EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
dated as of
January 4, 2000
between
COMPAQ COMPUTER CORPORATION,
ITY CORP.
and
INACOM CORP.
TABLE OF CONTENTS
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Page
ARTICLE 1
Definitions
Section 1.01. Definitions.....................................................1
ARTICLE 2
Purchase and Sale
Section 2.01. Purchased Assets................................................4
Section 2.02. Excluded Assets.................................................4
Section 2.03. Assumed Liabilities.............................................4
Section 2.04. Excluded Liabilities............................................4
Section 2.05. Assignment of Contracts and Rights..............................5
Section 2.06. Purchase Price; Allocation of Purchase Price....................6
Section 2.07. Closing.........................................................6
Section 2.08. Closing Statement...............................................7
Section 2.09. Adjustment of Purchase Price....................................9
ARTICLE 3
Representations and Warranties of Seller
Section 3.01. Corporate Existence and Power..................................11
Section 3.02. Corporate Authorization........................................11
Section 3.03. Governmental Authorization.....................................11
Section 3.04. Noncontravention...............................................12
Section 3.05. Required and Other Consents....................................12
Section 3.06. Financial Statements...........................................12
Section 3.07. Absence of Certain Changes.....................................12
Section 3.08. No Undisclosed Material Liabilities............................14
Section 3.09. Material Contracts.............................................14
Section 3.10. Litigation.....................................................15
Section 3.11. Compliance with Laws and Court Orders..........................16
Section 3.12. Properties.....................................................16
Section 3.13. Sufficiency of and Title to the Purchased Assets...............17
Section 3.14. Intellectual Property..........................................17
Section 3.15. Licenses and Permits...........................................18
Section 3.16. Finders' Fees..................................................18
Section 3.17. Environmental Compliance.......................................19
Section 3.18. Year 2000 Compliance ..........................................20
Page
Section 3.19. No Transfer of Substantially All of Seller's Assets............20
Section 3.20. Financing......................................................21
ARTICLE 4
Representations and Warranties of Buyer
Section 4.01. Corporate Existence and Power..................................21
Section 4.02. Corporate Authorization........................................21
Section 4.03. Governmental Authorization.....................................21
Section 4.04. Noncontravention...............................................22
Section 4.05. Finders' Fees..................................................22
ARTICLE 5
Covenants of Seller
Section 5.01. Conduct of the Business........................................22
Section 5.02. Access to Information; Confidentiality.........................23
Section 5.03. Seller's Sales Personnel.......................................24
Section 5.04. ICG Alliance...................................................24
Section 5.05. Leasehold Defaults.............................................24
Section 5.06. Use of Proceeds................................................24
ARTICLE 6
Covenants of Buyer
Section 6.01. Access.........................................................25
Section 6.02. Products for Seller's Franchisees..............................25
ARTICLE 7
Covenants of Buyer and Seller
Section 7.01. Further Assurances.............................................25
Section 7.02. Certain Filings................................................26
Section 7.03. Public Announcements...........................................26
Section 7.04. Trademarks; Tradenames.........................................26
Section 7.05. Warn Act.......................................................27
Section 7.06. Notices of Certain Events......................................27
Section 7.07. Operating Agreements............................................27
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ARTICLE 8
Tax Matters
Section 8.01. Tax Definitions................................................28
Section 8.02. Tax Matters....................................................28
Section 8.03. Tax Cooperation; Allocation of Taxes...........................28
ARTICLE 9
Employee Benefits
Section 9.01. Employee Benefits Representations..............................30
Section 9.02. Employees and Offers of Employment.............................31
Section 9.03. Seller's Employee Benefit Plans................................32
Section 9.04. Buyer Benefit Plans............................................34
Section 9.05. Inactive Employees.............................................35
Section 9.06. Severance Benefits.............................................35
Section 9.07. COBRA..........................................................36
Section 9.08. Continuation of Certain Administrative Services and
Insurance Coverage..........................................36
Section 9.09. Short Term Disability..........................................37
Section 9.10. Foreign Benefit Plans..........................................37
Section 9.11. Cooperation....................................................38
Section 9.12. No Third Party Beneficiaries...................................38
ARTICLE 10
Conditions to Closing
Section 10.01. Conditions to Obligations of each Party.......................39
Section 10.02. Conditions to Obligation of Buyer.............................39
Section 10.03. Conditions to Obligation of Seller............................40
ARTICLE 11
Survival; Indemnification
Section 11.01. Survival......................................................41
Section 11.02. Indemnification...............................................41
Section 11.03. Procedures....................................................42
Page
ARTICLE 12
Termination
Section 12.01. Grounds for Termination.......................................42
Section 12.02. Effect of Termination.........................................43
ARTICLE 13
Miscellaneous
Section 13.01. Notices.......................................................43
Section 13.02. Amendments and Waivers........................................44
Section 13.03. Fees and Expenses.............................................45
Section 13.04. Successors and Assigns........................................45
Section 13.05. Governing Law.................................................45
Section 13.06. Jurisdiction..................................................45
Section 13.07. WAIVER OF JURY TRIAL..........................................45
Section 13.08. Counterparts; Third Party Beneficiaries.......................46
Section 13.09. Entire Agreement..............................................46
Section 13.10. Bulk Sales Laws...............................................46
Section 13.11. Parent Guarantee..............................................46
Section 13.12. Schedules.....................................................46
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement") dated as of January 4, 2000
among Compaq Computer Corporation, a Delaware corporation ("Parent") (solely for
purposes of Section 13.11), ITY Corp., a Delaware corporation ("Buyer") and
wholly-owned subsidiary of Parent, and InaCom Corp., a Delaware corporation
("Seller").
The parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions.
(a) The following terms, as used herein, have the following meanings:
"affiliate" means, with respect to any person, any other person
directly or indirectly controlling, controlled by, or under common control with
such other person.
"Business" has the meaning set forth in Schedule 1.01.
"Lien" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim of
any kind in respect of such property or asset.
"knowledge" means (i) with respect to Seller (A) for purposes of
Section 5.01, the actual knowledge of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇▇ and (B) for all
other purposes, the actual knowledge of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇▇; and (ii) with respect to any other person, the
actual knowledge of such person.
"Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), business, assets or results of operations of
the Business or the Purchased Assets and Assumed Liabilities, except any such
effect resulting from or arising in connection with (i) changes in economic
conditions in the United States generally, (ii) changes or conditions affecting
the computer products or services industry generally or (iii) changes resulting
from any adverse
action taken by any customer or supplier of the Business as a result of the
announcement of this Agreement or the transactions contemplated hereby, provided
that Seller has used reasonable best efforts to maintain its relationship with
such customer or supplier, and has notified Buyer about such adverse action.
"person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"subsidiary" means, with respect to any person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at any time directly or indirectly owned by such person.
(b) A reference in this Agreement to any statute shall be to such
statute as amended from time to time and to the rules and regulations
promulgated thereunder.
(c) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Accounting Referee 2.06
Agreement preamble
Apportioned Obligations 8.03
Assumed Liabilities 2.03
Balance Sheet 2.08
Balance Sheet Date 3.07
Base Net Worth 2.09
Business Employees 9.02
Business Intellectual 3.14
Business Trademarks and Tradenames 7.04
Buyer preamble
Buyer 401(k) Plans 9.03
Closing 2.07
Closing Date 2.07
Closing Net Worth 2.08
Closing Plan Year 9.03
Closing Statement 2.08
Code 8.01
Confidentiality Agreement 5.02
Configuration Employee 9.02
Contracts 2.01
Term Section
---- -------
Damages 11.02
Employee Plan 9.01
ERISA 9.01
ERISA Affiliate 9.01
Excess Payment 2.09
Exchange Agreement 3.03
Excluded Assets 2.02
Excluded Liabilities 2.04
Final Net Worth 2.09
HSR Act 3.03
Inactive Business Employee 9.05
Indemnified Party 11.03
Indemnifying Party 11.03
Intellectual Property Rights 3.14
IT Employee 9.02
Make-Up Payment 2.09
Marketing Employee 9.02
Other Consents 3.05
Parent preamble
Permits 3.15
Permitted Liens 3.12
Post-Closing Tax Period 8.03
Pre-Closing Tax Period 8.01
Property Rights 3.14
Purchased Assets 2.01
Purchase Price 2.06
Real Property 3.12
Required Consents 3.05
Seller preamble
Seller 401(k) Plans 9.01
Seller FSA 9.04
Seller Indebtedness 3.20
Tax 8.01
Tax Allocation Statement 2.06
Taxing Authority 8.01
Transfer Taxes 8.03
Transferred Employee 9.02
WARN Act 7.05
ARTICLE 2
Purchase and Sale
Section 2.01. Purchased Assets. Except as otherwise provided in
Sections 2.02 and 2.05 and subject to the terms and conditions of this
Agreement, Buyer agrees to purchase from Seller and Seller agrees to sell,
convey, transfer, assign and deliver, or cause to be sold, conveyed,
transferred, assigned and delivered, to Buyer at the Closing, all right, title
and interest of Seller and its subsidiaries in, to and under
(a) the assets, properties and business, of every kind and
description, held or used primarily in connection with the Business as the same
shall exist on the Closing Date, and
(b) the assets, properties and businesses described on Schedule 2.01
(the items in clauses (a) and (b) collectively, the "Purchased Assets"),
in the case of tangible Purchased Assets, free and clear of all Liens, other
than Permitted Liens and Liens disclosed on Schedule 3.12(b).
Section 2.02. Excluded Assets. Notwithstanding anything else contained
in this Agreement, the Purchased Assets shall not include all right, title and
interest of Seller and its subsidiaries in, to and under the assets, properties
and businesses described on Schedule 2.02 (such excluded assets, properties and
businesses being referred to as the "Excluded Assets").
Section 2.03. Assumed Liabilities. Except as otherwise provided in
Section 2.04 and subject to the terms and conditions of this Agreement, Buyer
agrees, effective as of Closing, to assume all liabilities or obligations of
Seller and its subsidiaries of any kind, character or description (whether known
or unknown, accrued, absolute, contingent or otherwise)
(a) primarily relating to or arising out of the conduct of the
Business or the ownership or use of the Purchased Assets, or
(b) described on Schedule 2.03 or to be assumed by Buyer in Article 8
or Article 9 (the items in clauses (a) and (b) collectively, the "Assumed
Liabilities").
Section 2.04. Excluded Liabilities. Notwithstanding anything else
contained in this Agreement, Buyer is not assuming any liability or obligation
of Seller or any of its subsidiaries (or any predecessor thereof or any prior
owner of all or part of any of their businesses, properties and assets) of
whatever nature,
whether presently in existence or arising hereafter, known or unknown, accrued,
absolute, contingent or otherwise, other than the Assumed Liabilities and, in
any event, Buyer is not assuming any of the following:
(a) except as provided in Article 8 with respect Apportioned
Obligations and transfer taxes, any liability or obligation for Taxes of Seller
or any of its subsidiaries or any member of any consolidated, affiliated,
combined or unitary group of which Seller or any of its subsidiaries is or has
been a member, arising on or prior to the Closing Date;
(b) except to the extent provided in Article 9, all liabilities or
obligations relating to employees or their compensation or benefits;
(c) any liability or obligation under any indebtedness for borrowed
money (other than in respect of the Agreement for Wholesale Financing with
Deutsche Financial Services Corp. dated as of December 24, 1998, as amended on
May 25, 1999 and December 23, 1999);
(d) any liability or obligation described on Schedule 2.04;
(e) any liability or obligation relating to Excluded Assets; and
(f) any liability or obligation arising under or relating to any
Environmental Law which does not primarily relate to or arise out of the conduct
of the Business or the ownership or use of the Purchased Assets.
All such liabilities and obligations not being assumed by Buyer shall be
retained by and remain liabilities and obligations of Seller and its
subsidiaries (the "Excluded Liabilities").
Section 2.05. Assignment of Contracts and Rights. Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign any Purchased Asset or any right or benefit arising
thereunder or resulting therefrom if an attempted assignment, without the
consent of a third party thereto, would constitute a breach or other
contravention thereof or in any way adversely affect the rights of Buyer or
Seller or their affiliates thereunder. Buyer and Seller will use reasonable
efforts (but without any payment of money) to obtain any required consents to
the assignment of the Purchased Assets to Buyer as Buyer may reasonably request.
If such consent is not obtained, or if an attempted assignment thereof would be
ineffective or would adversely affect the rights thereunder so that Buyer would
not in fact receive all such rights, Seller and Buyer will cooperate in a
mutually agreeable arrangement under which Buyer
would obtain the benefits and assume the obligations thereunder in accordance
with this Agreement.
Section 2.06. Purchase Price; Allocation of Purchase Price. (a) The
purchase price for the Purchased Assets (the "Purchase Price") is $369.5 million
in cash. The Purchase Price shall be paid as provided in Section 2.07 and shall
be subject to adjustment as provided in Section 2.09.
(b) As soon as practicable after the determination of the Final Net
Worth, the Buyer shall deliver to the Seller a statement (the "Tax Allocation
Statement"), allocating the Purchase Price, as adjusted pursuant to Section 2.09
(plus Assumed Liabilities, to the extent properly taken into account under
Section 1060 of the Code) among the Purchased Assets in accordance with Section
1060 of the Code. If within 30 days after the delivery of the Tax Allocation
Statement the Seller notifies the Buyer in writing that the Seller objects to
the allocation set forth in the Tax Allocation Statement, the Buyer and the
Seller shall use commercially reasonable efforts to resolve such dispute within
30 days. In the event that the Buyer and the Seller are unable to resolve such
dispute within 30 days, the Buyer and the Seller shall jointly retain a
nationally recognized accounting firm (the "Accounting Referee") to resolve the
disputed items. Upon resolution of the disputed items, the allocation reflected
on the Tax Allocation Statement shall be adjusted to reflect such resolution.
The costs, fees and expenses of the Accounting Referee shall be borne equally by
Buyer and Seller.
(c) Seller and Buyer agree to (i) be bound by the Tax Allocation
Statement and (ii) act in accordance with the Tax Allocation Statement in the
preparation, filing and audit of any Tax return.
(d) Not later than 30 days prior to the filing of their respective
Forms 8594 relating to this transaction, each party shall deliver to the other
party a copy of its Form 8594.
Section 2.07. Closing. The closing (the "Closing") of the purchase and
sale of the Purchased Assets and the assumption of the Assumed Liabilities
hereunder shall take place at the offices of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, as soon as possible, but in no event later
than 10 business days, after satisfaction of the conditions set forth in Article
10, or at such other time or place as Buyer and Seller may agree. "Closing Date"
means the date of the Closing. At the Closing:
(a) Buyer shall deliver to Seller the Purchase Price in immediately
available funds by wire transfer to an account of Seller with a bank in New York
City designated by Seller, by notice to Buyer, not later than three days prior
to the Closing Date,
(b) Seller and Buyer shall enter into an Assignment and Assumption
Agreement substantially in the form attached hereto as Exhibit A, and
(c) Seller shall deliver to Buyer such deeds, bills of sale,
assignments and other good and sufficient instruments of conveyance and
assignment as the parties and their respective counsel shall deem reasonably
necessary to vest in Buyer all right, title and interest of Seller and its
subsidiaries in, to and under the Purchased Assets. Such instruments of
conveyance and assignment shall not contain any representation or warranty or
covenant in addition to those contained herein; nor shall the parties' rights or
obligations thereunder be different from those contained herein.
Section 2.08. Closing Statement. (a) As promptly as practicable but in
no event later than 30 days after the Closing Date, Seller will close its books
and records relating to the Purchased Assets and Assumed Liabilities in order to
permit Buyer to prepare the Closing Statement. As promptly as practicable
thereafter but no later than 60 days after the closing of such books and
records, Buyer will cause to be prepared and delivered to Seller a closing
statement of Purchased Assets and Assumed Liabilities (the "Closing Statement")
together with a report of Buyer's independent accountant thereon, and a
certificate based on such Closing Statement setting forth Buyer's calculation of
Closing Net Worth. The Closing Statement shall (x) fairly present the Purchased
Assets and Assumed Liabilities as at the close of business on the Closing Date
in accordance with U.S. generally accepted accounting principles applied on a
basis consistent with those used in the preparation of the audited balance sheet
of Seller included in Seller's Supplemental Consolidated Financial Statements
included in Seller's report on Form 8-K/A dated March 3, 1999 (the "Seller
8-K"), (y) be prepared in accordance with accounting policies and practices
consistent with those used in the preparation of such financial statements and
(z) include line items substantially consistent with those in the statement of
Purchased Assets and Assumed Liabilities as of November 27, 1999 referred to in
Section 3.06 (the "Balance Sheet"). "Closing Net Worth" means the excess of the
book value of the Purchased Assets over the book value of the Assumed
Liabilities as reflected on the Closing Statement. The Closing Statement shall
exclude: (i) all assets that in accordance with generally accepted accounting
principles would be classified as intangible assets, including, without
limitation, goodwill, patents, trademarks, deferred expenses and unamortized
debt discount; (ii) all liabilities for which Buyer is indemnified pursuant to
this Agreement and the receivable arising from such indemnification obligation;
and (iii) the effect (including the Tax effect) of any act, event or transaction
occurring after the Closing (but prior to the close of
business on the Closing Date) and not in the ordinary course of business of the
Business. For purposes of the Closing Statement, the amount of any accounts
payable due to, or any accounts receivable due from, Buyer or its affiliates
will be determined by agreement between Buyer and Seller, or absent such
agreement, through arbitration. In auditing the Closing Statement, Buyer's
independent accountant will follow generally accepted auditing standards and
such other procedures as are customary including, as appropriate, conducting a
physical inventory and verifying third party receivables and payables.
(b) If Seller disagrees with Buyer's calculation of Closing Net Worth
delivered pursuant to Section 2.08(a), Seller may, within 30 days after delivery
of the documents referred to in Section 2.08(a), deliver a notice to Buyer
disagreeing with such calculation and setting forth Seller's calculation of such
amount. Any such notice of disagreement shall specify those items or amounts as
to which Seller disagrees, and Seller shall be deemed to have agreed with all
other items and amounts contained in the Closing Statement and the calculation
of Closing Net Worth delivered pursuant to Section 2.08(a).
(c) If a notice of disagreement shall be duly delivered pursuant to
Section 2.08(b), Buyer and Seller shall, during the 15 days following such
delivery, use their reasonable commercial efforts to reach agreement on the
disputed items or amounts in order to determine, as may be required, the amount
of Closing Net Worth, which amount shall not be less than the amount thereof
shown in Buyer's calculations delivered pursuant to Section 2.08(a) nor more
than the amount thereof shown in Seller's calculation delivered pursuant to
Section 2.08(b). If during such period, Buyer and Seller are unable to reach
such agreement, they shall promptly thereafter cause the Accounting Referee
promptly to review this Agreement and the disputed items or amounts for the
purpose of calculating Closing Net Worth. In making such calculation, the
Accounting Referee shall consider only those items or amounts in the Closing
Statement or Buyer's calculation of Closing Net Worth as to which Seller has
disagreed. The Accounting Referee shall deliver to Buyer and Seller, as promptly
as practicable, a report setting forth such calculation. Such report shall be
final and binding upon Buyer and Seller. The cost of such review and report
shall be borne (i) by Buyer if the difference between Final Net Worth and
Closing Net Worth as set forth in Buyer's calculation of Closing Net Worth
delivered pursuant to Section 2.08(a) is greater than the difference between
Final Net Worth and Closing Net Worth as set forth in Seller's calculation of
Closing Net Worth delivered pursuant to Section 2.08(b), (ii) by Seller if the
first such difference is less than the second such difference and (iii)
otherwise equally by Buyer and Seller. "Final Net Worth" means Closing Net Worth
(x) as shown in Buyer's calculation delivered pursuant to Section 2.08(a) if no
notice of disagreement with respect thereto is duly delivered pursuant to
Section 2.08(b); or (y) if such a notice of disagreement is
delivered, (A) as agreed by Buyer and Seller pursuant to Section 2.08(c) or (B)
in the absence of such agreement, as shown in the Accounting Referee's
calculation delivered pursuant to Section 2.08(c); provided that in no event
shall Final Net Worth be less than Buyer's calculation of Closing Net Worth
delivered pursuant to Section 2.08(a) or more than Seller's calculation of
Closing Net Worth delivered pursuant to Section 2.08(b).
(d) Buyer and Seller agree that they will, and agree to cause their
respective independent accountants to, cooperate and assist in the preparation
of the Closing Statement and the calculation of Closing Net Worth and in the
conduct of the audits and reviews referred to in this Section 2.08, including
without limitation, the making available to the extent necessary of books,
records, work papers and personnel.
Section 2.09. Adjustment of Purchase Price. (a) The parties will make
payments as follows:
(i) If Final Net Worth exceeds $335.9 million, Buyer shall pay to
Seller, in the manner and with interest as provided in 2.09(b), an
amount equal to such excess (the "Excess Payment").
(ii) If Final Net Worth is less than $335.9 million, Seller shall pay
to Buyer, in the manner and with interest as provided in Section
2.09(b), an amount equal to the sum of
(A) the lesser of (x) $19.5 million and (y) 110% of the
excess of $335.9 million over Final Net Worth, and
(B) the excess, if any, of $275 million over Final Net
Worth (the "Make-Up Payment").
(b) Any payment pursuant to Section 2.09(a) shall be made within 10
days after determination of Final Net Worth (the "Final Payment Date") by the
paying party causing such payment to be credited to such account of the
receiving party as may be designated by such receiving party. The amount of any
payment to be made pursuant to this Section 2.09 shall bear interest from and
including the Closing Date to but excluding the date of payment at a rate per
annum equal to LIBOR plus 1.0%. For these purposes, "LIBOR" means
"USD-LIBOR-ISDA" (as defined in the 1991 ISDA Definitions published by the
International Swaps and Derivatives Association) with a "Designated Maturity" of
one month under such definition and reset every month. Such interest shall be
payable at the same time as the payment to which it relates and shall be
calculated daily on the basis of a year of 365 days and the actual number of
days elapsed.
Notwithstanding anything herein to the contrary, the parties agree
that:
(i) All payments pursuant Section 2.09(a) shall be made in cash or
other immediately available funds except as provided in clause (ii) or
(iii) below.
(ii) The Excess Payment shall, at the option of Buyer, be paid in (A)
accounts receivable that are, as of the Final Payment Date, not in
dispute and not aged over 60 days and are valued on a basis consistent
with the Closing Statement or inventory that has been received from the
original manufacturer no longer than three weeks prior to the Final
Payment Date and valued at the lower of cost or market (including any
purchase price protection received thereon), in each case that would
have otherwise constituted Purchased Assets or otherwise arises in
connection with the Business after the Closing, (B) cash or (C) any
combination thereof. To the extent that any such items are transferred
to Seller, they shall be treated as Excluded Assets.
(iii) The Make-Up Payment shall, at the option of Seller, be paid in
Specified Current Assets, cash or any combination thereof. "Specified
Current Assets" means, in each case free and clear of all Liens,
(x) accounts receivable that (A) are, as of the Final
Payment Date, not in dispute and not aged over 60 days, (B)
are not accounts receivable due from IBM, Hewlett Packard,
Dell or Toshiba and (C) are valued on a basis consistent with
the Closing Statement, or
(y) product inventory that (A) has been received by
Seller from the original manufacturer no longer than three
weeks prior to the Final Payment Date, (B) is not IBM, Hewlett
Packard, Dell or Toshiba inventory and (C) is valued at the
lower of cost or market (including any purchase price
protection received thereon).
During the 60-day period after the Final Payment Date, Buyer will use
reasonable and customary efforts to collect such receivables and sell
such inventory in the ordinary course of business. At the end of such
period, Seller will pay to Buyer in cash the excess, if any, of the
Make-Up Payment (less the amount of such payment made in cash) over the
amounts actually realized by Buyer from such accounts receivable and
inventory not to exceed the value used in making the Make-Up Payment.
Buyer shall assign such unsold inventory and uncollected accounts
receivable to Seller. Buyer shall not waive any rights against the
account debtor in respect of any accounts receivable so assigned.
ARTICLE 3
Representations and Warranties of Seller
Seller represents and warrants to Buyer as of the date hereof and as of
the Closing Date that:
Section 3.01. Corporate Existence and Power. Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all corporate powers and all material governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted. Seller is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for such matters as would not, individually
or in the aggregate, have a Material Adverse Effect. Seller has heretofore
delivered to Buyer true and complete copies of the certificate of incorporation
and bylaws of Seller as currently in effect.
Section 3.02. Corporate Authorization. The execution, delivery and
performance by Seller of this Agreement and the consummation of the transactions
contemplated hereby are within Seller's corporate powers and have been duly
authorized by all necessary corporate action on the part of Seller. This
Agreement constitutes a valid and binding agreement of Seller. In connection
with the authorization of this Agreement, the Seller's Board of Directors has
received an opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. to the effect that the consideration
to be paid pursuant to this Agreement is fair to Seller from a financial point
of view.
Section 3.03. Governmental Authorization. Except as set forth in
Schedule 3.03, the execution, delivery and performance by Seller of this
Agreement and the consummation of the transactions contemplated hereby require
no action by or in respect of, or filing with, any governmental body, agency or
official other than (i) compliance with any applicable requirements of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"); (ii) any
actions or filings which, if not taken or made, would not have a Material
Adverse Effect or materially adversely affect the ability of Seller to
consummate on the transactions contemplated hereby; and (iii) any filings or
notices not required to be made or given until after the Closing Date.
Section 3.04. Noncontravention. Except as set forth in Schedule 3.04,
the execution, delivery and performance by Seller of this Agreement and the
consummation of the transactions contemplated hereby do not and will not (i)
violate the certificate of incorporation or bylaws of Seller, (ii) assuming
compliance with the matters referred to in Section 3.03, violate any law, rule,
regulation, judgment, injunction, order or decree, (iii) assuming the obtaining
of all Required and Other Consents, constitute a default under or give rise to
any right of termination, cancellation or acceleration of any right or
obligation or to a loss of any benefit relating to the Business or the Purchased
Assets or Assumed Liabilities to which Seller or any of its subsidiaries is
entitled under any agreement or other instrument or (iv) result in the creation
or imposition of any Lien on any Purchased Asset, except, in the case of clauses
(ii), (iii) and (iv), for such matters as would not have a Material Adverse
Effect.
Section 3.05. Required and Other Consents. (a) Schedule 3.05(a) sets
forth each agreement or other instrument binding upon Seller or any of its
subsidiaries or any Permit requiring a consent or other action by any person as
a result of the execution, delivery and performance of this Agreement, except
such consents or actions as would not, individually or in the aggregate, have a
Material Adverse Effect if not received or taken by the Closing Date (the
"Required Consents").
(b) Schedule 3.05(b) sets forth each other consent or action by any
person (the "Other Consents") under such agreements or other instruments or
Permits that is necessary with respect to the execution, delivery and
performance of this Agreement.
Section 3.06. Financial Statements. The November 27, 1999 statement of
Purchased Assets and Assumed Liabilities attached hereto as Schedule 3.06 fairly
presents the Purchased Assets and Assumed Liabilities as at such date in
accordance with U.S. generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the audited balance sheet of
Seller included in the Seller 8-K. The revenues, gross margins, pre-coop
selling, general and administrative expenses and earnings before taxes for
Company 42/Distribution-Operations business for each month in the nine months
ended September 25, 1999 fairly present such items in all material respects on a
consistent basis.
Section 3.07. Absence of Certain Changes. Except as disclosed on
Schedule 3.07, since November 30, 1999 (the "Balance Sheet Date") or, after the
date hereof, in respect of transactions required by this Agreement, the Business
has been conducted in the ordinary course consistent with past practices and
there has not been:
(a) any event, occurrence, development or state of circumstances or
facts which has had or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Seller, or any
repurchase, redemption or other acquisition by Seller or any of its subsidiaries
of any outstanding shares of capital stock or other equity securities of, or
other ownership interests in, Seller or any of its subsidiaries;
(c) any incurrence, assumption or guarantee by Seller or any of its
subsidiaries of any indebtedness for borrowed money that will constitute an
Assumed Liability;
(d) any creation or other incurrence of any Lien on any Purchased
Asset other than in the ordinary course of business consistent with past
practices;
(e) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the Business or any Purchased Asset which,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect;
(f) any transaction or commitment made, or any contract or agreement
entered into, by Seller or any of its subsidiaries relating to the Business or
any Purchased Asset (including the acquisition or disposition of any assets) or
any relinquishment by Seller or any of its subsidiaries of any contract or other
right, in either case, material to the Business or Purchased Assets and Assumed
Liabilities, other than transactions and commitments in the ordinary course of
business consistent with past practices and those contemplated by this
Agreement;
(g) any change in any method of accounting or accounting practice by
Seller with respect to the Business, except for any such change required by
reason of a concurrent change in generally accepted accounting principles;
(h) any increase in compensation payable to any Business Employee,
other than in the ordinary course of business consistent with past practices; or
(i) any material labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any Business Employees, which Business Employees were not
subject to a collective bargaining agreement at the Balance Sheet Date, or any
material lockouts, strikes, slowdowns, work stoppages or threats thereof by or
with respect to Business Employees.
Section 3.08. No Undisclosed Material Liabilities. There are no
liabilities or obligations of the Business of any kind (whether known or
unknown, accrued, contingent, absolute or otherwise) that will constitute an
Assumed Liability and there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such a liability,
other than:
(a) liabilities or obligations provided for in the Balance Sheet or
disclosed in the notes thereto;
(b) liabilities disclosed on Schedule 3.08; and
(c) liabilities or obligations incurred in the ordinary course of
business consistent with past practice since the Balance Sheet Date, which in
the aggregate are not material to the Business.
Section 3.09. Material Contracts. (a) Except as disclosed in Schedules
3.09, 3.12, 3.14, 3.15 or 9.01, neither Seller nor any of its subsidiaries is a
party to or bound by any of the following agreements that will constitute a
Purchased Asset or an Assumed Liability:
(i) any lease of personal property (other than forklifts and
related equipment) providing for annual rentals of $50,000 or more or
any lease of real property;
(ii) any agreement committing Seller to purchase materials,
supplies, goods, services, equipment or other assets providing for
either (A) annual payments by Seller of $100 million or more or (B)
aggregate payments by Seller of $200 million or more;
(iii) any agreement committing Seller to sell materials, supplies,
goods, services, equipment or other assets providing for either (A)
annual payments to Seller of $50 million or more or (B) aggregate
payments to Seller of $100 million or more;
(iv) any partnership, joint venture or other similar agreement or
arrangement;
(v) any agreement relating to the prospective acquisition or
disposition of any business (whether by merger, sale of stock, sale of
assets or otherwise);
(vi) any agreement relating to indebtedness for borrowed money or
the deferred purchase price of property (in either case, whether
incurred, assumed, guaranteed or secured by any asset), except any such
agreement (A) with an aggregate outstanding principal amount not
exceeding $10 million and which may be prepaid on not more than 30 days
notice without the payment of any penalty and (B) entered into
subsequent to the date of this Agreement as permitted by Section
3.07(c);
(vii) any option, license, franchise or similar agreement;
(viii) any sales agency, dealer, sales representative, marketing
or other similar agreement that, in the aggregate, accounted for at
least 80% of Seller's revenues from resellers for the nine months ended
September 25, 1999;
(ix) any agreement that limits the freedom of Seller or any of its
subsidiaries to compete in any line of business or with any person or
in any area or to own, operate, sell, transfer, pledge or otherwise
dispose of or encumber any Purchased Asset or which would so limit the
freedom of Buyer after the Closing Date;
(x) any agreement with or for the benefit of any officer,
director, 5% or more shareholder or affiliate of Seller; or
(xi) any other agreement, commitment, arrangement or plan not made
in the ordinary course of business that is material to the Business.
(b) Each agreement disclosed in any Schedule to this Agreement or
required to be disclosed pursuant to this Section is a valid and binding
agreement of Seller and is in full force and effect, and none of Seller or any
of its subsidiaries or, to the knowledge of Seller, any other party thereto is
in default or breach in any material respect under the terms of any such
agreement, and, to the knowledge of Seller, no event or circumstance has
occurred that, with notice or lapse of time or both, would constitute any event
of default thereunder, except for such matters as would not have a Material
Adverse Effect. True and complete copies of each such agreement, including all
amendments and modifications thereto, have been delivered to Buyer.
Section 3.10. Litigation. Except as set forth in Schedule 3.10, there
is no action, suit, investigation or proceeding pending against, or to the
knowledge of Seller, threatened against or affecting, the Business or any
Purchased Asset before any court or arbitrator or any governmental body, agency
or official which would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
Section 3.11. Compliance with Laws and Court Orders. Except as set
forth in Schedule 3.11, neither Seller nor any of its subsidiaries is in
violation of, or has violated, any applicable law, rule, regulation, judgment,
injunction, order or decree applicable to the Purchased Assets or the conduct of
the Business, except for such matters as would not, individually or in the
aggregate, have a Material Adverse Effect.
Section 3.12. Properties. (a) Schedule 3.12(a) correctly lists all real
property used or held primarily in connection with the Business, including
leasehold interests (the "Real Property"), and any Liens thereon (other than
Permitted Liens or Liens disclosed on Schedule 3.12(b)), specifying in the case
of leases or subleases, the name of the lessor or sublessor.
(b) Seller has good and marketable, indefeasible, fee simple title to,
or in the case of leased property, valid leasehold interests in, all tangible
Purchased Assets (whether real, personal or otherwise) reflected on the Balance
Sheet or acquired after the Balance Sheet Date, except for properties and assets
sold since the Balance Sheet Date in the ordinary course of business consistent
with past practices. No tangible Purchased Asset is subject to any Lien, except:
(i) Liens disclosed on Schedule 3.12(b);
(ii) Liens securing Assumed Liabilities; or
(iii) Liens that do not materially detract from the value of such
Purchased Asset, or materially interfere with any present or intended use
of such Purchased Asset (clauses (ii) - (iii) of this Section 3.12(b)
are, collectively, the "Permitted Liens").
(c) There are no developments affecting any of the Purchased Assets
pending or, to the knowledge of Seller threatened, which are reasonably likely
to materially detract from the value, materially interfere with any present or
intended use or materially adversely affect the marketability of such Purchased
Assets.
(d) Except for the Excluded Assets, the Real Property includes all
real property as is used or held primarily in connection with the conduct of the
business and operations of the Business as heretofore conducted.
(e) Except as disclosed in Schedule 3.12 and except as would not have
a Material Adverse Effect, (i) the plants, buildings, structures and equipment
included in the Purchased Assets have no defects, are in good operating
condition and repair and have been reasonably maintained consistent with
standards generally followed in the industry (giving due account to the age and
length of use of same, ordinary wear and tear excepted), are adequate and
suitable for their present and intended uses and, in the case of plants,
buildings and other structures (including, without limitation, the roofs
thereof), are structurally sound; (ii) none of the structures on the Real
Property encroaches upon real property of another person, and no structure of
any other person encroaches upon any Real Property; (iii) the Real Property, and
its continued use, occupancy and operation as currently used, occupied and
operated, does not constitute a nonconforming use under all applicable building,
zoning, subdivision and other land use and similar laws, regulations and
ordinances; and (iv) there has been no actual or, to Seller's knowledge,
threatened taking of all or any portion of the Real Property by eminent domain
or similar governmental power, and no condemnation proceedings are currently
pending or, to Seller's knowledge, threatened with respect to the Real Property.
Section 3.13. Sufficiency of and Title to the Purchased Assets. (a)
Except for the Excluded Assets, the Purchased Assets constitute all of the
property and assets used or held primarily in connection with the Business and
are adequate to conduct the Business as currently conducted.
(b) Upon consummation of the transactions contemplated hereby, Buyer
will have acquired good and marketable title in and to, or a valid leasehold
interest (on the terms of the existing agreement as in effect on the date hereof
assuming that the subject asset is used in the same manner as it is currently
used by Seller) in, each of the tangible Purchased Assets, free and clear of all
Liens, except for Permitted Liens and Liens disclosed in Schedule 3.12(b), and
all of the right, title and interest of Seller and its subsidiaries in and to
any intangible Purchased Assets.
Section 3.14. Intellectual Property. Except for the Excluded Assets,
Seller and its subsidiaries have sufficient rights to use, whether through
ownership, licensing or otherwise, all patents, trademarks, service marks, trade
names, copyrights, trade secrets, processes and other proprietary rights that
are necessary for the Business as now conducted (collectively the "Intellectual
Property Rights"). Except as set forth on Schedule 3.14, none of Seller or any
of its subsidiaries has assigned, hypothecated or otherwise transferred or
encumbered any of the Intellectual Property Rights and none of the Intellectual
Property Rights purport to grant sole or exclusive licenses or other rights to
any other person, including, without limitation sole or exclusive licenses
limited to specific fields of use. To the best of Seller's knowledge, the
patents owned by Seller or its subsidiaries relating to the Business are valid
and enforceable and any patent
issuing from patent applications of Seller or its subsidiaries will be valid and
enforceable. Except as disclosed in Schedule 3.14, (i) to the best of the
Seller's knowledge, there is no infringement by any other person of any of the
Intellectual Property Rights, and (ii) neither Seller nor any of its
subsidiaries has entered into any agreement to indemnify any person against any
charge of infringement of any of the Intellectual Property Rights except for
such matters as would not, individually or in the aggregate, have a Material
Adverse Effect. To the best of Seller's knowledge, neither Seller nor any of its
subsidiaries has violated or infringed in connection with the Business any
intellectual property right of any other person, and neither Seller nor any of
its subsidiaries has received any communication alleging that it violates or
infringes the intellectual property right of any other person. Except as set
forth on Schedule 3.14, neither Seller nor any of its subsidiaries has been sued
or is being sued or has reason to believe that it may be sued for infringing in
connection with the Business any intellectual property right of another person.
None of the processes, techniques and formulae, research and development results
or other know-how or show-how relating to the Business, the value of which to
the Business is contingent upon maintenance of the confidentiality thereof, has
been disclosed by Seller or any affiliate thereof to any person other than those
persons who have a need to know thereof and who are bound to hold such
information in confidence pursuant to confidentiality agreements or by operation
of law.
Section 3.15. Licenses and Permits. Schedule 3.15 correctly describes
each material governmental license, authorization, consent and approval to the
extent relating to the Business (the "Permits") together with the name of the
government agency or entity issuing such Permit. Except as set forth on the
Schedule 3.15, (i) the Permits are valid and in full force and effect, (ii)
Seller is not in default, and no condition exists that with notice or lapse of
time or both would constitute a default, under the Permits and (iii) none of the
Permits will, assuming the related Required Consents have been obtained prior to
the Closing Date, be terminated or impaired or become terminable, in whole or in
part, as a result of the transactions contemplated hereby. Upon consummation of
such transactions, Buyer will, assuming the related Required Consents or Other
Consents, as the case may be, have been obtained prior to the Closing Date, have
all of the right, title and interest in all Permits primarily relating to the
Business (other than Excluded Assets).
Section 3.16. Finders' Fees. Except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., whose fees
will be paid by Seller, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
Seller who might be entitled to any fee or commission in connection with the
transactions contemplated by this Agreement.
Section 3.17. Environmental Compliance. (a) Except for such matters as
would not reasonably be expected to have a Material Adverse Effect or as
disclosed in Schedule 3.17:
(i) no written notice of violation or liability, demand, request
for information, citations, summons or order has been received, no
complaint has been filed, no penalty has been assessed and no
investigation, action, claim, suit, proceeding or review is pending, or
to the knowledge of Seller or any of its subsidiaries, threatened by
any governmental entity or other person with respect to any matters
relating to the Business or the Purchased Assets or Assumed Liabilities
and relating to or arising out of any Environmental Law;
(ii) no Hazardous Substance has been discharged, disposed of,
dumped, injected, pumped, deposited, spilled, leaked, emitted or
released at any of the Purchased Assets or Real Property or any
property now or previously owned, leased or operated by Seller or any
of its subsidiaries and used in connection with the Business, except in
compliance with applicable Environmental Laws or where such would not
reasonably be expected to result in liability under any Environmental
Law; and
(iii) Seller and each of its subsidiaries have all environmental
permits necessary for the Business and the Purchased Assets to comply
with applicable Environmental Laws and are in compliance with the terms
of such permits and all applicable Environmental Laws, and there are no
Environmental Liabilities.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which Seller or any of its subsidiaries
has knowledge and possession in relation to the Business or the Purchased Assets
which has not been delivered to Parent at least two days prior to the date
hereof.
(c) Except as disclosed to Buyer in writing on or prior to the date
hereof, neither Seller nor any of its subsidiaries owns, leases or operates any
real property in respect of the Business or the Purchased Assets in New Jersey
or Connecticut.
(d) For purposes of this Section, the following terms shall have the
meanings set forth below:
"Seller" and "subsidiary" shall include any entity which is, in whole
or in part, a predecessor of Seller or any of its subsidiaries;
"Environmental Laws" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
regulation, or any binding agreement with any governmental authority, relating
to the environment or the effect of the environment on human health, or
regulating the discharge, release, disposal or emission to the environment of
pollutants, contaminants, wastes or chemicals or any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, wastes or
materials;
"Environmental Liabilities" means any and all liabilities or
obligations of the Business or the Purchased Assets or Assumed Liabilities,
whether accrued, contingent, absolute, determined, determinable or otherwise,
arising under any Environmental Law;
"Hazardous Substances" means any pollutant, contaminant, waste or
chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise
hazardous substance, waste or material, or any substance, waste or material
having any constituent elements displaying of the foregoing characteristics,
including, without limitation, petroleum, its derivatives, by-products and other
hydrocarbons, which in any event is regulated under Environmental Laws.
Section 3.18. Year 2000 Compliance . Seller has conducted an assessment
of its and its subsidiaries' internal operating systems, processes, software,
hardware and equipment relating to the Business and based upon this assessment
has developed a plan designed to ensure that the same are Year 2000 Compliant on
or before December 31, 1999. To the knowledge of Seller, such plan will be
implemented and successfully completed on or before December 31, 1999, and the
implementation and completion of such plan will not have a Material Adverse
Effect. The term "Year 2000 Compliant", as used herein, shall mean that the
applicable systems, processes, software, hardware and/or equipment is able to
perform the following functions without human intervention: (a) handle date
information before, during and after January 1, 2000, including but not limited
to accepting date input, providing date output, and performing calculations on
dates or portions of dates; (b) function accurately and without interruption
before, during and after January 1, 2000, without any change in operations
associated with the advent of the new century; (c) respond to two-digit
year-date input in a way that resolves the ambiguity as to century in a
disclosed, defined and predetermined manner; and (d) store and provide output of
date information in ways that are unambiguous as to century.
Section 3.19. No Transfer of Substantially All of Seller's Assets. The
transactions contemplated by this Agreement (i) do not require the approval of
Seller's stockholders under Delaware law and (ii) do not constitute the
conveyance, transfer or lease of all or substantially all of Seller's assets
substantially as an entirety under the agreements governing the 6 3/4%
Convertible Subordinated Debentures due 2016 issued by a subsidiary of Seller
and the 6 3/4 Trust Convertible Preferred Securities related thereto.
Section 3.20. Financing. Seller has received and furnished a copy to
Buyer of an executed Third Amendment and Waiver dated as of January 4, 2000 (the
"Amendment and Waiver") to Seller's Credit Agreement dated as of April 9, 1999,
as amended (the "Credit Agreement") attached as Schedule 3.20 hereto. As of the
date hereof, Seller has no knowledge, after reasonable inquiry, of any facts or
circumstances that would result in any of the conditions set forth in the
Amendment and Waiver not being satisfied.
ARTICLE 4
Representations and Warranties of Buyer
Buyer represents and warrants to Seller as of the date hereof and as of
the Closing Date that:
Section 4.01. Corporate Existence and Power. Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all corporate powers and all material governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted.
Section 4.02. Corporate Authorization. The execution, delivery and
performance by Buyer of this Agreement and the consummation of the transactions
contemplated hereby are within the corporate powers of Buyer and have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement constitutes a valid and binding agreement of Buyer.
Section 4.03. Governmental Authorization. The execution, delivery and
performance by Buyer of this Agreement and the consummation of the transactions
contemplated hereby require no action by or in respect of, or filing with, any
governmental body, agency or official other than (i) compliance with any
applicable requirements of the HSR Act; (ii) any actions or filings which, if
not taken or made, would not have a material adverse effect on Buyer or
materially adversely effect the ability of Buyer to consummate the transactions
contemplated hereby; and (iii) any filings or notices not required to be made or
given until after the Closing Date.
Section 4.04. Noncontravention. The execution, delivery and performance
by Buyer of this Agreement and the consummation of the transactions contemplated
hereby do not and will not (i) violate the certificate of incorporation or
bylaws of Buyer, (ii) assuming compliance with the matters referred to in
Section 4.03, violate any law, rule, regulation, judgment, injunction, order or
decree, or (iii) constitute a default under or give rise to any right of
termination, cancellation or acceleration of any right or obligation of Buyer or
to a loss of any benefit to which Buyer is entitled under any agreement or other
instrument binding upon Buyer, except, in the case of (ii) and (iii), for such
matters as would not materially adversely effect the ability of Buyer to
consummate the transactions contemplated by this Agreement.
Section 4.05. Finders' Fees. Except for ▇▇▇▇▇▇▇▇▇ & Co., LLC and
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc., 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
transactions contemplated by this Agreement.
ARTICLE 5
Covenants of Seller
Seller agrees that:
Section 5.01. Conduct of the Business. From the date hereof until the
Closing Date, Seller and its subsidiaries shall conduct the Business in the
ordinary course consistent with past practice and shall use their reasonable
commercial efforts to preserve intact the business organizations and
relationships with third parties and to keep available the services of the
present employees of the Business. Without limiting the generality of the
foregoing, from the date hereof until the Closing Date and except as otherwise
required by this Agreement or the Fulfillment Agreement between Buyer and Seller
dated as of the date hereof (the "Fulfillment Agreement"), Seller will not, and
will not permit any of its subsidiaries to:
(a) with respect to the Business, acquire a material amount of assets
from any other person, other than purchases of materials or products in the
ordinary course of business;
(b) sell, lease, license or otherwise dispose of any Purchased Assets
except (i) pursuant to existing contracts or commitments and (ii) sale of
inventory in the ordinary course consistent with past practice;
(c) except in the ordinary course consistent with Seller's customary
practices, will not with respect to the Business collect any accounts
receivable, delay payment of any accounts payable or sell any inventory;
(d) terminate the employment of any Business Employee (except for (i)
terminations of employment in connection with the restructuring of Seller's
business as publicly announced prior to the date hereof, which terminations are
itemized in Schedule 5.01(d), (ii) termination by an employee and (iii)
termination for cause);
(e) agree or commit to do any of the foregoing; or
(f) take or agree or commit to take any action that, to the knowledge
of Seller, would or is likely to make any representation or warranty of Seller
hereunder inaccurate in any respect at, or as of any time prior to, the Closing
Date.
Section 5.02. Access to Information; Confidentiality. (a) From the date
hereof until the Closing Date, Seller will (i) give Buyer and its authorized
representatives reasonable access to the properties, books and records and
employees of Seller and its subsidiaries relating to the Business or the
Purchased Assets or Assumed Liabilities and such financial and other information
relating to the Business or the Purchased Assets or Assumed Liabilities as such
persons may reasonably request and (ii) instruct the employees, counsel and
financial advisors of Seller to cooperate with Buyer in its investigation of the
Business or the Purchased Assets or Assumed Liabilities. Any investigation
pursuant to this Section shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of Seller or otherwise
unreasonably harm such business. Notwithstanding the foregoing, Buyer shall not
have access to personnel records of Seller relating to individual performance or
evaluation records, medical histories or other information which in Seller's
good faith opinion is sensitive or the disclosure of which could subject Seller
to risk of liability. No investigation by Buyer or other information received by
Buyer shall operate as a waiver or otherwise affect any representation, warranty
or agreement given or made by Seller hereunder. The foregoing information shall
be held in confidence to the extent required by, and in accordance with, the
provisions of the letter agreement dated as of November 9, 1999 between Buyer
and Seller (the"Confidentiality Agreement") which shall continue in effect.
(b) After the Closing, Seller and its affiliates will hold, and will
use their reasonable commercial efforts to cause their respective officers,
directors, employees, accountants, counsel, consultants, advisors and agents to
hold, in confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all confidential documents and
information concerning the Business or the Purchased Assets or Assumed
Liabilities, except to the extent that such information can be shown to have
been (i) in the public domain through no fault of Seller or its affiliates or
(ii) later lawfully acquired by Seller on a non-confidential basis from sources
other than those related to its prior ownership of the Business. The obligation
of Seller and its affiliates to hold any such information in confidence shall be
satisfied if they exercise the same care with respect to such information as
they would take to preserve the confidentiality of their own similar
information.
(c) After the Closing Date, Seller will give Buyer and its authorized
representatives reasonable access to properties, books and records and employees
of Seller to the extent necessary to permit Buyer to determine any matters
relating to its rights or obligations hereunder or any other reasonable business
purpose relating to the Business or the Purchased Assets or Assumed Liabilities;
provided that any such access by Buyer shall not unreasonably interfere with the
conduct of the business of Seller or otherwise harm such business.
Section 5.03. Seller's Sales Personnel. Seller agrees that for the
period from the date hereof until the Closing Date, Seller will review with
Buyer any plans of Seller or its subsidiaries to terminate the employment of any
of Seller's and its subsidiaries' sales and marketing employees.
Section 5.04. ICG Alliance. At the request of Buyer, Seller will use
reasonable commercial efforts to ensure that Buyer becomes a member of the ICG
Services alliance prior to the Closing.
Section 5.05. Leasehold Defaults. Seller will as of the Closing cure
any payment defaults under any leases of Real Property.
Section 5.06. Use of Proceeds. Seller will use a portion of the
Purchase Price for the repayment of Seller Indebtedness and will retain the
balance, if any, in Seller for use in its ongoing business.
ARTICLE 6
Covenants of Buyer
Buyer agrees that:
Section 6.01. Access. After the Closing Date, Buyer will give Seller
and its authorized representatives reasonable access to the properties, books
and records and employees of Buyer and its affiliates relating to the Business
to the extent necessary to permit Seller to determine any matter relating to its
rights and obligations hereunder or any other reasonable business purpose
relating to any period ending on or before the Closing Date; provided that any
such access by Seller shall not unreasonably interfere with the conduct of the
business of Buyer and its affiliates.
Section 6.02. Products for Seller's Franchisees. Buyer will use
reasonable efforts to provide product to Seller for resale to Seller's
franchisees, but only to the extent such product is available to Buyer for
resale, on terms consistent with those Buyer offers to similarly situated
resellers
ARTICLE 7
Covenants of Buyer and Seller
Buyer and Seller agree that:
Section 7.01. Further Assurances. (a) Subject to the terms and
conditions of this Agreement, Buyer and Seller will use their reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement (including, in the
case of Seller, the condition in Section 10.03(b)). Seller and Buyer agree to
execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated by
this Agreement and to vest in Buyer good and marketable title to the Purchased
Assets.
(b) Seller hereby constitutes and appoints, effective as of the
Closing Date, Buyer and its successors and assigns as the true and lawful
attorney of Seller with full power of substitution in the name of Buyer, or in
the name of Seller but for the benefit of Buyer, (i) to collect for the account
of Buyer any items of Purchased Assets and (ii) to institute and prosecute all
proceedings which Buyer
may in its sole discretion deem proper in order to assert or enforce any right,
title or interest in, to or under the Purchased Assets, and to defend or
compromise any and all actions, suits or proceedings in respect of the Purchased
Assets. Buyer shall be entitled to retain for its own account any amounts
collected pursuant to the foregoing powers, including any amounts payable as
interest in respect thereof.
Section 7.02. Certain Filings. Seller and Buyer shall cooperate with
one another (i) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (ii) in taking such actions or
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such actions, consents, approvals or waivers.
Section 7.03. Public Announcements. The parties agree to consult with
each other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except as
may be required by applicable law or any listing agreement with any national
securities exchange, will not issue any such press release or make any such
public statement prior to such consultation.
Section 7.04. Trademarks; Tradenames. (a) Except as set forth otherwise
in this Section 7.04, after the Closing, (i) Seller and its subsidiaries shall
not use any of the marks or names used primarily in the Business as set forth on
Schedule 7.04(a) the "Business Trademarks and Tradenames") and (ii) Buyer and
its subsidiaries shall not use any of the marks or names set forth on Schedule
7.04(b) (the "Seller Trademarks and Tradenames").
(b) After the Closing, Buyer shall have the right to sell existing
inventory and to use existing packaging, labeling, containers, supplies,
advertising materials, technical data sheets and any similar materials bearing
any Seller Trademarks and Tradenames until the earlier of (i) six months after
the Closing Date and (ii) the date existing stocks are exhausted. Buyer shall
have the right to use the Seller Trademarks and Tradenames in advertising that
cannot be changed by Buyer using reasonable efforts for a period not to exceed
90 days after the Closing Date. Buyer shall comply with all applicable laws or
regulations in any use of packaging or labeling containing the Seller Trademarks
and Tradenames.
(c) Buyer shall not be obligated to change the Seller Trademarks and
Tradenames on goods in the hands of dealers, distributors and customers at the
time of the expiration of a time period set forth in subsection 7.04(b) above.
The
obliteration of the Seller Trademarks and Tradenames shall be deemed compliance
with the covenant not to use the Seller Trademarks and Tradenames pursuant to
this Section 7.04 with respect to the property to which such Seller Trademarks
and Tradenames were not affixed.
(d) Buyer agrees to cease using the Seller Trademarks and Tradenames
on buildings, cars, trucks and other fixed assets as soon as possible within a
period not to exceed six months after the Closing Date.
(e) Seller agrees that its consent to the amendment or extension of
this Section will not be unreasonably withheld if Buyer cannot exhaust existing
inventory within six months of the Closing Date.
Section 7.05. Warn Act. The parties agree to cooperate in good faith to
determine whether any notification may be required under the Worker Adjustment
and Retraining Notification Act (the "WARN Act") as a result of the transactions
contemplated by this Agreement. Buyer will be responsible for providing any
notification that may be required under the WARN Act with respect to any
Transferred Employees. Seller will be responsible for providing any notification
that may be required under the WARN Act with respect to any employees of the
Business that are not Transferred Employees.
Section 7.06. Notices of Certain Events. Buyer and Seller shall
promptly notify each other of:
(a) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement; and
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement.
Section 7.07. Operating Agreements. On the date hereof, the parties
entered into the Fulfillment Agreement in the form set forth as Exhibit B. At
Closing, the parties will enter into definitive agreements on the terms set
forth in Schedule 7.07 relating to the sharing of (1) Tech Center, (2) Gateway
Building, (3) Corporate Headquarters and (4) Corporate IT Function.
ARTICLE 8
Tax Matters
Section 8.01. Tax Definitions. The following terms, as used herein,
have the following meanings:
"Code" means the Internal Revenue Code of 1986.
"Pre-Closing Tax Period" means (i) any Tax period ending on or before
the Closing Date and (ii) with respect to a Tax period that commences before but
ends after the Closing Date, the portion of such period up to and including the
Closing Date.
"Tax" means (i) any tax, governmental fee or other like assessment or
charge of any kind whatsoever (including, without limitation, withholding on
amounts paid to or by any person, together with any interest, penalty, addition
to tax or additional amount imposed by any governmental authority (a "Taxing
Authority") responsible for the imposition of any such tax (domestic or
foreign), or (ii) liability for the payment of any amounts of the type described
in (i) as a result of being party to any agreement or any express or implied
obligation to indemnify any other person.
Section 8.02. Tax Matters. Seller hereby represents and warrants to
Buyer that
(a) Seller has timely paid all Taxes which will have been required to
be paid on or prior to the date hereof, the non-payment of which would result in
a Lien on any Purchased Asset, would otherwise adversely affect the Business or
would constitute an Assumed Liability.
(b) Seller has established, in accordance with generally accepted
accounting principles applied on a basis consistent with that of preceding
periods, adequate reserves for the payment of, and will timely pay, all Taxes,
which arise from or with respect to the Purchased Assets or the operation of the
Business and are incurred in or attributable to the Pre-Closing Tax Period, the
non-payment of which would result in a Lien on any Purchased Asset, would
otherwise adversely affect the Business or would constitute an Assumed
Liability.
Section 8.03. Tax Cooperation; Allocation of Taxes. (a) Buyer and
Seller agree to furnish or cause to be furnished to each other, upon request, as
promptly as practicable, such information and assistance relating to the
Business and the Purchased Assets or Assumed Liabilities (including, without
limitation, access to books and records) as is reasonably necessary for the
filing of all Tax
returns, the making of any election relating to Taxes, the preparation for any
audit by any Taxing Authority, and the prosecution or defense of any claim, suit
or proceeding relating to any Tax. Buyer and Seller shall retain all books and
records with respect to Taxes pertaining to the Purchased Assets and Assumed
Liabilities for a period of at least six years following the Closing Date. At
the end of such period, each party shall provide the other with at least 10 days
prior written notice before destroying any such books and records, during which
period the party receiving such notice can elect to take possession, at its own
expense, of such books and records. Seller and Buyer shall cooperate with each
other in the conduct of any audit or other proceeding relating to Taxes
involving the Purchased Assets or Assumed Liabilities or the Business.
(b) All real property taxes, personal property taxes and similar ad
valorem obligations levied with respect to the Purchased Assets for a taxable
period which includes (but does not end on) the Closing Date (collectively, the
"Apportioned Obligations") shall be apportioned between Seller and Buyer based
on the number of days of such taxable period included in the Pre-Closing Tax
Period and the number of days of such taxable period after the Closing Date
(with respect to any such taxable period, the "Post-Closing Tax Period"),
provided, however, that Seller shall not be responsible for any increased
assessments resulting from the transactions contemplated hereby. Seller shall be
liable for the proportionate amount of such taxes that is attributable to the
Pre-Closing Tax Period, and Buyer shall be liable for the proportionate amount
of such taxes that is attributable to the Post-Closing Tax Period.
(c) All excise, sales, use, value added, registration stamp,
recording, documentary, conveyancing, franchise, property, transfer, gains and
similar Taxes, levies, charges and fees (collectively, "Transfer Taxes")
incurred in connection with the transactions contemplated by this Agreement
shall be borne equally by Seller and Buyer. Buyer and Seller shall cooperate in
providing each other with any appropriate resale exemption certifications and
other similar documentation. The party that is required by applicable law to
make the filings, reports, or returns with respect to any applicable Transfer
Taxes shall do so, and the other party shall cooperate with respect thereto as
necessary.
(d) Apportioned Obligations and Transfer Taxes described in Section
8.03(b) or 8.03(c) shall be timely paid, and all applicable filings, reports and
returns shall be filed, as provided by applicable law. The paying party shall be
entitled to reimbursement from the non-paying party in accordance with Section
8.03(b) or (c), as the case may be. Upon receipt of any ▇▇▇▇ for, or payment of,
any such Apportioned Obligation or Transfer Tax, the paying party shall present
a statement to the non-paying party setting forth the amount of reimbursement to
which the paying party is entitled under Section 8.03(b) or (c), as the case may
be,
together with such supporting evidence as is reasonably necessary to calculate
the amount to be reimbursed. The non-paying party shall make such reimbursement
promptly but no event later than 10 days after the presentation of such
statement. Any payment not made within such time shall bear interest at a rate
set forth in Section 2.09(b) for each day until paid.
ARTICLE 9
Employee Benefits
Section 9.01. Employee Benefits Representations. Seller hereby
represents and warrants to Buyer as of the date hereof and as of the Closing
Date, that:
(a) Schedule 9.01(a) lists each material "employee benefit plan", as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA"), each material employment, severance or similar contract, plan,
arrangement or policy and each other material plan or arrangement (written or
oral) providing for compensation, bonuses, profit-sharing, stock option or other
stock related rights or other forms of incentive or deferred compensation,
vacation benefits, insurance (including any self-insured arrangements), health
or medical benefits, employee assistance program, disability or sick leave
benefits, workers' compensation, supplemental unemployment benefits, severance
benefits and post-employment or retirement benefits (including compensation,
pension, health, medical or life insurance benefits) which is maintained,
administered or contributed to by Seller or any ERISA Affiliate and covers any
person who is a Business Employee, as defined in Section 9.02 (any such plan,
arrangement or policy, an "Employee Plan"). Copies of each Seller 401(k) Plan
(as defined in Section 9.01(b)) and each other Employee Plan that provides for
severance, vacation, sick leave or deferred compensation and all amendments
thereto and written interpretations thereof have been furnished to Buyer. For
purposes of this Agreement, "ERISA Affiliate" of Seller shall mean any other
entity which, together with Seller, would be treated as a single employer under
Section 414 of the Code. Since December 31, 1998, except as set forth in
Schedule 9.01(a), no employee benefit plan or arrangement, including without
limitation any Employee Plan, or modification thereto, has been adopted that
would, individually or in the aggregate, increase materially the operating cost
of the Business.
(b) No Employee Plan is a multiemployer plan, as defined in Section
3(37) of ERISA, and no Employee Plan is subject to Title IV of ERISA. Neither
Seller nor any of Seller's ERISA Affiliates has incurred any liability under
Title IV of ERISA arising in connection with the termination of any plan covered
or
previously covered by Title IV of ERISA that could become, after the Closing
Date, an obligation of Buyer or any of its affiliates. The InaCom Employees
Retirement Savings Plan and Trust, the Vanstar Corporation 401(k) Plan, the
Office Products of Minnesota Inc. 401(k) Plan, the National Technology Group
401(k) Plan, the Computerland 401(k) Plan and the Mentor Technologies Ltd.
401(k) Plan (the "Seller 401(k) Plans") have been determined to be qualified
under Section 401(a) of the Code and nothing has occurred with respect to such
plans since such determination that could reasonably be expected to result in
the loss of such qualification or exemption from tax. Each plan loan outstanding
under the Seller 401(k) Plans is fully secured by the vested Plan account
balance of the applicable participant, and each such loan has been extended on
such terms and administered in such a manner as to avoid treatment as a
distribution under Section 72(p) of the Code.
(c) Neither Seller nor any of its subsidiaries is a party to or subject
to, or is currently negotiating in connection with entering into, any collective
bargaining agreement or other contract or understanding with a labor union or
labor organization.
(d) Neither Seller nor any of its subsidiaries has, in connection with
the Business, engaged any individual as an independent contractor or made
payments for services to be performed by any individual as an independent
contractor who should be considered, under applicable law, an employee of
(rather than an independent contractor to) Seller or any of its subsidiaries.
Section 9.02. Employees and Offers of Employment. For purposes of this
Agreement, "Business Employees" shall mean the individuals described in Schedule
9.02. As soon as practicable after the date hereof, Seller shall provide Buyer
with a list containing the names of all of the Business Employees, and through
the Closing Date Seller shall periodically revise such list to include each
Business Employee newly hired by Seller or its affiliate, and to reflect
termination of employment or similar personnel changes. At Closing, Buyer or its
affiliate shall offer employment, in a comparable position and at the same rate
of salary (or, if applicable, base hourly rate), to each Business Employee who
is actively employed as of the Closing Date, and each inactive Business Employee
who is on approved leave on the Closing Date because of jury duty, family or
medical leave, sick leave, short-term disability, vacation or military duty;
provided, however, that nothing contained herein is intended to confer upon any
Business Employee any right to continued employment after the Closing Date. Each
Business Employee who accepts (or is deemed to accept) employment with Buyer on
the Closing Date is referred to herein as a "Transferred Employee". Seller
hereby agrees that neither Seller nor any affiliate shall (i) rehire or continue
to employ any Business Employee at any time prior to the first anniversary of
the Closing Date; or (ii)
offer any Business Employee any severance or similar benefits payable on
termination of such Employees' employment by Seller or its affiliate; provided,
that this clause (ii) shall not apply with respect to any Business Employee
unless Buyer offers such Employee employment in accordance with this Article 9,
at a location no greater than 50 miles from that in effect at the Closing Date.
Section 9.03. Seller's Employee Benefit Plans. (a) Seller shall retain
all obligations and liabilities under the Employee Plans and any other benefit
plan or arrangement of Seller or its affiliate in respect of each employee or
former employee (including any beneficiary thereof) who is not a Transferred
Employee. Except as expressly set forth herein, Seller or its designated
affiliate shall retain all liabilities and obligations in respect of benefits
accrued by Transferred Employees under the Employee Plans and any other benefit
plan or arrangement of Seller or its affiliate, and neither Buyer nor any of its
affiliates shall have any liability with respect thereto. Except as expressly
set forth herein, no assets of any Employee Plan shall be transferred to Buyer
or any of its affiliates or to any plan of Buyer or any of its affiliates.
Seller shall take all actions necessary (including any necessary plan
amendments) to cause accrued benefits or account balances of Transferred
Employees under the Seller 401(k) Plans to be fully vested as of the Closing
Date, and to provide that Transferred Employees shall be entitled to the full
benefit of any matching contribution under the Seller 401(k) Plans for the plan
year that includes the Closing Date (the "Closing Plan Year") attributable to
amounts actually deferred prior to the Closing Date by Transferred Employees
under the Seller 401(k) Plans during the Closing Plan Year, to the extent
consistent with the governing plan documents and the past practice of Seller,
excluding:
(i) any discretionary matching contribution determined after the
Closing Date; and
(ii) any nondiscretionary matching contribution the allocation of
which to a participant's account is conditioned on such participant's
being employed at the end of the Closing Plan Year.
(b) In the event that Seller reasonably determines that the
transactions contemplated by this Agreement constitute an event described in
Section 401(k)(10)(A)(ii) of the Code, Seller shall take all actions necessary:
(i) to permit Transferred Employees to elect to take distributions (subject to
applicable law) of their accounts thereunder in accordance with the terms of
such plans; and (ii) to the extent Transferred Employees so elect, to roll over
the amounts received from the Seller 401(k) Plans (including, to the extent
permissible under applicable law, any outstanding loans) to an individual
retirement account or to one or more defined contribution retirement plans
qualified under Section 401(a) of the Code
and maintained by Buyer or one of its affiliates (the "Buyer 401(k) Plans").
Buyer shall cause the Buyer 401(k) Plans to accept such rollovers, provided
Buyer receives evidence reasonably acceptable to it that the Seller 401(k) Plans
are qualified under the applicable provisions of the Code. In the event that
Buyer and Seller reasonably determine that the transactions contemplated by this
Agreement do not constitute an event described in Section 401(k)(10)(A)(ii) of
the Code, then as soon as practical following receipt by Buyer and Seller of
favorable determination letters or Buyer's certification to Seller, and Seller's
certification to Buyer, in a manner reasonably acceptable to both Seller and
Buyer, that Buyer's 401(k) Plans and Seller's 401(k) Plans are qualified under
the applicable provisions of the Code, Seller shall cause the trustee of
Seller's 401(k) Plans to transfer, solely in the form of cash or notes
representing outstanding participant loans, assets representing the full account
balances of the Transferred Employees, together with the appropriate net
investment return (including unrealized appreciation or depreciation) thereon,
reduced by any necessary benefit or withdrawal payments made in respect of
Transferred Employees prior to the actual date of transfer, to the trustee of
Buyer's 401(k) Plans.
(c) With respect to the Transferred Employees (including any
beneficiary or dependent thereof), Seller shall retain (i) all liabilities and
obligations arising under any group life, accident, medical, dental or similar
arrangement (whether or not insured) to the extent that such liability or
obligation relates to claims that are covered by such arrangements and incurred
(whether or not reported), prior to the Closing Date, and (ii) all liabilities
and obligations arising under any worker's compensation arrangement to the
extent such liability or obligation relates to claims incurred prior to the
Closing Date, including liability for any retroactive worker's compensation
premiums attributable to such period. With respect to Transferred Employees
(including beneficiaries or dependents thereof), Buyer or its affiliate shall be
responsible, in accordance with the terms of its benefit plans and arrangements,
for (I) all liabilities and obligations arising under any group life, accident,
medical, dental or similar arrangement (whether or not insured) to the extent
that such liability or obligation relates to claims that are covered by such
arrangements and incurred (whether or not reported) on or after the Closing
Date, and (II) all liabilities and obligations arising under any worker's
compensation arrangement to the extent such liability or obligation relates to
claims incurred on or after the Closing Date, including liability for any
retroactive workers' compensation premiums attributable to such period. Buyer
shall assume all liabilities and obligations of Seller under any vacation or
sick leave plan or arrangement with respect to Transferred Employees, to the
extent such liabilities are reflected on the Closing Statement. Buyer shall
assume all liabilities of Seller under any nonqualified deferred compensation
plan or arrangement with respect to Transferred Employees, but only to the
extent such liabilities are funded by means of a rabbi trust; and Seller shall,
as soon as
practicable after the Closing Date, pay to Buyer, by wire transfer in a cash
lump sum, the full amount of such funding.
For purposes of this Section 9.03(c), claims shall be deemed to have
been incurred:
(A) with respect to all death or dismemberment claims, on the actual
date of death or dismemberment;
(B) with respect to all disability claims on the date the claimant
became unable to (x) perform his or her regular duties of employment,
in the case of an employee claimant, or (y) perform the normal
day-to-day responsibilities that would reasonably be expected of
someone of similar age and lifestyle, in the case of a dependent
claimant;
(C) with respect to sick leave claims, on each day for which sick
leave benefits are payable to the claimant;
(D) with respect to all medical, drug or dental claims, on the date
the service was received or the supply was purchased by the claimant;
provided, however, a medical claim relating to a claimant's
hospitalization shall be deemed to be incurred on the date the claimant
was first hospitalized; and
(E) with respect to workers' compensation claims, on the date the
incident occurred.
Section 9.04. Buyer Benefit Plans. As of the Closing Date, each
Transferred Employee shall become a participant in all employee benefit plans of
Buyer (or comparable employee benefit plans of its affiliate) on the same terms
and conditions as similarly situated employees of Buyer, to the extent such
Transferred Employee satisfies the applicable eligibility requirements under
such plans. Transferred Employees shall participate under Buyer's "welfare
plans" (within the meaning of Section 3(1) of ERISA) as of the Closing Date
without any waiting periods, evidence of insurability, or the application of any
preexisting physical or mental condition restrictions (except, in each case, to
the extent applicable and unsatisfied under Seller's welfare plans, and except
to the extent otherwise required for coverage by Buyer's long-term disability
insurance carrier); and, to the extent relevant, Buyer shall provide credit for
claims incurred during 2000 and prior to the Closing Date for purposes of
applying deductibles, co-payments, out-of-pocket maximums, and benefit maximums.
Buyer or one of its affiliates will recognize all service of the Transferred
Employees with Seller or any of its affiliates, only for purposes of: (i)
eligibility to participate and vesting,
under those employee benefit plans (within the meaning of Section 3(3) of ERISA)
in which the Transferred Employees are eligible to participate, and are in fact
participating, on and after the Closing Date; and (ii) level of benefits, under
any vacation or sick leave plan in which the Transferred Employees are eligible
to participate, and are in fact participating, on and after the Closing Date.
With respect to any Transferred Employee who participates in an Employee Plan
which is a "flexible spending arrangement," within the meaning of Proposed
Treasury Regulation ss. 1.125-2 (a "Seller FSA"), Buyer or its affiliate shall
permit such Transferred Employee to continue to participate after the Closing
Date in a flexible spending account maintained by Buyer, and shall credit such
Transferred Employee with an account balance equivalent to that which applied,
as of the Closing Date, to the Transferred Employee under the applicable Seller
FSA. As soon as practicable after the Closing Date, either Seller shall pay to
Buyer the amount described in "X" below, or Buyer shall pay to Seller the amount
described in "Y" below, whichever is applicable, in either case by wire transfer
in a cash lump sum. For this purpose, "X" shall mean the amount, if any, by
which the aggregate amount deferred through such date by Transferred Employees
under the Seller FSAs during the plan year in which the Closing Date occurs
exceeds aggregate claims paid for such year on behalf of such Transferred
Employees under the Seller FSAs; and "Y" shall mean the amount, if any, by which
aggregate claims paid for such year on behalf of Transferred Employees under the
Seller FSAs exceeds the aggregate amount deferred through the Closing Date by
Transferred Employees under the Seller FSAs during such year.
Section 9.05. Inactive Employees. Seller shall retain all liability
with respect to Business Employees who are absent from active employment on the
Closing Date other than for the reasons expressly stated in the third sentence
of Section 9.02 (any such employee, an "Inactive Business Employee"). Subject to
applicable law, if any Inactive Business Employee returns directly from such
leave of absence to active employment, then from and after the date of such
return such Inactive Business Employee shall be treated as a Transferred
Employee under this Article 9, applying this Article with respect to such
Inactive Business Employee by substituting the date of his or return to active
employment for the Closing Date, where applicable hereunder.
Section 9.06. Severance Benefits. Buyer agrees that, in the event any
Transferred Employee is terminated by Buyer during the one-year period
immediately following the Closing Date, Buyer shall provide such Transferred
Employee with a severance benefit which is not less than the cash separation
payment that would have been provided for by Seller's severance pay policy and
the severance agreements between Seller and certain Transferred Employees as
listed in Schedule 9.06, had such Transferred Employee been terminated under the
same circumstances by the Seller immediately prior to the Closing Date, but only
to the extent the terms of such severance pay policy and severance agreements
have been fully disclosed to Buyer prior to the date hereof.
Section 9.07. COBRA. Seller shall retain all obligations and
liabilities arising under Section 601 of ERISA or Section 4980B of the Code
which result from the termination of employment of any employee of Seller or its
affiliate, including without limitation any such obligations or liabilities
which result from the termination of employment of any Business Employee on or
prior to the Closing. Buyer shall have sole responsibility for all obligations
and liabilities arising under Section 601 of ERISA or Section 4980B of the Code
with respect to all Transferred Employees, and "qualified beneficiaries" of
Transferred Employees, for whom a "qualifying event" has occurred after the
Closing Date. The terms "qualified beneficiaries" and "qualifying event" shall
have the meaning ascribed to them under Section 4980B of the Code and Sections
601-608 of ERISA.
Section 9.08. Continuation of Certain Administrative Services and
Insurance Coverage. To the extent (i) requested by Buyer in writing prior to the
Closing Date and (ii) the Closing occurs within 30 days (or, if the Seller fails
to comply with its obligations under the last sentence of this Section 9.08, 60
days) after the date of this Agreement (such 30- or 60-day period, the
"Post-Signing Period"), Seller agrees to (A) continue to provide certain
administrative services in respect of the Transferred Employees as reasonably
necessary for Buyer to conduct the Business, which shall be limited to payroll
services, record keeping services and claims processing services and (B) to
cover Transferred Employees under the Employee Plans which constitute "welfare
plans" within the meaning of Section 3(1) of ERISA and which provide for
insurance coverage, to the extent such coverage is permitted under the terms of
such plans and the applicable insurance contracts, and to provide claims
processing services in respect of the Transferred Employees in both cases for
the duration of the Post-Signing Period or, in either case, until such earlier
time as Buyer or its designated affiliate can assume responsibility for such
insurance and administrative services in an orderly manner. Buyer agrees to
reimburse Seller, within seven business days after its receipt from Seller of an
invoice with respect to such services, for any and all of Seller's costs and all
other expenses reasonably incurred in continuing to provide such insurance and
administrative services, including, without limitation, insurance premiums, cost
of direct claims reimbursement under any self-insured plans and a reasonable
share of all other related administrative and other costs and expenses of any
nature whatsoever. Such continuation of insurance and administrative services
shall not affect the allocation of liabilities and obligations as set forth in
this Article 9. Buyer shall use all reasonable efforts to arrange for such
insurance and administrative services as promptly as possible in order to avoid
using Seller's services under this Section; and Seller shall use all reasonable
efforts to provide Buyer, as promptly as possible, with computer tapes, data or
other payroll or other information necessary for Buyer to assume responsibility
for such insurance and administrative services.
Section 9.09. Short Term Disability. Notwithstanding anything to the
contrary in this Article 9, the following provisions shall apply with respect to
any Business Employee who is absent from work on the Closing Date by reason of
short-term disability, within the meaning of the applicable Employee Plan
covering such Business Employee (an "STD Employee"): At Closing, Buyer or its
affiliate shall offer employment, contingent on returning to work, to each STD
Employee in accordance with the third sentence of Section 9.02, and Seller shall
comply with the requirements set forth in the last sentence of Section 9.02 with
respect to such STD Employee (substituting such STD Employee's Return Date, as
defined below, for the Closing Date). The date on which any STD Employee returns
directly from disability leave of absence to active employment shall be referred
to hereunder as such STD Employee's "Return Date". Any STD Employee who accepts
Buyer's or its affiliate's offer of employment as of his or her Return Date
shall be treated as a Transferred Employee under this Article 9, applying this
Article with respect to such STD Employee by substituting his or her Return Date
for the Closing Date where applicable hereunder. Until his or her Return Date,
each STD Employee shall continue to be employed by Seller or its affiliate and
covered under the Employee Plans and other benefit arrangements of Seller and
its affiliates in accordance with their terms. Until each STD Employee's Return
Date, Buyer or its affiliate shall reimburse Seller or its affiliate for
one-half of the cost of any employee benefit incurred on or after the Closing
Date with respect to such STD Employee which is: (i) incurred in the ordinary
course of business under an Employee Plan; and (ii) not provided through the
purchase of insurance. For this purpose, medical and dental benefits shall be
treated as provided through the purchase of insurance. Seller shall not take any
action that would impair or diminish the coverage of any STD Employee under any
applicable plan or policy of insurance.
Section 9.10. Foreign Benefit Plans. Buyer and Seller agree to
cooperate and to take all actions reasonably necessary to effectuate the
transfer, where (i) permissible and consistent with common practice or (ii)
required by law, from Seller or one of its affiliates to Buyer or one of its
affiliates (or from a plan or trust maintained by Seller or one of its
affiliates to a plan or trust maintained by Buyer or one of its affiliates) of
assets (and corresponding liabilities) attributable to Transferred Employees
under any Employee Plan maintained primarily for the benefit of employees
resident outside the United States ("Non-U.S. Business Employees"). Any
liability that Buyer or its affiliate is required by law to assume with respect
to Non-U.S. Business Employees by virtue of the transactions contemplated by
this Agreement which is not fully offset
by a transfer of assets pursuant to the preceding sentence shall be reflected as
a liability on the Closing Statement; provided, that if such liability
(determined without reduction for any such transfer of assets) as reasonably
computed by the parties no later than seven days prior to the Closing Date
exceeds $500,000 in the aggregate, Buyer may elect, on notice given no later
than five days before the Closing Date, to assume such excess or cause all such
Non-U.S. Business Employees not to be treated as Business Employees (in which
case such Non-U.S. Business Employees shall be made available by Seller for
secondment to Buyer after the Closing Date, at Buyer's election, the
post-closing employment-related costs of such seconded employees to be borne by
Buyer); provided, that Seller may nevertheless cause such employees to be
treated as Business Employees if it, upon notice given to Buyer on or before the
Closing Date, pays such excess to Buyer. Seller shall promptly (and in any event
no later than 10 days after the date hereof) furnish Buyer with full and
complete information concerning the identities and locations of the Non-U.S.
Business Employees (nothing in this sentence being deemed to limit Seller's
ability to hire employees in the ordinary course of its business); benefit,
compensation, severance and similar plans, commitments or obligations with
respect thereto; and workers councils or similar organizations applicable to the
Non-U.S. Business Employees.
Section 9.11. Cooperation. Seller and Buyer agree to cooperate with
each other in good faith in effectuating the provisions of this Article 9, and
to furnish each other promptly with such information concerning employees and
employee benefit plans, arrangements or policies as is necessary and appropriate
to carry out the terms hereof. Without limiting the foregoing, Seller agrees to
provide Buyer with a reasonable opportunity to communicate with Business
Employees prior to the Closing Date.
Section 9.12. No Third Party Beneficiaries. No provision of this
Article 9 shall create any third party beneficiary or other rights in any
employee or former employee (including any beneficiary or dependent thereof) of
Seller or of any of its subsidiaries in respect of continued employment (or
resumed employment) with either Buyer or any of its affiliates and no provision
of this Article 9 shall create any such rights in any such persons in respect of
any benefits that may be provided, directly or indirectly, under any Employee
Plan or any plan or arrangement which may be established by Buyer or any of its
affiliates. No provision of this Agreement shall constitute a limitation on
rights to amend, modify or terminate after the Closing Date any such plans or
arrangements of Buyer or any of its affiliates.
ARTICLE 10
Conditions to Closing
Section 10.01. Conditions to Obligations of each Party. The obligations
of Buyer and Seller to consummate the Closing are subject to the satisfaction of
the following conditions:
(a) Any applicable waiting period under the HSR Act relating to the
transactions contemplated hereby shall have expired or been terminated.
(b) No provision of any applicable law or regulation and no judgment,
injunction, order or decree of a court of competent jurisdiction shall prohibit
or enjoin the consummation of the Closing.
(c) Buyer and the Board of Directors of Seller shall have received a
customary opinion of a nationally recognized investment banking or appraisal
firm, in form and substance reasonably satisfactory to Buyer and such Board ,
regarding the solvency of Seller after the Closing, including that the fair
value of Seller's assets would exceed Seller's liabilities, Seller would be able
to pay its debts as they become due and Seller's remaining capital would not be
unreasonably small for its business.
Section 10.02. Conditions to Obligation of Buyer. The obligation of
Buyer to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) (i) Seller shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Closing
Date and (ii) the representations and warranties of Seller contained in this
Agreement, disregarding all qualifications and exceptions contained therein
relating to materiality or Material Adverse Effect, shall be true at and as of
the Closing Date, as if made at and as of such date with only such exceptions as
would not in the aggregate reasonably be expected to have a Material Adverse
Effect.
(b) There shall not be any injunction, judgment, order or decree of a
court of competent jurisdiction entered, or any law, rule or regulation enacted,
adopted, amended or deemed applicable that prohibits the Closing or is
reasonably likely to have a Material Adverse Effect, or a material adverse
effect on Buyer and its affiliates , taken as a whole, or the ability of Buyer
to own and exercise control over the Business after the Closing;
(c) The Amendment and Waiver shall have become effective (assuming the
Closing hereunder shall have occurred), or Seller shall have at Closing
available funds sufficient (i) to effect all necessary refinancing of all
outstanding indebtedness under the Credit Agreement that is required as a result
of the transactions contemplated by this Agreement and to pay all related fees
and expenses and (ii) to provide reasonable working capital to Seller's business
after the Closing.
(d) Execution and delivery by Seller of the Services, Supply and Sales
Agreement in the form and substance set forth as Exhibit C hereto (the
"Services, Supply and Sales Agreement");
(e) (i) Seller shall have received all Required Consents, in each case
in form and substance reasonably satisfactory to Buyer and without imposing any
incremental costs on Buyer, and no such consent, authorization or approval shall
have been revoked or be subject to revocation and (ii) material terms of any
lease of Real Property not subject to a Required Consent shall not have been
changed to impose any incremental costs to Buyer.
(f) Buyer shall have (i) obtained at its sole cost an ALTA extended
coverage form of leasehold owner's title insurance policies, or binders to issue
the same, dated the Closing Date and in amounts satisfactory to Buyer insuring
or committing to insure, at ordinary premium rates without any requirement for
additional premiums, title to the Real Property as indicated by an asterisk in
Schedule 3.12(a), free and clear of any Liens, except for Permitted Liens and
Liens disclosed on Schedule 3.12(b); provided that the condition in this clause
(i) will be deemed satisfied without regard to any Liens that may exist on
landlord's interest and (ii) received evidence reasonably satisfactory to it
that all Liens on any of the Purchased Assets arising under any of Seller's
indebtedness for borrowed money that is not an Assumed Liability shall have been
released, including without limitation duly executed partial releases under all
applicable UCC financing statements.
(g) Buyer shall have received on or before the Closing Date an opinion
of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ and an opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Finger, in each
case in the form provided to Buyer prior to the date hereof.
Section 10.03. Conditions to Obligation of Seller. The obligation of
Seller to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) (i) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Closing
Date and (ii) the representations and warranties of Buyer contained in this
Agreement shall be true in all material respects at and as of the Closing Date,
as if made at and as of such date.
(b) The Amendment and Waiver shall have become effective (assuming the
Closing hereunder shall have occurred), or Seller shall have refinanced all
outstanding indebtedness under the Credit Agreement on terms that in the
aggregate are not, in Seller's reasonable judgment, materially more adverse to
Seller than the terms under the Amendment and Waiver.
(c) Execution and delivery by Buyer of the Services, Supply and Sales
Agreement in the form and substance set forth as Exhibit C hereto.
ARTICLE 11
Survival; Indemnification
Section 11.01. Survival. The representations and warranties of the
parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall not survive
the Closing; provided that the representations and warranties contained in
Section 3.13 shall survive indefinitely.
Section 11.02. Indemnification. (a) Seller hereby indemnifies Buyer and
its affiliates and their respective directors, officers, employees and agents
against and agrees to hold each of them harmless from any and all damage, loss,
liability and expense (including reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any action, suit or
proceeding) ("Damages") incurred or suffered by any such person arising out of:
(i) any misrepresentation or breach of warranty made by Seller
contained in Section 3.13;
(ii) any breach of covenant or agreement made or to be performed by
Seller pursuant to this Agreement; or
(iii) any Excluded Liability.
(b) Buyer hereby indemnifies Seller and its affiliates and their
respective directors, officers, employees and agents against and agrees to hold
each of them harmless from any and all Damages incurred or suffered by any such
person arising out of:
(i) any breach of covenant or agreement made or to be performed by
Buyer pursuant to his Agreement; or
(ii) any Assumed Liability.
Section 11.03. Procedures. The party seeking indemnification under
Section 11.02 (the "Indemnified Party") agrees to give prompt notice to the
party against whom indemnity is sought (the "Indemnifying Party") of the
assertion of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought under such Section. The Indemnifying
Party may at the request of the Indemnified Party participate in and control the
defense of any such suit, action or proceeding at its own expense. The
Indemnifying Party shall not be liable under Section 11.02 for any settlement
effected without its consent of any claim, litigation or proceeding in respect
of which indemnity may be sought hereunder.
ARTICLE 12
Termination
Section 12.01. Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written agreement of Seller and Buyer; or
(b) by either Seller or Buyer,
(i) if the Closing shall not have been consummated on or before
March 31, 2000; provided that the right to terminate this Agreement
pursuant to this Section 12.01(b)(i) shall not be available to any
party whose breach of any provision of this Agreement results in the
failure of the Closing to be consummated by such time; or
(ii) if there shall be any law or regulation that makes
consummation of the transactions contemplated hereby illegal or
otherwise prohibited or if consummation of the transactions
contemplated hereby would violate any nonappealable final judgment,
injunction, order or decree of any court of competent jurisdiction.
The party desiring to terminate this Agreement pursuant to clause
12.01(b) shall give notice of such termination to the other party.
Section 12.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 12.01, this Agreement shall become void and of no effect
with no liability on the part of any party hereto; provided that no such
termination shall relieve any party of any liability or damages resulting from
(i) any action taken by such party that, to such party's knowledge after
reasonable inquiry, would, or would likely result in a, breach of any covenant
hereunder or (ii) any inaccuracy in the representations and warranties of such
party as of the date hereof that would constitute a failure to satisfy the
conditions in Section 10.02(a)(ii) or 10.03(a)(ii), as applicable, if at the
date hereof such party had or would have had, after reasonable inquiry,
knowledge of such inaccuracy. The provisions of Section 13.03, 13.05, 13.06 and
13.07 shall survive any termination hereof pursuant to Section 12.01.
ARTICLE 13
Miscellaneous
Section 13.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given, if to Parent or Buyer, to:
Compaq Computer Corporation
20555 S.H. 249 MS110701
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Compaq Computer Corporation
20555 S.H. 249 MS110701
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to Seller, to:
InaCom Corp.
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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 13.02. Amendments and Waivers. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 13.03. Fees and Expenses. Except as otherwise provided in this
Agreement, all costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense. If the Closing
occurs, Buyer and Seller shall share equally the cost of obtaining the opinion
referenced in Section 10.01(c).
Section 13.04. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto, except that Buyer may transfer
or assign, in whole or from time to time in part, to one or more of its
affiliates, the right to purchase all or a portion of the Purchased Assets, but
no such transfer or assignment will relieve Buyer of its obligations hereunder.
Section 13.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York without regard to
the conflicts of law rules of such state.
Section 13.06. Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby shall be
brought in the United States District Court for the Southern District of New
York or any New York State court sitting in New York City, so long as such
courts shall have subject matter jurisdiction over such suit, action or
proceeding, and each of the parties hereby irrevocably consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 13.01
shall be deemed effective service of process on such party.
Section 13.07. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 13.08. Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement is intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
Section 13.09. Entire Agreement. This Agreement, the Fulfillment
Agreement, the Services, Supply and Sales Agreement, the agreements contemplated
by Section 7.07 and the Confidentiality Agreement constitute the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement.
Section 13.10. Bulk Sales Laws. Buyer and Seller each hereby waive
compliance by Seller with the provisions of the "bulk sales", "bulk transfer" or
similar laws of any state.
Section 13.11. Parent Guarantee. Parent hereby agrees to guarantee
Buyer's obligations to Seller, in accordance with the terms of this Agreement,
for payment of the Purchase Price under Article 2 and any indemnification
amounts under Section 11.02(b).
Section 13.12. Schedules. Reference to any Schedule in Article 3 shall
be deemed a reference to the applicable section of the disclosure schedule
provided by Seller to Buyer on or prior to the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
INACOM CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
COMPAQ COMPUTER
CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President and
Group Manager
ITY CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
EXHIBIT A
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of ________ __, 2000,
between InaCom Corp., a Delaware corporation ("Seller"), and ITY Corp., a
Delaware corporation ("Buyer").
W I T N E S S E T H :
WHEREAS, Buyer and Seller have concurrently herewith consummated the
purchase by Buyer of the Purchased Assets pursuant to the terms and conditions
of the Asset Purchase Agreement dated as of January __, 2000 (the "Asset
Purchase Agreement"; terms defined in the Asset Purchase Agreement and not
otherwise defined herein being used herein as therein defined);
WHEREAS, pursuant to the Asset Purchase Agreement, Buyer has agreed to
assume certain liabilities and obligations of Seller;
NOW, THEREFORE, in consideration of the sale of the Purchased Assets
and in accordance with the terms of the Asset Purchase Agreement, Buyer and
Seller agree as follows:
1. (a) Seller does hereby sell, transfer, assign and deliver to Buyer
all of the right, title and interest of Seller in, to and under the Purchased
Assets; provided that no sale, transfer, assignment or delivery shall be made of
any or any material portion of any of the agreements or Permits if an attempted
sale, assignment, transfer or delivery, without the consent of a third party,
would constitute a breach or other contravention thereof or in any way adversely
affect the rights of Buyer or Seller thereunder. The foregoing sale, transfer,
assignment and delivery is made without representation, warranty or recourse of
any kind, except as set forth in the Asset Purchase Agreement.
(b) Buyer does hereby accept all the right, title and interest of
Seller in, to and under all of the Purchased Assets (except as aforesaid) and
Buyer assumes and agrees to pay, perform and discharge promptly and fully when
due all of the Assumed Liabilities.
2. This Agreement shall be governed by and construed in accordance
with the law of the State of New York, without regard to the conflicts of law
rules of such state.
3. This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
INACOM CORP.
By:_______________________________
Name:
Title:
ITY CORP.
By:_______________________________
Name:
Title:
EXHIBIT B
January 4, 2000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
Inacom Corporation
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇▇▇:
This letter of understanding sets forth the understanding between
Compaq Computer Corporation, a Delaware corporation ("Compaq"), and Inacom
Corporation, a Delaware corporation ("Inacom"), regarding Compaq's desire that
Inacom provide, and Inacom's desire to provide, certain configuration and
distribution services ("Services") with respect to certain Compaq products and
services for major and small and medium business accounts in North America.
Compaq and Inacom agree to cooperate and use their reasonable commercial efforts
to negotiate in good faith a definitive fulfillment agreement ("Fulfillment
Agreement") governing the Services, on terms mutually-agreeable to Compaq and
Inacom.
1. Inacom agrees that, from and after the date of this letter until the
Expiration Date (as defined below), it will not execute any agreement or
arrangement regarding the provision of configuration or distribution services to
any person or entity that could reasonably be expected to, either individually
or in the aggregate, following the Expiration Date require utilization of more
than 7.5% of Inacom's potential configuration or distribution capacity.
2. Each of Compaq and Inacom agree that it will bear its own expenses
and costs with regard to the transactions contemplated by this letter including
without limitation the fees and expenses of its legal counsel.
3. This letter of understanding shall expire on the earlier to occur of
(a) the closing of the Asset Purchase Agreement dated of even date herewith
between Compaq and Inacom; and (b) February 6, 2000 (the earlier to occur of
such dates, the "Expiration Date") unless the Fulfillment Agreement shall have
been executed and delivered prior to such date, in the case of which execution
and delivery the Fulfillment Agreement shall supersede this letter.
4. This letter of understanding shall be subject to that certain
Confidentiality Agreement dated November 9, 1999, between Compaq and Inacom.
5. If the foregoing accurately summarizes our understanding with
respect to the proposed Fulfillment Agreement, please date and execute the
enclosed duplicate original of this letter and return the same to the
undersigned not later than January 4, 2000. This letter of understanding may be
executed in multiple counterparts, but all of which together shall constitute
but one and the same instrument.
Very truly yours,
COMPAQ COMPUTER CORPORATION
By: ____________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President and Group
Manager, Commercial Personal
Computing Group
AGREED TO AND ACCEPTED
AS OF January 4, 2000
INACOM CORPORATION
By: _________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
EXHIBIT C
SERVICES, SUPPLY AND SALES AGREEMENT
SERVICES, SUPPLY AND SALES AGREEMENT (THE "AGREEMENT"), dated as of
________ __, 2000, by and between COMPAQ COMPUTER CORPORATION, A DELAWARE
CORPORATION ("COMPAQ"), ITY Corp., a Delaware corporation and a WHOLLY-OWNED
SUBSIDIARY OF COMPAQ ("COMPAQ SUB"), AND INACOM CORPORATION, A DELAWARE
CORPORATION ("INACOM").
RECITALS
WHEREAS, Compaq Sub and Inacom have entered into an Asset Purchase
Agreement dated as of January __, 2000 (THE "ASSET PURCHASE AGREEMENT");
WHEREAS, the execution of this Agreement is a condition to Compaq Sub
acquiring, and Inacom disposing of, the Purchased Assets (as defined in the
Asset Purchase Agreement) in connection with the Asset Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto hereby agree as follows:
ARTICLE I.
AGREEMENT TO COOPERATE
SECTION 1.1. Services Agreement. Compaq agrees to assist Inacom in the
generation of incremental revenues from its service business during the
three-year period following the closing of the Asset Purchase Agreement. The
revenue will be derived from the following (as summarized on Exhibit 1):
1. Compaq shall outsource an additional $10 million, $20 million and
$25 million in 2000, 2001 and 2002 respectively over the 1999 levels for on-site
warranty work, subject to the provisions of Section 7 below. Compaq's intent is
to move as much on-site warranty work to Inacom as possible. It is understood
that any business above the committed amount will depend on the percentage of
Compaq's business that is direct to end-user.
2. Compaq shall provide $50 million, $75 million and $100 million of
service revenue to Inacom in 2000, 2001 and 2002 respectively over the 1999
levels for the ongoing delivery and management of the service obligation sold
with Compaq hardware to customers, subject to the provisions of Section 7 below.
Compaq's intent is to build a service revenue stream for Inacom from the sale of
desktop, laptop and workstation products from Compaq to all customers. In all
cases, the volume of service revenue above the Compaq commitment will depend on
the sale of Compaq branded services with the product sale, which will be
influenced in turn by the percentage of Compaq's business that is direct to end
user and the value of the Compaq brand for service sold by other resellers.
3. Compaq shall outsource to Inacom an additional $5 million, $10
million and $20 million in 2000, 2001 and 2002 respectively over the 1999 levels
for call handling and off-site support, subject to the provisions of Section 7
below.
4. Compaq shall provide $15 million, $25 million and $35 million of
service revenue to Inacom in 2000, 2001 and 2002 respectively over 1999 levels
for the delivery and ongoing management of service obligations from the sale of
Inacom services, such as asset management services by Compaq, subject to the
provisions of Section 7 below. Compaq's intent is to expand Compaq's service
portfolio by adding Inacom's asset management service offerings and direct
delivery of that business to Inacom.
5. Compaq commits to designate Inacom as a "Premier Service Partner
for Distributed Infrastructure Services". Compaq also commits to provide $5
million, $10 million and $15 million of professional services subcontracting to
Inacom in 2000, 2001 and 2002 respectively over 1999 levels, subject to the
provisions of Section 7 below. Compaq's intent is to refer and recommend
personal computer integration opportunities to Inacom and utilize Inacom
capabilities, such as MCSE resources, to support Compaq Professional Service
projects.
6. FOR PURPOSES OF THIS SECTION 1.1, "COMPAQ'S INTENT" shall mean that
Compaq will use commercially reasonable efforts to direct revenue to Inacom
above Compaq's revenue commitment.
7. The obligations set forth in this Section 1.1 shall be subject to
Inacom's ability to competitively price its services (which for these purposes
shall not require Inacom to be the lowest-priced service provider) and to
satisfy Service Level Agreements for service capabilities and performance, as
mutually agreed to by the parties. In addition, it is agreed that Inacom will
offer Compaq its most favored customer fees, i.e. the lowest fees which it
charges any of its customers, for the services described in this Section 1.1 ,
except in the instance where lower pricing is offered to "meet competition" in
response to a documented lower bid, as such term is commonly used in the
relevant industry.
SECTION 1.2. Supply. In connection with Inacom's computer services
business, Compaq Sub and Inacom agree as follows:
The parties agree that when Inacom places an order with Compaq Sub for
hardware and Procurement Services, as defined below, Compaq Sub will invoice the
amount directed by Inacom and collect from the customer for the invoiced amount;
provided that Inacom, acting as an agent of Compaq Sub, shall have entered into
an agreement with the customer relating to the acquisition of such hardware and
Procurement Services, in form and substance reasonably acceptable to Compaq Sub.
Such agreement shall include a grant of a purchase money security interest in
favor of Compaq or Compaq Sub, as appropriate, on all hardware and related
software licenses supplied by Compaq Sub. From these collected amounts, Compaq
Sub will retain its sales price for hardware and Procurement Services, and pay
the remaining proceeds to Inacom as an agency fee. As used herein, "sales price"
shall mean, (i) with respect to hardware, Compaq's actual cost (excluding the
impact of volume incentive rebates) with respect to third party hardware and US1
or TOSS price, whichever is applicable, with respect to Compaq's hardware, and
(ii) with respect to Procurement Services, the fees as per the Fee Schedule. In
the event that the invoiced amounts are insufficient to cover the sales price of
the hardware and Procurement Services as per the Fee Schedule (defined below),
Inacom agrees to pay the difference to Compaq Sub. The scope of Inacom's agency
is as set forth in Exhibit 2.
1. Inacom agrees to make Compaq Sub its preferred provider of the
procurement services listed in Exhibit 3 ("Procurement Services"), meaning only
that Inacom shall direct at least 75% of its requirements for such services to
Compaq Sub. The obligations set forth in this Section 1.2(1) shall be subject to
Compaq Sub's ability to competitively price its services (which for these
purposes shall not require Compaq Sub to be the lowest-priced service provider)
and to satisfy Service Level Agreements for service capabilities and
performance, as mutually agreed to by the parties.
2. Inacom will pay a fee to Compaq Sub for the Procurement Services
based on the fee schedule, attached hereto as Exhibit 4 (the "Fee Schedule").
Compaq Sub agrees to provide Inacom with a fixed rate structure for the
Procurement Services, which does not depend on rebates for volume attainment. In
any event, Compaq Sub will offer Inacom the most favored procurement service
customer fees of Compaq Sub or any of its affiliates, i.e. the lowest fees which
it charges any of its customers for the Procurement Services except in the
instance where lower pricing is offered to "meet competition" in response to a
documented lower bid, as such term is commonly used in the relevant industry.
Upon reasonable notice, Compaq Sub will give Inacom's independent third party
auditor access, on a quarterly basis, to Compaq and multi-vendor sales price
information at the SKU level, including but not limited to product cost and
freight information, for the sole purpose of verifying Compaq Sub's pricing of
the Procurement Services. All such information shall be subject to the terms of
the Confidentiality and Non-disclosure Agreement executed by the parties.
3. In the event that Compaq Sub must go outside of the normal
distribution agreements with third party vendors in order to obtain third party
products, it will absorb commercially reasonable increases in product costs
associated with such procurement. If Compaq Sub determines that such costs are
not commercially reasonable, Compaq Sub will offer Inacom the right to procure
such products from its own channels. Inacom shall be responsible for product
sourcing cost increases resulting from instances where Compaq has a distribution
agreement with a particular vendor, but product is unavailable, provided Inacom
has agreed to incur such additional costs.
4. Compaq and Compaq Sub agree that any marketing funds or other
vendor funding (including rebates) provided to Compaq by third party vendors for
sales of product to customers where Inacom acted as agent, shall be paid to
Inacom within a reasonable time following receipt by Compaq, provided that
Inacom agrees to independently satisfy any vendor requirements for such funding.
5. Inacom will provide Compaq Sub with a list of current and potential
accounts and Compaq Sub will determine a credit limit and any other appropriate
limitations or requirements for each such account. To the extent that Inacom
sells products within each customer's credit limit, Compaq Sub will assume the
credit risk. However, to the extent that Inacom sells products in excess of any
customer's credit limit, Inacom must bear the credit risk. Inacom agrees that
all payment terms for its customer invoices shall be net 30 days from receipt of
invoice by customer.
6. As part of its Procurement Services, Compaq Sub will provide
invoice and collection services for accounts receivable on product procured by
customers through Inacom from Compaq Sub under the name of Compaq Sub or Inacom
(as agent for Compaq Sub), whichever Inacom prefers. These invoice and
collection services will only be available for hardware and/or Procurement
Services. Inacom agrees to pay agreed upon fees for customer invoices that are
not paid when due in accordance with the Fee Schedule, to the extent the payment
period is in excess of the payment period calculated into the assumptions for
the Fee Schedule. Compaq's obligation for collections of accounts receivables in
this provision is only effective for hardware and Procurement Services delivered
by Compaq and sold by Inacom after the close of the Asset Purchase Agreement.
7. Inacom will not bear any inventory price protection risk. If Inacom
or a customer requires Compaq Sub to hold inventory beyond the normal stocking
period, then Inacom agrees to pay to Compaq Sub a price protection risk fee in
accordance with the Fee Schedule to the extent the inventory holding period is
in excess of the inventory price protection element calculated into the
assumptions for the Fee Schedule.
SECTION 1.3. Sales Agreement.
1. Compaq and Inacom will jointly develop Compaq-branded service
offerings for end users ("Services"). These services will be performed by Inacom
and will be sold through the Compaq sales force.
2. Compaq and Inacom will jointly develop and agree on rules of
engagement, which will include, among other things, Relationship Management and
Joint Account Planning. Compaq and Compaq Sub agree (and agree to cause their
affiliates) not to directly solicit, the Inacom customers with contracts that
include the purchase of Compaq hardware or a demonstrated run-rate of the
purchase of Compaq hardware, as set forth in Exhibit 5, where Compaq's direct
product sales and services offerings are competitive with those offered by
Inacom as of the date hereof, for a period of one year from the date hereof,
provided the customer continues to purchase Compaq product from Inacom.
ARTICLE II.
MISCELLANEOUS
SECTION 2.1. Definitive Agreements; Binding Effect. The parties agree
to use their reasonable best efforts to complete definitive agreements with
respect to the matters described in Article 1 within 30 days of the date hereof.
Until superseded by such definitive agreements, this Agreement shall be binding
on the parties.
SECTION 2.2. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,
If to Inacom, to:
Inacom Corporation
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Compaq or Compaq Sub, to:
Compaq Computer Corporation
▇▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Facsimile:
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 2.3. 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 2.4. Successors and Assigns. This Agreement shall be binding
upon and shall 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.
SECTION 2.5. Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter of this Agreement.
SECTION 2.6. 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 2.7. Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement is intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
SECTION 2.8. Term. The term of this Agreement shall be for a period of
three (3) years from the date of execution. Following the first anniversary of
the date of execution of the Asset Purchase Agreement, the parties agree to
renegotiate pricing for Procurement Services for pricing periods to be mutually
agreed to by the parties to the extent necessary to ensure that pricing for
Procurement Services remains competitively priced in the marketplace for each of
the parties.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
Inacom Corporation
By: _____________________________
Name:
Title:
Date:
Compaq Computer Corporation
By: _____________________________
Name:
Title:
Date:
ITY Corp.
By: _____________________________
Name:
Title:
Date:
SERVICES, SUPPLY & SALES AGREEMENT
EXHIBIT 1
REVENUE COMMITMENTS
Compaq agrees that it shall purchase the following aggregate service revenues
over 1999 levels from Inacom over the course of the next three years. In
addition, Compaq shall be obligated to satisfy the individual services
categories within plus or minus twenty-five percent (25%) of the revenue targets
outlined below, provided that Compaq shall be required to achieve revenue
commitments in the aggregate. Compaq estimates that it will achieve the
aggregate revenue commitment for 2000 on the following basis: $10M in 1Q00; $20M
in 2Q00; $25M in 3Q00; $30M in 4Q00, provided that Compaq shall be required to
achieve the 2000 revenue commitment in the aggregate.
----------------------------------------- ------------------- ----------------- ------------------
INCREMENTAL REVENUE SOURCE 2000 2001 2002
----------------------------------------- ------------------- ----------------- ------------------
----------------------------------------- ------------------- ----------------- ------------------
1. Outsourcing of on-site warranty work $10 million $20 million $25 million
----------------------------------------- ------------------- ----------------- ------------------
----------------------------------------- ------------------- ----------------- ------------------
2. Ongoing delivery and management of $50 million $75 million $100 million
service obligations sold with Compaq
hardware
----------------------------------------- ------------------- ----------------- ------------------
----------------------------------------- ------------------- ----------------- ------------------
3. Outsourcing of call handling and $5 million $10 million $20 million
off-site support
----------------------------------------- ------------------- ----------------- ------------------
----------------------------------------- ------------------- ----------------- ------------------
4. Delivery and ongoing management of $15 million $25 million $35 million
service obligations
----------------------------------------- ------------------- ----------------- ------------------
----------------------------------------- ------------------- ----------------- ------------------
5. Designation as "Premier Service $5 million $10 million $15 million
Partner for Distributed Infrastructure
Services and subcontracting for
professional services
----------------------------------------- ------------------- ----------------- ------------------
----------------------------------------- ------------------- ----------------- ------------------
Aggregate Revenue Commitment $85 million $140 million $195 million
----------------------------------------- ------------------- ----------------- ------------------
EXHIBIT 2
SCOPE OF AGENCY
EXHIBIT 3
PROCUREMENT SERVICES
Compaq Sub agrees to offer the following Procurement Services pursuant to this
Agreement:
PROGRAM DEVELOPMENT & MANAGEMENT PROGRAM DESIGN Scope of Work
Statement of Work Process Alignment Transition & Implementation
TECHNOLOGY SELECTION
Provide evaluation hardware Establish hardware standards
Identification and cataloging of existing images Create and
implement design process Design software images Create software
images Create proof-of-concept system Test and validate
proof-of-concept system GLOBAL PROJECT MANAGEMENT Single point
of accountability International standards ORDER FULFILLMENT
ACCOUNT SETUP Create account(s) Implement financing methods &
processes PRICING AND AVAILABILITY 90-Day forecast
Client-specific purchasing Client-owned inventory
Pre-customized inventory Special bid pricing Create and
maintain client-specific pricing profiles Assign and maintain
client-specific SKUs Create and maintain convenience bundles
PRE-SALES CONSULTING Create & provide client-specific web-based
catalog Provide configuration manual Provide live pre-sales
support (standards only) Provide live pre-sales support (any
products) Provide on-site pre-sales support ORDER CREATION
Create adhoc system order Create adhoc order for
upgrade/peripheral/supplies Create refresh plan Obtain Client
internal approval Generate purchase order ORDER ENTRY,
CONFIRMATION, ETAS Provide web-based order entry tool Provide
centralized order entry contact Provide on-site order entry
contact Provide X.12 EDI connection to client system Review
order for completeness Review order for technical correctness
Review order for credit availability Release order on
fulfillment system Verbally confirm order and ETA to client
contact Electronically confirm order and ETA to client contact
ORDER MANAGEMENT Ensure product acquisition and allocation
Answer order status inquires Escalate issues Advance ship
notification (ASN) Returns and DOAs Track and review SLA
compliance Measure and report client satisfaction MANUFACTURING
AND CUSTOMIZATION Manage image and instructions Assemble system
(JMAS) Customize hardware Third-party component setup
Partition/format fixed disk drives Asset tagging and recording
Custom labeling or bar-coding Install software Operating System
Shrink-wrapped applications Proprietary applications Image load
Personalized system settings IP address Workgroup name Other
Perform dial-out and/or leased line connectivity testing Apply
client-specific data via dial-out or leased line Burn-in
Troubleshoot and repair image issues Perform client-specific
quality check LOGISTICS Pick and pack/repack products Special
overpack Design packing per client specifications Acquire
packaging Pack orders per client specifications Ensure shipment
integrity Ship/Deliver products Standard ground Three-day
Two-day Next-day Crisis transport service Carrier-specific
delivery Time/place specific delivery INVOICING AND REPORTING
Customized packing list Provide proof-of-delivery (POD)
confirmation Standard invoice Summary invoice EDI invoice
Invoice acceptance Payment generation (standard) Payment
generation (EFT) REPORTS Product Purchase Purchase history
Standard vs. non-standard By manufacturer By business unit
Standards price list Order Management Daily Status Report
Backorder report - open orders Proof-of-delivery (POD)
Notification SLA Performance order turnaround SLA attainment
Invoices Invoices billed Invoices paid Asset Management feed
Client Satisfaction
EXHIBIT 4
FEE SCHEDULE
EXHIBIT 5
SPECIFIED CUSTOMERS
Schedule 1.01
Definition of the Business
The Business means the following businesses currently conducted by
Seller and its subsidiaries:
o Configuration and distribution operations, including:
o Distribution center and distribution services
o Configuration and configuration support
o Central sales
o Project and technology project management
o Purchasing
o Quality assurance
o Traffic
o Memphis distribution and configuration activities
o Microsoft project
o Asset recovery
o Bid desk
o Client services
o Operations - International
o Loss prevention
o Reseller business, other than (1) obligations under franchise
and TMS franchise agreements and (2) in Latin America
o Tangible assets and liabilities of Government services unit,
but not including Sysorex goodwill.1
o Information technology systems and applications, but only to
the extent allocated to Buyer under Section 7.07.
o International Operations as follows:
o Project management activities located in Omaha,
Nebraska and, if any, in Luxembourg
o Canadian operations (solely through Buyer's purchase
of Seller's 19% interest in InaCom Information
Systems, Ltd., a Canadian entity).2
o Boston Computer Exchange
The Business does not include the following (the "Excluded Business"):
o Services organization, excluding procurement.
--------
1 Buyer has an option within three weeks of the date hereof to delete this
item from the definition of "Business" if Buyer reasonably concludes after
review and upon notice to Seller on or prior to the end of such three-week
period that contracts representing a substantial portion of the Government
business are not assignable without consent and not likely to be consented to
within a customary period of time needed for obtaining such consents, including
novations if necessary.
2 Buyer has an option within two weeks of the date hereof to delete this
item from the definition of the "Business".
o Product and service field sales force.
o Communications group.
o Franchisees (including TMS) business, including sales offices
and equity investments in or loans or advances to franchisees.
o Latin American reseller business.
o Rentals business.
o Europe business.
Schedule 2.01
Purchased Assets
Item Purchased Assets
-----------------------------------------------------------------------------
Cash and Cash o None
Equivalents
-----------
-----------------------------------------------------------------------------
Accounts Receivable
-------------------
o Trade o All non-direct product accounts
receivable, other than those arising out of (1)
Communications group, (2) Latin America and (3)
Europe
o Government receivables
o Boston Computer Exchange receivables.
o Vendor o All accounts receivable due from Compaq.
o Securitization o None.
-----------------------------------------------------------------------------
Inventory
---------
o All product inventory, other than non-committed
inventory related to the following vendors and
businesses: IBM, HP, Dell, Toshiba and the
Excluded Business (as defined on Schedule 1.01)
o All HP printer inventory.
o All committed product inventory.
o Boston Computer Exchange inventory.
-----------------------------------------------------------------------------
Other Current Assets
--------------------
o Prepaids o None.
o Deferred Taxes o None.
o Other o None.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Item Purchased Assets
-----------------------------------------------------------------------------
Fixed Assets o All assets primarily used by the Business or the
------------ Transferred Employees.
o Leasehold interests and all fixed assets and
equipment associated with the following:
o Distribution and configuration centers and
central sales call centers in (1) Omaha,
Nebraska, (2) Indianapolis, Indiana, (3)
Swedesboro, New Jersey and (4) Ontario,
California.
o Tech center in Omaha, Nebraska, excluding
personnel and assets not associated with
information technology or distribution. See
Section 7.07 for allocation of use of this
facility.3
o Gateway building in Omaha, Nebraska. See
Section 7.07 for allocation of use of this
facility.
o Corporate headquarters in Omaha, Nebraska.
See Section 7.07 for allocation of use of
this facility.
o Livermore, California facility.
o Memphis, Tennessee facility.
o Boston Computer Exchange.
o Distribution center in Singapore.
-----------------------------------------------------------------------------
Intangibles o None.
-----------
-----------------------------------------------------------------------------
Other Assets
------------
o Other o 19% interest in InaCom Information Systems, Ltd.,
a Canadian entity, and option to purchase
remainder.4
o Deferred Taxes o None.
-----------------------------------------------------------------------------
--------
3 If landlord consent to transfer of the Tech Center has not been received
by Closing, the Tech Center shall become an Excluded Asset and Seller shall
sublease it to Buyer.
4 Buyer has option within two weeks of the date hereof to delete this item
from the definition of "Purchased Assets" and to add it to the definition of
"Excluded Assets". If this item is to be included, Buyer will purchase Seller's
19% equity interest in InaCom Information Systems, Ltd., and not the underlying
assets.
Schedule 2.02
Excluded Assets
-------------------------------------------------------------------------------
Item Excluded Assets
-------------------------------------------------------------------------------
Cash and cash o All.
equivalents
-----------
-------------------------------------------------------------------------------
Accounts Receivable
-------------------
o Trade o All direct product accounts receivable (other than
Government receivables and Boston Computer
Exchange receivables).
o All accounts receivable arising out of (1)
Communications group, (2) Latin America and (3)
Europe.
o Vendor o All accounts receivable other than those due from
Compaq.
o Securitization o All.
-------------------------------------------------------------------------------
Inventory
---------
o All non-committed product inventory related to the
following vendors and businesses: IBM, HP, Dell,
Toshiba and the Excluded Business.
-----------------------------------------------------------------------------
Other Current Assets
--------------------
o Prepaids o All.
o Deferred Taxes o All.
o Other o All.
-------------------------------------------------------------------------------
Fixed Assets
------------ o All assets primarily used by the Excluded Business.
o Leasehold interests and all fixed assets and
equipment associated with the following:
o Services call centers in (1) Tempe, Arizona,
(2) Atlanta, Georgia and (3) Omaha, Nebraska.
o Branch offices.
▇ ▇▇▇▇▇▇▇ repair facility.
o South Building in Omaha, Nebraska.
o Atlanta Facilities.
o Corporate airplane.
-------------------------------------------------------------------------------
Intangibles
----------- o All intangibles (including goodwill and InaCom name
and logo).
-------------------------------------------------------------------------------
Other Assets
------------
o Other o All losses, loss carryforwards and rights to
receive refunds, credits and loss carryforwards
with respect to any and all Taxes of Seller that
constitute Excluded Liabilities, including any
interest receivable with respect thereto.
o Stock in any subsidiary of Seller, other than
pursuant to Buyer's option on the Canadian entity.
o Desktops for all employees other than Transferred
Employees.
o Any receivables from Seller.
o Deferred Taxes o All.
-------------------------------------------------------------------------------
o Other o Monies or other properties received by Seller as a
result of affirmative claims made by Seller against
third parties for the matters set forth in Schedule
3.10.
o Authorizations to do business.
o If Buyer elects not to acquire the Canadian
interest or the Government unit, those items will
become Excluded Assets.
-------------------------------------------------------------------------------
Schedule 2.03
Assumed Liabilities
-------------------------------------------------------------------------------
Item Assumed Liabilities
-------------------------------------------------------------------------------
Accounts Payable o All accounts payable related to the following
---------------- vendors and businesses: Compaq, Microsoft, Ingram,
Tech Data, 3Com, Lexmark, other 3rd party product
vendors, reseller business, and Boston Computer
Exchange business.
o Liabilities under the Agreement for Wholesale
Financing with Deutsche Financial Services Corp.
dated as of December 24, 1998, as amended on May
25, 1999 and December 23, 1999.
o Government payables.
-------------------------------------------------------------------------------
Notes Payable None.
-------------
-------------------------------------------------------------------------------
Other Current
Liabilities
-----------
o Accrued liabilities o See Article 9 relating to compensation and benefits.
o Taxes payable. o None.
o Accrued other o See Article 9 relating to compensation and benefits.
-------------------------------------------------------------------------------
Long Term Debt o None.
--------------
-------------------------------------------------------------------------------
Preferred Stock o None.
---------------
-------------------------------------------------------------------------------
Schedule 2.04
Excluded Liabilities
-------------------------------------------------------------------------------
Item Excluded Liabilities
-------------------------------------------------------------------------------
Accounts Payable o All accounts payable related to the following
---------------- vendors and businesses: IBM, Hewlett-Packard, Dell,
Toshiba, Lucent, rental business, international
businesses, Inacom Latin America, Oracle A/P
(administrative payables).
o Liabilities under Agreement for Inventory Financing
with IBM Credit Corporation dated as of April 27,
1998.
o Accounts payable to Compaq or its affiliates for
which checks have been written, but not yet
released to Buyer by Seller (provided such checks
will be delivered in the ordinary course).
-------------------------------------------------------------------------------
Notes Payable All.
-------------
-------------------------------------------------------------------------------
Other Current
Liabilities
-----------
o Accrued liabilities o All, other than as provided in Article 9 relating
to compensation and benefits.
o All intangibles or liabilities associated with
Sysorex.
o Taxes payable. o All.
o Accrued other o All, other than as provided in Article 9 relating
to compensation and benefits.
-------------------------------------------------------------------------------
Long Term Debt o All.
--------------
-------------------------------------------------------------------------------
Preferred Stock o All.
---------------
-------------------------------------------------------------------------------
Other
----- o Any liabilities relating to any Vanstar litigation.
o Any liabilities relating to earn out or contingent
payment obligations arising from pre-closing
acquisitions.
o Any liabilities relating to litigation (whether
pending, threatened or settled) disclosed in
Schedule 3.10.
o Computer Associates software license obligations.
o Any payable to Seller.
-------------------------------------------------------------------------------
Schedule 5.01(d)
Conduct of the Business.
-----------------------
None.
Schedule 7.04
Trademarks; Trade Names.
-----------------------
(a) None.
(b) Any and all trademarks and trade names of the Seller and its
affiliates, including, but not limited to, InaCom and derivatives thereof,
INACOMP, VALCOM, and VANSTAR.
Schedule 7.07
Information Technology
Physical Separation and Sharing of Common Costs
Both Inacom and Compaq (the "Parties") recognize that while the
Information Technology infrastructure is being physically separated, both
Parties will be required to share the cost of certain personnel and assets. All
cost sharing will be based on actual direct costs, with no markup or loading of
indirect costs of any sort.
During the period beginning on the signing date and ending on the
Closing Date, the Parties undertake to initiate and complete a classification of
all Information Technology personnel and assets as either (a) dedicated solely
to the Business (the "Business Personnel and the Business Assets"), (b)
dedicated solely to the Excluded Business (the "Excluded Business Personnel and
the Excluded Business Assets"), or (c) jointly supporting both the Business and
the Excluded Business (the "Joint Personnel and Joint Assets").
Excluded Business Personnel remain employees of Inacom and Excluded
Business Assets become Excluded Assets at the Closing Date. Each Party will bear
the cost of their respective personnel and assets.
With respect to Joint Personnel and Joint Assets (a) the Parties agree
to jointly prepare a time schedule within which to achieve physical separation,
and (b) share the costs of such personnel and assets, using a percentage to be
determined monthly, during the period that such personnel and assets are jointly
employed. As Joint Personnel or Joint Assets are no longer required, each Party
will share equally in the termination cost of the Joint Personnel or the
disposal cost of the Joint Asset. If either party elects to assume complete
responsibility for a Joint Personnel or Joint Asset, such party will settle up
with the other based on the original classification or accounting at the Closing
Date.
In any event, both Parties agree that time is of the essence in
achieving separation and that in any event, all separation activities will be
completed no later than 12 months after the Closing Date.
Administrative Services
Jointly Provided Services
The Parties recognize that subsequent to closing, the temporary
services of administrative support personnel will be required until such time as
complete physical separation can be achieved. The Parties agree to share the
cost of such personnel based on periodic estimates of the amount of time devoted
to each. All cost sharing will be based on actual direct salary, benefit and
insurance costs, with no markup or loading of indirect costs of any sort.
During the period beginning on the signing date and ending on the
Closing Date, Inacom and Compaq (the "Parties") undertake to initiate and
complete a classification of all Administrative Support personnel as either (a)
dedicated solely to the Business (the "Business Personnel"), (b) dedicated
solely to the Excluded Business (the "Excluded Business Personnel"), or (c)
jointly supporting both the Business and the Excluded Business (the "Joint
Personnel").
Excluded Business Personnel and Joint Personnel remain employees of
Inacom at the Closing Date. Each Party will bear the cost of their respective
personnel and assets.
With respect to Joint Personnel (a) the Parties agree to jointly
prepare a time schedule within which to achieve physical separation, and (b)
share the costs of such personnel, using a percentage to be determined
quarterly, during the period that such personnel are jointly employed. As Joint
Personnel are no longer required, each Party will share equally in the
termination cost of the Joint Personnel. If either party elects to assume
complete responsibility for Joint Personnel, such party will settle up with the
other based on the original classification or accounting at the Closing Date.
In any event, both Parties agree that time is of the essence in
achieving separation and that in any event, all separation activities will be
completed no later than 12 months after the Closing Date.
Shared Space Arrangements
In all matters related to leased space in the Corporate Headquarters
and Gateway Buildings, each Party shall take reasonable steps to help reduce the
costs to be borne by the other Party.
With respect to the Gateway building, each Party will bear the cost of
leased space attributable to the space occupied by the Business or the Excluded
Business, as applicable, at the date hereof. Subtenant rentals will directly
offset the cost of the leased space for the Party to which the space was
attributed at the date hereof.
With respect to the Corporate Headquarters, Seller will reimburse Buyer
for its pro rata portion of the building occupied by Excluded Business Personnel
and its share of Joint Personnel at the date hereof. The pro rata portion is to
be based on a fraction, the numerator of which is the sum of Excluded Business
Personnel plus Seller's share of Joint Personnel occupying the building at the
date hereof and the denominator of which is the total number of Seller Employees
occupying the building at the date hereof. The resulting fraction will be used
to allocate the net cost of the building until the lease term expires. The net
cost of the building is defined as the total lease cost less subtenant lease
payments.
With respect to the Tech Center in Chalco Hills:
o With respect to the portion of the building not occupied by
Information Technology personnel and assets at the date hereof,
Seller will reimburse Buyer it pro rata portion of the building
occupied by Excluded Business Personnel. The pro rata portion is
be based on a fraction, the numerator of which is the square
footage of such space occupied by Excluded Business Personnel at
the date hereof and the denominator of which is the total square
footage of the building (excluding the square footage occupied by
Information Technology personnel and assets) at the date hereof.
The resulting fraction will be used to allocate the net cost of
the building until the lease term expires. Buyer agrees to use
reasonable best efforts to take over space vacated by Seller and
to the extent it does so utilize the vacated space, adjust the
fraction downward.
o With respect to the space occupied by Information Technology
personnel and assets, Seller will reimburse Buyer its pro rata
portion of the building occupied by Excluded Business Personnel
and its share of Joint Personnel. The pro rata portion is to be
based on a fraction, the numerator of which is the sum of
Excluded Personnel plus Seller's share of Joint Personnel and the
denominator of which is the sum of Excluded Business Personnel
plus Business Personnel plus Joint Personnel.
Schedule 9.01(a)
Employee Benefits.
InaCom Employees Retirement Savings Plan and Trust
InaCom Medical, Dental, Short-Term Disability and Employee Assistance Plan
InaCom Managed Care Plan
InaCom Life, A D & D & Long Term Disability Plan
InaCom Crop Dependent Care Reimbursement Plan
InaCom Health Care Reimbursement Plan
InaCom Before-Tax Premium Payment Plan
Office Products of Minnesota Inc. 401(k) Plan
InaCom Executive Deferred Compensation Plan
InaCom Corp. 1997 Stock Plan
InaCom Severance Pay Policy
InaCom 1994 Stock Plan
InaCom Corp 1990 Stock Plan
Valcom, Inc. 1987 Stock Option Plan
Group Insurance Plan for Employees of Vanstar Corporation
Vanstar Corporation Section 401(k) Plan
National Technology Group 401(k) Plan
Computerland 401(k) Plan
Mentor Technologies Ltd. 401(k) Plan
InaCom Paid Time Off Policy
See Section 3.07(3).
Schedule 9.02
Business Employees
The term "Business Employees" means any person primarily employed in
connection with the Business, including:
1. Order management/central sales (approximately 806 employees,
including 160 employees resident in branch offices);
2. Procurement services (approximately 780 employees);
3. Configuration centers (Indianapolis; Omaha; Ontario, CA; and
Swedesboro, NJ (approximately 450 employees in total);
4. Boston computer exchange (approximately 10 employees);
5. Bid desk unit (approximately 10 employees);
6. Reseller group (approximately 40 employees);
7. IT systems and applications to the extent provided in Schedule
1.01 (approximately 150 employees);
8. Memphis center exclusively devoted to Federal Express
(approximately 30 employees);
9. Government unit (approximately 130 employees); and
10. Human resource, finance and marketing communications
functions, but only those employees directly and exclusively
involved in support of the categories listed above
(approximately 30 employees).
11. Configuration and Logistics Project Management resources in
US, Europe, Singapore and Hong Kong.
1
Schedule 9.06
Severance Benefits.
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See InaCom Severance Pay Policy applicable to all of Seller's employees
attached hereto as Exhibit 9.06.
