Subject to Buyer's receipt of a detailed itemized list, in form and
substance reasonably acceptable to Buyer of expenses in respect of the
foregoing, Buyer shall provide advance payment to the account described in
Section 11.03(b)(ii) for any amount that is allocated to Buyer hereunder or
under Sections 11.03(a), 11.04, or 11.06 of the Agreement, upon reasonable
notice by the Seller, whether or not such provision calls for
"reimbursement" of such amount. It is the intention of the parties that
Seller and/or its Subsidiaries shall not be required to advance such funds
to the extent they are reasonably contemplated to be reimbursed by Buyer.
