EXHIBIT 2.1
PURCHASE AGREEMENT
BY AND AMONG
COMPUCOM SYSTEMS, INC.
MICROAGE TECHNOLOGY SERVICES, L.L.C.
AND
MICROAGE, INC.
DATED AS OF DECEMBER 22, 2000
TABLE OF CONTENTS
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Page
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ARTICLE I PURCHASE AND SALE OF ASSETS................................ 1
1.1 Purchase and Sale of Assets................................ 1
1.2 Purchased Assets........................................... 2
1.3 Cure Costs................................................. 3
1.4 The Business - Defined..................................... 3
1.5 Excluded Assets - Defined.................................. 3
1.6 Section 363/365 - Defined.................................. 4
ARTICLE II ASSUMPTION OF LIABILITIES.................................. 4
2.1 Assumption of Assumed Liabilities.......................... 4
2.2 Assumed Liabilities........................................ 4
2.3 No Other Liabilities Assumed............................... 4
ARTICLE III CLOSING.................................................... 6
3.1 Closing Date............................................... 6
3.2 Deliveries at the Closing.................................. 6
ARTICLE IV PURCHASE PRICE AND PAYMENT................................. 8
4.1 Purchase Price, Payment of Purchase Price Amount........... 8
4.2 Determination of the Purchase Price Amount................. 8
4.3 Purchase Price Adjustment.................................. 10
4.4 Loss Limitations........................................... 11
4.5 Further Assurances......................................... 11
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLERS.............. 12
5.1 Organization, Qualification, Etc........................... 12
5.2 Authorization, Etc......................................... 12
5.3 No Violation............................................... 13
5.4 Absence of Certain Changes................................. 13
5.5 Title to Properties........................................ 13
5.6 Intellectual Property...................................... 14
5.7 Tax Matters................................................ 15
5.8 Contracts.................................................. 16
5.9 Labor Relations............................................ 17
5.10 Employee Benefit Plans; ERISA.............................. 18
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5.11 Litigation................................................. 19
5.12 Consents and Approvals of Governmental Authorities......... 19
5.13 Third Party Consents....................................... 19
5.14 Compliance with Law........................................ 19
5.15 Environmental Matters...................................... 20
5.16 Brokers and Finders........................................ 21
5.17 Customers and Suppliers.................................... 21
5.18 Personnel.................................................. 21
5.19 Conduct of Activities...................................... 21
5.20 Condition and Sufficiency of the Equipment................. 22
ARTICLE VI [Intentionally Omitted].................................... 22
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF BUYER.................... 22
7.1 Organization, Etc.......................................... 22
7.2 Authorization, Etc......................................... 22
7.3 No Violation............................................... 22
7.4 Litigation................................................. 23
7.5 Consents and Approvals..................................... 23
7.6 Brokers and Finders........................................ 23
ARTICLE VIII COVENANTS OF THE PARTIES................................... 23
8.1 Access..................................................... 23
8.2 Conduct of Business........................................ 23
8.3 Confidentiality............................................ 25
8.4 Consents and Approvals..................................... 26
8.5 Covenants Not to Compete................................... 26
8.6 Employee Matters........................................... 26
8.7 Consummation of Transactions............................... 29
8.8 Tax Matters................................................ 29
8.9 Transitional Services Agreement............................ 30
8.10 Disclosure Schedule Supplements............................ 30
8.11 No-shop Clause............................................. 30
8.12 Financing.................................................. 30
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8.13 Bankruptcy Court Approval.................................. 30
8.14 Bankruptcy Notices......................................... 31
8.15 Bid Procedures............................................. 31
8.16 [Intentionally Omitted].................................... 31
8.17 [Intentionally Omitted].................................... 31
8.18 [Intentionally Omitted].................................... 31
8.19 Transfer of Lockbox Account, Servicing of Lockbox Account.. 31
8.20 Intellectual Property Assets............................... 32
8.21 Cooperation Regarding Financial Statements................. 32
8.22 Transition Leases.......................................... 33
ARTICLE IX CONDITIONS TO THE BUYER'S OBLIGATIONS...................... 34
9.1 Representations and Warranties............................. 34
9.2 Performance................................................ 34
9.3 No Injunction.............................................. 34
9.4 Governmental Authorizations................................ 34
9.5 [Intentionally Omitted].................................... 35
9.6 Material Adverse Change.................................... 35
9.7 Bankruptcy Court Approval.................................. 35
9.8 Certificates............................................... 35
9.9 Transitional Services Agreement............................ 35
9.10 [Intentionally Omitted].................................... 35
9.11 [Intentionally Omitted].................................... 35
9.12 [Intentionally Omitted].................................... 35
9.13 [Intentionally Omitted].................................... 35
9.14 Third Party Consents....................................... 35
ARTICLE X CONDITIONS TO THE SELLERS' OBLIGATIONS..................... 35
10.1 Representations and Warranties............................. 35
10.2 Performance................................................ 36
10.3 No Injunction.............................................. 36
10.4 Governmental Authorizations................................ 36
10.5 Certificates............................................... 36
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10.6 Transitional Services Agreement............................ 36
10.7 Bankruptcy Court Approval.................................. 36
ARTICLE XI TERMINATION AND ABANDONMENT................................ 36
11.1 Methods of Termination..................................... 36
11.2 Effect of Termination...................................... 37
ARTICLE XII MISCELLANEOUS PROVISIONS................................... 38
12.1 Survival of Representations and Warranties................. 38
12.2 Execution in Counterparts.................................. 38
12.3 Notices.................................................... 38
12.4 Waivers.................................................... 39
12.5 Amendment.................................................. 39
12.6 Entire Agreement........................................... 39
12.7 APPLICABLE LAW............................................. 40
12.8 FORUM FOR DISPUTES......................................... 40
12.9 Relationship of the Parties................................ 40
12.10 Headings................................................... 40
12.11 Assignments................................................ 40
12.12 Binding Effect, Benefits................................... 41
12.13 Severability............................................... 41
12.14 All Obligations Joint and Several.......................... 41
12.15 Transfer Taxes............................................. 41
12.16 Plan of Reorganization..................................... 41
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TABLE OF DEFINED TERMS
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Defined Terms Page
Agreement............................................................. 1
Approvals............................................................. 26
Assumed Confidentiality/Non-Solicitation Agreements................... 3
Assumed Liabilities................................................... 4
[Intentionally Omitted]............................................... 5
Bankruptcy Code....................................................... 1
Bankruptcy Court...................................................... 1
Bid Procedures........................................................ 1
▇▇▇▇ of Sale.......................................................... 6
Business.............................................................. 3
Business Benefit Plan................................................. 18
Business Employees.................................................... 18
Business Intellectual Property........................................ 15
Buyer................................................................. 1
CERCLA................................................................ 20
Chapter 11 Case....................................................... 1
Cleanup............................................................... 21
Closing............................................................... 6
Closing Date.......................................................... 6
Closing Payment Statement............................................. 8
Closing Payment Statement Date........................................ 8
CO.................................................................... 14
Code.................................................................. 18
Confidential Information.............................................. 25
Contracts............................................................. 16
Deferred Revenue Liabilities.......................................... 4
Designated Chapter 11 Costs........................................... 5
Disbursement Amount................................................... 8
Effective Time........................................................ 6
Eligible Trade Accounts Receivable.................................... 9
Eligible Vendor Accounts Receivable................................... 9
Employee Schedule..................................................... 21
Environmental Laws.................................................... 21
Environmental Studies................................................. 20
ERISA................................................................. 18
ERISA Affiliate....................................................... 18
events................................................................ 28
Excluded Assets....................................................... 3
Excluded Contracts.................................................... 2
Excluded Liabilities.................................................. 4
Final Price Adjustment Statement...................................... 10
Financing............................................................. 30
GAAP.................................................................. 4
Governmental Entity................................................... 19
Hazardous Substances.................................................. 21
HSR Act............................................................... 19
Intellectual Property................................................. 15
Inventory............................................................. 2
IP License Agreements................................................. 14
Leased Properties..................................................... 14
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Liens................................................................. 14
Lockbox Account....................................................... 7
Losses................................................................ 11
Material Adverse Effect............................................... 12
Parent................................................................ 1
Parent SEC Reports.................................................... 13
Petition Date......................................................... 1
Plan.................................................................. 18
Post-Closing Taxes.................................................... 30
Prepaid Lease Amounts................................................. 8
Price Adjustment Statement............................................ 10
Principal Clients..................................................... 21
Purchase Price........................................................ 8
Purchase Price Amount................................................. 8
Purchased Assets...................................................... 2
Retained Intellectual Property........................................ 32
Retained Receivables.................................................. 31
Retention and Severance Plan.......................................... 26
Retention Bonus Payment............................................... 26
Section 363/365 Order................................................. 4
Section 365 Assumed Rights............................................ 2
Seller................................................................ 1
Sellers............................................................... 1
Sellers Savings Plans................................................. 27
Straddle Period....................................................... 16
Supplier.............................................................. 21
Tax................................................................... 16
Tax Return............................................................ 16
Taxes................................................................. 16
Transfer Taxes........................................................ 29
Transferred Employee.................................................. 27
Transition Leases..................................................... 33
Transition Period..................................................... 33
Transitional Services Agreement....................................... 30
Vantive License....................................................... 15
Vantive Upgrades...................................................... 15
WARN Act.............................................................. 17
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INDEX OF EXHIBITS
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Exhibit A Form of Section 363/365 Order
Exhibit B Form of ▇▇▇▇ of Sale and General Assignment and Assumption Agreement
Exhibit C [Intentionally Omitted]
Exhibit D Form of Transitional Services Agreement
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INDEX OF DISCLOSURE SCHEDULES
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Agreement
Section No. Title Page No.
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1.2(a)(v)(A) Contracts and Leases 2
1.2(a)(v)(B) Additional Contracts and Leases 2
1.2(a)(vi) Government Entity Licenses and Permits 2
1.2(a)(xii) Confidentiality, Non-Disclosure, Non-Solicitation and Similar
Agreements 3
1.5 Excluded Assets 3
3.2(a)(xii) Lockbox Accounts 6
5.4 Conduct of Business Since Petition Date 13
5.5(a) Title to Properties 13
5.5(b) Leased Properties 13
5.6(a) Business Intellectual Property Owned by Sellers 14
5.6(b) Material License Agreements 14
5.6(c) Intellectual Property Disclosure 14
5.7(a) Tax Returns 15
5.8(a) Material Contracts 16
5.9(a) Labor Relations 17
5.9(b) WARN Act 17
5.10(a) Employee Benefit Plans 17
5.10(c) ERISA and Code Compliance 18
5.10(d) Employee Severance 18
5.11 Litigation 19
5.12 Governmental Consents 19
5.13 Third Party Consents 19
5.14 Compliance with Laws 19
5.15 Environmental Disclosure 19
5.17 Customers and Suppliers Disclosure 21
5.20 Sufficiency of Purchased Assets 21
7.3 No Violation - Buyer 22
7.5 Buyer Consents and Approvals 23
8.2 Conduct of Business 23
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PURCHASE AGREEMENT
This PURCHASE AGREEMENT, dated as of this 22nd day of December, 2000 (the
"Agreement"), by and among CompuCom Systems, Inc., a Delaware corporation (the
"Buyer"), MicroAge Technology Services, L.L.C., a Delaware limited liability
company ("Seller") and MicroAge, Inc., a Delaware corporation ("Parent," and
together with Seller, the "Sellers").
WHEREAS, the Seller is a wholly-owned subsidiary of the Parent;
WHEREAS, on April 11, 2000 (the "Petition Date") the Sellers sought relief
under Chapter 11 of title 11 of the United States Code (the "Bankruptcy Code")
by filing a case (the "Chapter 11 Case") in the United States Bankruptcy Court
for the District of Arizona (the "Bankruptcy Court");
WHEREAS, on December 13, 2000, the Bankruptcy Court entered an Order
approving the bidding procedures for the sale of substantially all of the assets
relating to the business conducted by Seller (the "Bid Procedures");
WHEREAS, the Buyer desires to purchase and assume and the Sellers desire to
sell, assign and transfer the Purchased Assets (as hereinafter defined), on the
terms and conditions set forth in this Agreement and in accordance with sections
105, 363 and 365 and other applicable provisions of the Bankruptcy Code;
WHEREAS, it is contemplated that the Purchased Assets will be sold pursuant
to an order of the Bankruptcy Court approving such sale under section 363 of the
Bankruptcy Code, and such sale will include the assumption and assignment of
certain executory contracts and liabilities thereunder under section 365 of the
Bankruptcy Code, and the terms and conditions of this Agreement; and
WHEREAS, the Sellers desire to sell, assign and transfer the Purchased
Assets to further their reorganization efforts and to enable them to consummate
a plan of reorganization in the Chapter 11 Case.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration described
herein, the receipt and sufficiency of which are hereby acknowledged, the
Sellers and the Buyer agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
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1.1 Purchase and Sale of Assets. Pursuant to sections 363 and 365 (and
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other applicable provisions) of the Bankruptcy Code and on the terms and subject
to the conditions of this Agreement, at the Closing (but effective as of the
Effective Time) provided for in Section 3.1, the Sellers will sell, transfer,
convey, assign and deliver (or cause to be sold, transferred, conveyed, assigned
and delivered) to the Buyer, and the Buyer will purchase, acquire and accept (or
cause to
be purchased, acquired and accepted) from the Sellers, free and clear of all
Liens (as hereinafter defined), the Purchased Assets set forth in Section 1.2.
1.2 Purchased Assets.
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(a) "Purchased Assets" means all of the Sellers' rights, title and
interests in, to and under the following assets and rights, but specifically
excluding the Excluded Assets (as defined in Section 1.5 below):
(i) all inventory of the Seller (A) that is listed in the EDI
feed provided by ▇▇▇▇▇▇ Micro Inc. to the Sellers (a printed copy of which will
be provided to the Buyer three (3) business days prior to the Closing Date and
will be set forth in the Closing Payment Statement (as hereinafter defined)) or
(B) for which there is an open, bona fide purchase order or commitment from a
third party to purchase such inventory (the "Inventory"), and all computer
records and other records relating to Inventory;
(ii) all trade and vendor accounts receivable related to the
Business (as hereinafter defined) that are Eligible Trade Accounts Receivable or
Eligible Vendor Accounts Receivable;
(iii) all laptop and portable computers and related equipment
assigned to and used by any Transferred Employees (as hereinafter defined), as
of the Closing Date, in the performance of field sales and service field work
that is related to the Business;
(iv) all remote field office equipment and supplies used in
connection with the Business that are (A) located at the Seller's remote field
offices, (B) located at Sellers' office at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
(provided, that the equipment and supplies listed in and subject to the lease
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for equipment and supplies, in the form attached as Exhibit D to the Purchase
Agreement, dated as of November 21, 2000, by and among Global Technology Finance
LLC, Buyer Desktop Solutions, Inc. and Sellers will not be Purchased Assets),
(C) located at the premises of customers whose contracts with Sellers are
included in the Section 365 Assumed Rights (as hereinafter defined), and (D) in
the possession or under the control of Transferred Employees on the Closing
Date;
(v) all of the Sellers' executory contracts and unexpired
leases that are listed on Section 1.2(a)(v)(A) of the Disclosure Schedule and
all of Sellers' executory contracts and unexpired leases entered into in the
ordinary course of business after the date hereof that the Buyer agrees in
writing to assume at or prior to the Closing Date (such assumed contracts and
leases will, as of the Closing Date, be set forth on Section 1.2(a)(v)(B) of the
Disclosure Schedule) (collectively, the "Section 365 Assumed Rights") (executory
contracts not listed on Section 1.2(a)(v)(A) or Section 1.2(a)(v)(B) of the
Disclosure Schedule are referred to herein as the "Excluded Contracts");
(vi) to the extent permitted by applicable law to be
transferred by the Sellers to Buyer, all Governmental Entity (as hereinafter
defined) licenses, permits, certificates of authority, authorizations,
approvals, registrations, franchises and similar consents related to the
Business, including, without limitation, those listed on Section 1.2(a)(vi) of
the Disclosure Schedule;
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(vii) originals or true, complete and correct copies of all
books, records and other data and information of the Business, as such relate to
its customers, including, without limitation, the Principal Clients (as
hereinafter defined), including, but not limited to, all books, records,
materials, manuals, financial and accounting statements, sales and promotional
materials and records, advertising materials, customer lists, supplier lists,
mailing lists, distribution lists, business plans, litigation files, demographic
information, credit information, cost and pricing information, reference
catalogs, data and information derived from management information systems, and
other similar property and rights that relate to or are used in connection with
the Business, wherever located;
(viii) all Business Intellectual Property (as defined in Section
5.6);
(ix) all prepaid rent, prepaid property taxes, prepaid
supplies, credits, prepaid expenses, deferred charges, advance payments and
security deposits with respect to the Purchased Assets;
(x) all guarantees, warranties, indemnities and similar rights
in favor of the Sellers with respect to any of the Purchased Assets;
(xi) all causes of action, lawsuits, judgments, claims and
demands of any nature available to or being pursued by the Sellers with respect
to the Purchased Assets, whether arising by way of counterclaim or otherwise;
and
(xii) to the extent assignable without consent of any party
thereto (other than Sellers), all confidentiality, non-disclosure, non-
solicitation or similar types of agreements entered into between Sellers and any
other parties in connection with the possible purchase by such parties of the
Purchased Assets, including, without limitation, those agreements set forth in
Section 1.2(a)(xii) of the Disclosure Schedule (collectively, the "Assumed
Confidentiality/Non-Solicitation Agreements").
(b) As used in this Section 1.2, the term "Sellers" includes the
respective direct and indirect subsidiaries of the Sellers.
1.3 Cure Costs. The Sellers will take all commercially reasonable steps,
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including paying all commercially reasonable costs, to achieve cure and
reinstatement of and the assumption and assignment of the rights, title and
interest in, to and under the Purchased Assets.
1.4 The Business - Defined. As used herein, "Business" refers to any and
----------------------
all business activities of any kind that are conducted by the Seller prior to
and as of the Effective Time (as hereinafter defined).
1.5 Excluded Assets - Defined. As used herein, "Excluded Assets" means
-------------------------
the following: (i) vendor accounts receivable from Compaq Computer Corporation
and its affiliates, (ii) all rights to the names "MicroAge" or "MicroAge
Direct," (iii) the MicroAge Direct proprietary ordering and billing software
system, (iv) other assets primarily used in the conduct of the MicroAge Direct
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business, (v) the shares of capital stock, assets and business of Eleris, Inc.,
and (vi) the assets set forth on Section 1.5 of the Disclosure Schedule.
1.6 Section 363/365 - Defined. As used herein, "Section 363/365 Order"
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means an order authorizing the Sellers to sell the Purchased Assets to the Buyer
pursuant to this Agreement and sections 363 and 365 of the Bankruptcy Code, free
and clear of all Liens (as hereinafter defined), in or on the Purchased Assets
(including any and all "claims and interests" in the Purchased Assets within the
meaning of section 363(g) of the Bankruptcy Code) other than Liens related to
the Assumed Liabilities and otherwise free and clear of all claims and
liabilities, such that the Buyer will not, among other things, incur any
liability as a successor to the Business and authorizing, among other things,
the Sellers, pursuant to section 365 of the Bankruptcy Code, to assign to the
Buyer the Purchased Assets and authorizing the Sellers to enter into and perform
the Transitional Services Agreement, which order will be substantially in the
form attached to this Agreement as Exhibit A.
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ARTICLE II
ASSUMPTION OF LIABILITIES
2.1 Assumption of Assumed Liabilities. Subject to the terms and
---------------------------------
conditions of this Agreement, at the Closing, Buyer will assume the Assumed
Liabilities (as hereinafter defined).
2.2 Assumed Liabilities. As used in this Agreement, "Assumed Liabilities"
-------------------
means, and is limited to: (a) obligations of the Seller arising from and after
the Effective Time under or in connection with the contracts, agreements,
personal property leases, permits, licenses, authorizations and approvals which
are fully and effectively assigned to Buyer pursuant to this Agreement or under
which Buyer is provided the full economic benefits thereof under Section 3.2(b)
of this Agreement; (b) liabilities and obligations for deferred revenue (the
"Deferred Revenue Liabilities"), as defined by United States generally accepted
accounting principles ("GAAP"), with respect to the customers of the Business as
of the Effective Time; (c) any obligations of Buyer to Transferred Employees
specifically assumed by Buyer pursuant to Section 8.6 of this Agreement, and (d)
any liabilities or obligations of Buyer under Section 8.22 of this Agreement.
Notwithstanding the foregoing, the Assumed Liabilities exclude liabilities,
commitments and obligations defined below as "Excluded Liabilities."
2.3 No Other Liabilities Assumed.
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(a) Notwithstanding any provisions in this Agreement to the contrary,
Buyer is assuming only the Assumed Liabilities and no other liability,
commitment or obligation of the Business or the Sellers or any other person or
entity whatsoever, whether presently in existence or arising hereafter. All
liabilities, commitments and obligations other than the Assumed Liabilities will
be retained by, and remain liabilities, commitments and obligations of the
Sellers. All such liabilities, commitments and obligations so retained by the
Sellers are referred to herein as the "Excluded Liabilities."
(b) Notwithstanding anything in this Agreement to the contrary, none
of the following will be Assumed Liabilities: (i) any and all liabilities,
commitments and obligations
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resulting from any litigation, claim, arbitration, investigation or other
proceeding, including, but not limited to, those resulting from the Chapter 11
Case, and all other liabilities, commitments and obligations arising in
connection with all actions, suits, claims, arbitrations, investigations or
proceedings pending at the Effective Time or arising after the Effective Time;
(ii) any and all liabilities, commitments and obligations arising from any
indebtedness for borrowed money of the Sellers or any of their affiliates; (iii)
except as specifically set forth in Section 8.6, any and all liabilities,
commitments and obligations relating to employee benefits or compensation
arrangements of the Sellers or any of their affiliates existing on or prior to
the Effective Time, including, without limitation, liabilities, commitments and
obligations relating to uninsured workers compensation claims arising on or
prior to the Effective Time, the severance and retention bonus payments payable
under the Retention and Severance Plan (as hereinafter defined) and any benefits
under the Business Benefit Plans (as hereinafter defined) or any other benefit
plan of the Sellers; (iv) any and all environmental liabilities of the Sellers
or any of their affiliates; (v) any and all liabilities for Taxes of the Sellers
or any of their affiliates and any and all liabilities for Taxes attributable to
the ownership or operation of the Business or the Purchased Assets at or prior
to the Effective Time, including, but not limited to, any and all liabilities
for pre-petition property taxes that have not been paid on any of the Sellers'
properties, including the Leased Properties; (vi) any and all liabilities,
commitments and obligations arising from the sale or distribution of any product
by the Sellers or any of their affiliates at or prior to the Effective Time,
including warranty obligations, all product liabilities and product returns, and
customer prepaid services not specifically identified as deferred liabilities;
(vii) any and all liabilities, commitments and obligations owed to the Parent or
any of its affiliates, except as expressly set forth in this Agreement; (viii)
any and all liabilities, commitments and obligations for expenses incurred by
the Sellers or any of their affiliates in connection with or resulting from or
attributable to the transactions contemplated by this Agreement; (ix) any and
all liabilities, commitments and obligations for Designated Chapter 11 Costs (as
hereinafter defined) and any contracts related thereto; (x) any and all
liabilities, commitments and obligations in connection with or resulting from or
attributable to any agreement or other arrangement of the Business or the
Sellers or any of their affiliates that is not a Section 365 Assumed Right; (xi)
any and all liabilities arising under the WARN Act (as hereinafter defined)
resulting from or attributable to the consummation of the transactions provided
for in this Agreement; and (xii) any and all other liabilities, commitments and
obligations not expressly assumed pursuant to Section 2.2. "Designated Chapter
11 Costs" means all out-of-pocket fees and expenses incurred or owed in
connection with the administration of Chapter 11 Cases including the U.S.
Trustee fees, the fees and expenses of attorneys, accountants, financial
advisors, consultants and other professionals retained by the Sellers, the
Creditors' Committee, the post-petition lenders or the pre-petition lenders
incurred or owed in connection with the administration of the Chapter 11 Case,
and all out-of-pocket expenses of Sellers in connection with the transactions
contemplated under this Agreement.
(c) At the Closing, Buyer will assume the Assumed Liabilities by
executing and delivering to the Sellers the ▇▇▇▇ of Sale (as defined in Section
3.2(a)(i)).
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ARTICLE III
CLOSING
3.1 Closing Date.
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(a) Subject to the terms and conditions of this Agreement, the
closing of the purchase and sale of the Purchased Assets (the "Closing") will be
at 10:00 A.M. (Phoenix time) at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other location agreed to by
the Buyer and the Sellers, on January 10, 2001 or, if all of the conditions to
the parties' obligations hereunder have not been satisfied or waived by the
appropriate party by such time of day on such date, at such time of day as the
parties may agree on the second business day to occur following the date on
which all of the conditions to the parties' obligations hereunder have been
satisfied or waived by the appropriate party, or such other date as may be
agreed upon by the parties, but in no event later than February 1, 2001 (the
date of the Closing being herein referred to as the "Closing Date").
(b) The Closing hereunder will be deemed to have occurred at 11:59
p.m. on the Closing Date. The deemed time of the Closing pursuant to this
Section 3.1(b) is herein referred to as the "Effective Time."
3.2 Deliveries at the Closing.
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(a) At the Closing, the Seller, the Parent, or their respective
subsidiaries as appropriate, will:
(i) deliver, or cause to be delivered, to the Buyer, a duly
executed ▇▇▇▇ of sale, assignment and assumption with respect to the Purchased
Assets set forth in Section 1.2 of this Agreement (the "▇▇▇▇ of Sale"), in the
form annexed hereto as Exhibit B;
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(ii) [Intentionally Omitted];
(iii) deliver, or cause to be delivered, to Buyer duly executed
instruments of assignment in a form reasonably acceptable to Buyer of all
interests, titles and other rights in, to and under all contracts, agreements,
permits, licenses and authorizations which are included in the Section 365
Assumed Rights and the Purchased Assets (including, without limitation, the
Assumed Confidentiality / Non-Solicitation Agreements);
(iv) deliver, or cause to be delivered, to the Buyer all such
other deeds, endorsements, assignments and other instruments, documents and
agreements as are reasonably necessary to carry out the transfers and
assignments contemplated by this Agreement and to comply with the terms hereof;
(v) deliver, or cause to be delivered, to the Buyer duly
executed copies of the consents referred to in Sections 5.12 and 5.13 of this
Agreement;
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(vi) deliver, or cause to be delivered, to the Buyer all
consents, orders and approvals of the Bankruptcy Court, and all necessary
creditors and other parties to the Chapter 11 Case and all other third parties,
necessary to effectuate transfer of the Purchased Assets, including, without
limitation, the Section 365 Assumed Rights, and to consummate the transactions
contemplated hereby;
(vii) deliver, or cause to be delivered, to the Buyer the
certificates referred to in Section 9.8;
(viii) to the extent required under applicable law, deliver, or
cause to be delivered, to the Buyer a certificate of non-foreign status in
accordance with section 1445 of the Code (as hereinafter defined) and the
Treasury Regulations promulgated thereunder; and
(ix) deliver or cause to be delivered to the Buyer, all such
assignments, signature cards, and other instruments, documents and agreements as
are necessary to transfer control of the bank accounts set forth in Section
3.2(a)(ix) of the Disclosure Schedule (collectively, the "Lockbox Account") to
the Buyer, including evidence reasonably satisfactory to the Buyer that the bank
signature cards relating to the Lockbox Account have been amended so that only
designees of the Buyer are authorized signatories thereto.
(b) To the extent that the assignment to the Buyer of any outstanding
contract, agreement, license, lease, permit or authorization pursuant to this
Agreement is not permitted without the consent of another party, court or entity
and such restriction cannot be effectively overridden or canceled by the Section
363/365 Order (as hereinafter defined) or other related order of the Bankruptcy
Court (to be determined by the Buyer in its sole discretion), then this
Agreement will not be deemed to constitute an assignment of or an undertaking or
attempt to assign the same or any right or interest therein if such consent is
not given; provided, that the Sellers and Buyer will use commercially reasonable
-------- ----
efforts, both before and after the Closing, to obtain all such consents; and
provided, further, that if any such consents are not obtained prior to the
-------- -------
Closing, the Sellers will, at Buyer's request, reasonably cooperate with Buyer
in any lawful and feasible arrangement designed to provide Buyer (at the sole
cost and expense of Sellers) with the benefits and obligations of any such
contract, agreement, license, lease, permit or authorization.
(c) At the Closing:
(i) Buyer will deliver, or cause to be delivered, to the
Sellers, the ▇▇▇▇ of Sale providing for the assumption by Buyer of the Assumed
Liabilities, duly executed by Buyer;
(ii) Buyer will deliver, or cause to be delivered, to the
Seller, the Purchase Price Amount (as hereinafter defined);
(iii) Buyer will deliver, or cause to be delivered, to the
Sellers, such other instruments or documents as may be reasonably necessary to
carry out the transactions contemplated by this Agreement and to comply with the
terms hereof; and
7
(iv) Buyer will deliver, or cause to be delivered, to the
Sellers, the certificates referred to in Section 10.5.
ARTICLE IV
PURCHASE PRICE AND PAYMENT
4.1 Purchase Price, Payment of Purchase Price Amount.
------------------------------------------------
(a) The purchase price (the "Purchase Price") payable to the Sellers
by the Buyer as consideration for the sale and assignment of the Purchased
Assets will consist of, in addition to Buyer's assumption of the Assumed
Liabilities, the sum of (i) $5,278,743 plus (ii) the amount determined in
----
accordance with Section 4.2 and Annex 1 hereto (the "Purchase Price Amount").
The Purchase Price will be subject to adjustment pursuant to the provisions of
Section 4.3 hereof.
(b) On the Closing Date, Buyer will deliver, or cause to be
delivered, as consideration for the Purchased Assets, by wire transfer of
immediately available funds to the account of the Seller, an amount equal to the
Purchase Price Amount.
(c) Until the Purchase Price adjustment contemplated by Section 4.3
has been completed, the Sellers will retain free and clear of all Liens and keep
available for disbursement to Buyer no less than $5,000,000 (the "Disbursement
Amount") of the proceeds received pursuant to this Article IV; provided,
--------
however, that, if, and to the extent, Buyer and the Sellers agree, or it is
-------
otherwise determined by the Bankruptcy Court, that the Sellers' maximum
liability under Section 4.3 is less than $5,000,000, the Disbursement Amount
will be reduced to such lesser amount.
4.2 Determination of the Purchase Price Amount.
------------------------------------------
(a) Three (3) business days prior to the Closing Date (the "Closing
Payment Statement Date"), the Sellers will deliver to the Buyer a statement (the
"Closing Payment Statement"), certified by an appropriate senior executive
officer of the Parent, setting forth Parent's good faith estimate of (i) the
components, aging and value of and a brief description of all Eligible Trade
Accounts Receivable, Eligible Vendor Accounts Receivable and Inventory as of the
Effective Time; (ii) the Deferred Revenue Liabilities to be assumed by Buyer
pursuant to Section 2.2(b) as of the Effective Time; and (iii) the aggregate
amount of prepaid rent and security deposits to be outstanding as of the
Effective Time with respect to the Leased Properties (the "Prepaid Lease
Amounts"). The Sellers and the Buyer will mutually prepare the Closing Payment
Statement, with the full participation and cooperation of each other, in
accordance with this Agreement and in accordance with and following GAAP and
customary business practices of the Sellers. The value of the Inventory will be
determined by reference to the "standard cost" thereof as reflected in the
Seller's accounting records. The value of the Eligible Trade Accounts Receivable
and the Eligible Vendor Accounts Receivable will be equal to the gross book
value of such accounts receivable determined in accordance with GAAP.
(b) The Purchase Price Amount will be (i) $5,278,743 plus (ii) the
----
amount calculated by applying the formula set forth in Annex I hereto to the
Eligible Trade Accounts
8
Receivable, Eligible Vendor Accounts Receivable, Inventory, Deferred Revenue
Liabilities and Prepaid Lease Amounts set forth on the Closing Payment
Statement.
(c) "Eligible Trade Accounts Receivable" means all trade accounts
receivable of the Sellers related to the Business and "Eligible Vendor Accounts
Receivable" means all vendor accounts receivable of the Sellers related to the
Business; provided, however, that none of the following classes of accounts
-------- -------
receivable will be Eligible Trade Accounts Receivable or Eligible Vendor
Accounts Receivable, as the case may be:
(i) trade or vendor accounts receivable that do not arise out
of the sale of goods in the ordinary course of business of the Sellers;
(ii) trade or vendor accounts receivable that arise out of a
sale made by the Sellers to an affiliate of the Sellers;
(iii) trade or vendor accounts receivable that have payment
terms that are longer than three hundred and sixty-five (365) days from the date
of invoice;
(iv) trade accounts receivable that are unpaid more than 270
days after the original payment due date;
(v) trade or vendor accounts receivable that are from the same
account debtor (or its affiliates) and fifty percent (50%) or more of all
accounts from that account debtor (and its affiliates) are ineligible under
(iii) or (iv) above;
(vi) except with respect to accounts for which the account
debtor is SBC Communications, Inc. or any of its affiliates, trade or vendor
accounts receivable that, when aggregated with all other accounts of an account
debtor, exceed twenty percent (20%) in face value of all trade and vendor
accounts receivable of the Sellers then outstanding;
(vii) trade or vendor accounts receivable for which the account
debtor for the account is a creditor of the Sellers, has or has asserted a right
of setoff, has disputed its liability or made any claim against the Sellers or
with respect to the account or any other account which has not been resolved, to
the extent of the amount owed by the Sellers to the account debtor, the amount
of such actual or asserted right of setoff, or the amount of such dispute or
claim, as the case may be;
(viii) trade or vendor accounts receivable for which the account
debtor is (or its assets are) the subject of any of the following: (A) a
voluntary or involuntary petition for bankruptcy or other relief under the
Bankruptcy Code or any similar statute, (B) an assignment for the benefit of
creditors, (C) failure, suspension of business operations, or insolvency, (D)
appointment of a receiver or trustee, or (E) failure to pay debts generally as
they become due;
(ix) trade or vendor accounts receivable for which the account
is not payable in United States dollars or the account debtor is located outside
the continental United States (it being understood by the parties hereto that
the continental United States includes the State of Alaska);
9
(x) trade or vendor accounts receivable in excess of $1.5
million for which the sale to the account debtor is on a guaranteed sale, sale-
and-return, sale on approval or consignment basis or made pursuant to any other
written agreement providing for repurchase or return;
(xi) trade or vendor accounts receivable in excess of $1.5
million in the aggregate for which the goods giving rise to such account have
not been shipped and delivered to and accepted by the account debtor, the
services giving rise to such account have not been performed and accepted, or
the account otherwise does not represent a final sale (unless there (A) is
written evidence that such account debtor has agreed to pay for the goods and
requested that the Seller retain goods in its possession and (B) such goods are
kept segregated from all other goods in Seller's possession);
(xii) trade or vendor accounts receivable for which the account
does not comply with all applicable laws;
(xiii) trade or vendor accounts receivable for which the account
is subject to any adverse security deposit;
(xiv) vendor accounts receivable unpaid more than one hundred
and twenty (120) days from date of invoice, except for such accounts for which
the account debtor is IBM Corporation or its affiliates; or
(xv) trade or vendor accounts receivable for which a settlement
has been made between the Seller and the customer or vendor prior to the Closing
Date and for which payment has not yet been received.
4.3 Purchase Price Adjustment.
-------------------------
(a) On February 28, 2001, the Sellers will provide the Buyer with a
statement (the "Price Adjustment Statement"), certified by an appropriate senior
executive officer of the Parent, setting forth the actual amount of the Eligible
Trade Accounts Receivable, Eligible Vendor Accounts Receivable and Inventory
acquired by the Buyer as of the Effective Time and a recalculation of the
Purchase Price Amount in accordance with the provisions of Section 4.2 and Annex
1 using the amounts set forth on the Price Adjustment Statement.
(b) The Sellers and the Buyer will mutually prepare the Price
Adjustment Statement, with the full participation and cooperation of each other.
If the Sellers and the Buyer are unable to agree on the Price Adjustment
Statement by March 9, 2001, then all disagreements will be submitted for
resolution to the Bankruptcy Court. The Price Adjustment Statement, either as
agreed to by the Buyer and the Sellers or as determined by the Bankruptcy Court
pursuant to the preceding sentence, will be final and binding and will be
referred to as the "Final Price Adjustment Statement."
(c) If the Purchase Price Amount as recalculated on the Final Price
Adjustment Statement is less than the Purchase Price Amount paid on the Closing
Date, the Sellers will pay the
10
difference to Buyer within two (2) business days. If the Purchase Price Amount
as recalculated on the Final Price Adjustment Statement is greater than the
Purchase Price Amount paid on the Closing Date, Buyer will pay the difference to
the Sellers within two (2) business days.
(d) To the extent that Sellers are unable, after using commercially
reasonable efforts, to adjust their payroll system to provide for any
Transferred Employee accruing his or her last day of base compensation payable
by Sellers on the Closing Date, Buyer will reimburse Sellers the full amount of
all base compensation paid or to be paid by Sellers to such Transferred Employee
in respect of any business day after the Closing Date, provided that Buyer is
--------
able to obtain such agreement as Buyer may reasonably require from such
Transferred Employee to permit Buyer to adjust the compensation to be paid by
Buyer to such Transferred Employee in respect of any business day after the
Closing Date to allow Buyer to recover in full the amount of any compensation
paid by Sellers to such Transferred Employee for which Buyer has reimbursed or
is required to reimburse Sellers pursuant to this Subsection (d). Sellers will
deliver to Buyer written notice together with reasonable supporting
documentation of any such reimbursable payments concurrent with the delivery of
the Price Adjustment Statement pursuant to Subsection (a), and Buyer will pay
such reimbursement to Seller as soon as Buyer is able to obtain the
aforementioned agreement from any such Transferred Employee (which agreement
Buyer will use commercially reasonable efforts to obtain promptly after receipt
of Sellers' notice requiring reimbursement.
4.4 Loss Limitations.
----------------
(a) For purposes of this Section 4.4, "Losses" means any and all
demands, claims, actions, losses, damages, liabilities, obligations, fines,
deficiencies, costs and expenses (including the reasonable fees and expenses of
consultants and counsel), whether or not resulting from third party claims,
including interest and penalties with respect thereto.
(b) Other than with respect to Losses arising from fraud or breaches
by the Sellers of any covenants contained in this Agreement that by their terms
require performance following the Closing Date (including, without limitation
covenants to convey and deliver any Purchased Assets, but excluding any
covenants relating to the provision of the Transitional Services), the Buyer
shall have no claim, monetary or otherwise, whatsoever against Sellers (or
either of them) for Losses incurred by Buyer arising out of or in connection
with this Agreement or any ancillary agreement contemplated by this Agreement,
including, without limitation, any Losses relating to or in respect of any
breach of the Transitional Services Agreement.
4.5 Further Assurances. After the Closing, each party hereto will from
------------------
time to time, at the reasonable request of any other party hereto, execute and
deliver such other instruments of conveyance and transfer and such other
instruments, documents and agreements and take such other actions as such other
party may reasonably request, in order to more effectively consummate the
transactions contemplated hereby and to vest in the Buyer the right, title and
interest in, to and under the Purchased Assets and to provide for the assumption
of the Assumed Liabilities; provided, that the requesting party will prepare
-------- ----
such additional documents and instruments and will handle any submittal,
applications, processing, recording and registrations. The Buyer and the Sellers
hereby irrevocably consent to the personal and subject-matter jurisdiction of
the Bankruptcy Court for all
11
purposes necessary to effectuate this Section 4.5. The Sellers will seek to
include in any plan of reorganization in any of the Chapter 11 Cases supported
by it, provision for retained jurisdiction of the Bankruptcy Court to effectuate
this Section 4.5, and will use commercially reasonable efforts to oppose any
such plan of reorganization which fails to include such provisions.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
As of the date hereof and as of the Closing Date, except as otherwise
specified below, the Sellers jointly and severally represent and warrant to the
Buyer as follows:
5.1 Organization, Qualification, Etc.
---------------------------------
(a) The Seller is a limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
formation. The Seller has full limited liability company power and authority to
carry on the Business and to own the properties and assets it now owns. The
Seller is duly qualified or licensed to do business as a foreign limited
liability company and is in good standing in each jurisdiction in which such
qualification is required, except where any failures to be so qualified would
not, individually or in the aggregate, have a material adverse effect on the
Purchased Assets (a "Material Adverse Effect"). The complete and correct copies
of the Certificate of Formation and comparable organizational documents of the
Seller heretofore delivered to the Buyer are complete and correct copies of such
instruments as in effect as of the date of this Agreement and as of the Closing
Date. The Seller is not in violation of any provisions of its Certificate of
Formation and comparable organizational documents.
(b) The Parent is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its formation. The Parent
has full corporate power and authority to carry on its business and to own the
properties and assets it now owns. The Parent is duly qualified or licensed to
do business as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is required, except where any failures
to be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. The copies of the Certificate of Incorporation and Bylaws of the
Parent heretofore delivered to the Buyer are complete and correct copies of such
instruments as in effect as of the date of this Agreement and as of the Closing
Date. The Parent is not in violation of any provisions of its Certificate of
Incorporation and Bylaws.
5.2 Authorization, Etc. Each of the Sellers has full corporate or limited
-------------------
liability company capacity, power and authority to enter into this Agreement to
perform its obligations hereunder and to consummate the transactions
contemplated hereby in accordance with the terms of this Agreement. Each of the
members of the Seller and the board of directors and stockholders of the Parent
have taken all action required by law, the Seller's Certificate of Formation and
other organizational documents of the Seller and the Certificate of
Incorporation and Bylaws of the Parent, as the case may be, to authorize the
execution and delivery of this Agreement by the Parent and the Seller and the
consummation by the Parent and the Seller of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Parent and
the Seller. Assuming it
12
constitutes a valid and binding obligation of the Buyer, this Agreement will
constitute a valid and binding obligation of each of the Sellers upon the entry
of the Section 363/365 Order, except for the provisions of the Bid Procedures
hereof which will become the binding obligations of the Sellers upon the entry
of the Interim Order (as hereinafter defined).
5.3 No Violation. Neither the execution or delivery of this Agreement nor
------------
the consummation of the transactions contemplated hereby will, upon entry of the
Section 363/365 Order: (a) violate any provision of the Seller's Certificate of
Formation or other organizational documents or the Certificate of Incorporation
or Bylaws of the Parent, as the case may be; or (b) violate any statute, law,
judgment, decree, order, regulation or rule of any court or governmental
authority applicable to the Sellers; or (c) violate, or be in conflict with, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or cause the acceleration of the
maturity of any debt or obligation pursuant to, any agreement or commitment to
which the Sellers or by which the Sellers are bound.
5.4 Absence of Certain Changes.
--------------------------
(a) Except as set forth in Section 5.4 of the Disclosure Schedule or
as disclosed in any filing made by Parent with the Securities Exchange
Commission after December 31, 1999 and prior to the date of this Agreement
("Parent SEC Reports"), since the Petition Date, the Sellers have not taken any
action which, if taken after the date hereof without the consent of the Buyer,
would violate Section 8.2 of this Agreement.
(b) Except as disclosed in the Parent SEC Reports, since the Petition
Date the Business has been conducted in the ordinary course, and there has not
been:
(i) any event, occurrence, development or state of
circumstances or facts that, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect;
(ii) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the Business or any Purchased Asset, that,
individually or in the aggregate, has had or could reasonably be expected to
have individually or in the aggregate a Material Adverse Effect; or
(iii) any sale or other disposition of any material assets or
Purchased Assets other than sales of products and services in the ordinary
course of business.
5.5 Title to Properties.
-------------------
(a) Except as disclosed in Section 5.5(a) of the Disclosure Schedule
or as disclosed in the Parent SEC Reports: (i) the Seller has good, valid and
marketable title to all the properties and assets (real, personal and mixed,
tangible and intangible) included in the Purchased Assets; and (ii) upon entry
of the Section 363/365 Order, none of the properties and assets (real, personal
and mixed, tangible and intangible) included in the Purchased Assets will be
subject to any
13
Liens, other than the Assumed Liabilities. As used in this Agreement, the term
"Liens" means: any mortgage, pledge, hypothecation, right of others, claim,
security interest, encumbrance, lease, sublease, license, occupancy agreement,
adverse claim or interest, easement, covenant, encroachment, burden, title
defect, title retention agreement, voting trust agreement, interest, equity,
option, lien, right of first refusal, charge or other restrictions or
limitations of any nature whatsoever on the assets and properties of the Seller
or any of its subsidiaries, including, but not limited to, such as may arise
under any Contracts (as hereinafter defined) or the Purchased Assets.
(b) Section 5.5(b) of the Disclosure Schedule contains an accurate
list of the real property covered by and under the real property leases (the
"Leased Properties") that Buyer will assume as Section 365 Assumed Rights under
this Agreement.
(c) The Sellers have a current, valid certificate of occupancy ("CO")
or equivalent thereof for each of the Leased Properties and the Seller's use of
all of the Leased Properties is in conformity with any CO issued for any of the
Leased Properties. No proceeding is currently pending or, to the Sellers'
knowledge, threatened regarding the revocation or limitation of any CO issued
for the Leased Properties.
(d) As of the Closing Date the leases relating to the Leased
Properties will be in full force and effect, and constitute the legal, valid and
binding obligations of the parties thereto, and there will exist no event of
default, event, occurrence, condition or act which, with the giving of notice,
the lapse of time or the happening of any further event or condition that,
individually or 'in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect.
5.6 Intellectual Property.
---------------------
(a) Section 5.6(a) of the Disclosure Schedule sets forth for the
Business Intellectual Property owned by Sellers a complete and accurate list of
all U.S. and foreign (i) patents and patent applications; (ii) trademark
registrations (including Internet domain registrations), trademark applications,
and material unregistered trademarks; and (iii) copyright registrations,
copyright applications, and material unregistered copyrights; in each case,
identifying, where appropriate, which of the foregoing assets constitute
Purchased Assets or Excluded Assets.
(b) Section 5.6(b) of the Disclosure Schedule sets forth for the
Business Intellectual Property a complete and accurate list of all material
license agreements (whether as licensor or licensee), including but not limited
to, all agreements relating to technology, know-how or processes included in the
Purchased Assets (the "IP License Agreements").
(c) Except as set forth in Section 5.6(c) of the Disclosure Schedule
or as disclosed in the Parent SEC Reports or except where the failure of any of
the following to be true and correct would not, individually or in the
aggregate, result in a Lien on the Purchased Assets or result in any liability
to the Buyer following the Closing Date:
(i) the Sellers own or have the valid right to use the
Business Intellectual Property;
14
(ii) all Business Intellectual Property owned or, to the
knowledge of the Sellers used, by the Sellers is valid and subsisting in full
force and effect and has not been cancelled, expired or abandoned;
(iii) no claims have been asserted by any person challenging the
ownership or right to use the Business Intellectual Property or challenging or
questioning the validity or effectiveness of any such IP License Agreement;
(iv) to the knowledge of Sellers, the use by the Sellers of the
Business Intellectual Property does not infringe on the rights of any third
party;
(v) the IP License Agreements are valid and binding
obligations of all parties thereto, enforceable in accordance with their terms,
and there exists no condition or third party consent which, if not met or
obtained, will result in a violation or breach of, or constitute a default by
any party under any such IP License Agreement as a result of the consummation of
the transaction contemplated hereby.
"Business Intellectual Property" means trademarks, service marks, trade
names, Internet domain names, logos, designs, slogans, and general intangibles
of like nature, together with all goodwill, registrations and applications
related to the foregoing; patents (including any registrations, continuations,
continuations in part, renewals and applications for any of the foregoing);
registered copyrights (including any registration applications); software
(including source code and application code) (excluding commercially available
mass-market software (e.g. Microsoft Windows, WordPerfect, Excel)); databases;
technology, trade secrets and other confidential information, know-how,
proprietary processes, formulae, algorithms, models, and methodologies
(collectively, "Intellectual Property"); in each of the foregoing, that are
primarily used in the conduct of the Business or necessary for the continued
conduct of the Business by the Buyer after the Closing Date. Notwithstanding the
foregoing, Business Intellectual Property does not include any of Sellers'
right, title and interest in and to the Sellers' license of the Vantive software
program (the "Vantive License") nor any of Sellers' right title and interest in
and to any and all upgrades, modifications and improvements to the Vantive
software program as may exist as of the Closing Date (the "Vantive Upgrades").
5.7 Tax Matters.
-----------
(a) Except as set forth in Section 5.7(a) of the Disclosure Schedule
or as disclosed in the Parent SEC Reports, all Tax Returns (as hereinafter
defined) required to be filed with respect to the Purchased Assets have, within
the time and in the manner prescribed by law, been duly filed with the
appropriate taxing authorities. All such Tax Returns are true, correct and
complete in all material respects and all Taxes (as hereinafter defined) shown
to be due on such Tax Returns have been paid, except where the non-payment
thereof would not result in a Lien on any Purchased Asset or in any liability or
obligation on the part of the Buyer or any affiliate of the Buyer to pay such
Taxes. The Sellers have timely paid or caused to be paid all Taxes, with respect
to the Purchased Assets, required to be paid on or before the Effective Time for
all taxable years or periods ending on or before the Effective Time and for the
portion of any taxable year or period through and including the Effective Time
in the case of any "Straddle Period" (as defined in Section 5.7(e)), the
15
non-payment of which could result in a Lien on any Purchased Asset, or could
result in the Buyer or any affiliate of the Buyer becoming responsible for or
obligated to pay such Taxes, or that has had or could reasonably be expected to
have a Material Adverse Effect.
(b) There are no Liens for Taxes upon any of the Purchased Assets,
except for statutory Liens for Taxes not yet due.
(c) For purposes of this Agreement the term "Tax" or "Taxes" means
all taxes, charges, fees, levies or other assessments, including without
limitation all net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, withholding, payroll, value added,
employment, social security, unemployment, occupation, excise, estimated,
severance, stamp, property, environmental or other taxes, duties, fees,
assessments or charges of any kind whatsoever, including any interest, penalties
or additional amounts attributable thereto imposed by any Governmental Entity.
(d) For purposes of this Agreement, the term "Tax Return" means any
return, report, information return, statement, declaration or other document
(including any related or supporting information) filed or required to be filed
with any Governmental Entity in connection with any determination, assessment or
collection of any Tax or other administration of any laws, regulations or
administrative requirements.
(e) For purposes of this Agreement, "Straddle Period" means any
taxable year or period that commences before but ends after the Effective Time.
5.8 Contracts.
---------
(a) Section 5.8(a) of the Disclosure Schedule sets forth a list of
all of the following contracts and agreements of the Sellers and their
affiliates relating to the Business and currently in effect (collectively, the
"Contracts"): (i) any collective bargaining agreement; (ii) any oral or written
employment agreement with any employee; (iii) any contract which involves the
payment or receipt of an amount in excess of $500,000 in any calendar year; (iv)
any credit agreement, factoring agreement, loan agreement, indenture, note,
mortgage, security agreement, loan commitment, evidence of indebtedness, or
other contract relating to the borrowing of funds; (v) any contract granting to
any person or entity a right of first refusal or first offer or any option to
purchase or acquire any of the Purchased Assets; (vi) any limited partnership,
joint venture or other unincorporated business organization or similar
arrangement or agreement; (vii) any agreement relating to the acquisition or
disposition of any of the Purchased Assets, other than purchase orders or
similar instruments entered into in the ordinary course of business; (viii) any
material dealer, agency, sales representative, marketing or similar agreement;
and (ix) any agreement that restricts or prohibits the Seller or any of its
affiliates from engaging in the Business or from competing with any person or
entity in connection with the Business.
(b) The Sellers have heretofore furnished or made available to the
Buyer complete and correct copies of the Contracts, each as amended or modified
to the date hereof (including any waivers with respect thereto). As of the
Closing, each of the Section 365 Assumed Rights will be in full force and effect
and enforceable in accordance with its terms. Except as
16
disclosed in Section 1.2(a)(v)(A) of the Disclosure Schedule, neither the
Sellers nor any of their subsidiaries have received any written notice nor do
any senior executives of the Sellers have any knowledge of any cancellation or
termination of, or any expression or indication of an intention or desire to
cancel or terminate, any of the Section 365 Assumed Rights. None of the Section
365 Assumed Rights is the subject of, or has been threatened to be made the
subject of, any arbitration, suit or other legal proceeding (other than the
bankruptcy proceedings related to the Chapter 11 Case). With respect to any of
the Section 365 Assumed Rights which by their terms will terminate as of a
certain date unless renewed or unless an option to extend such Section 365
Assumed Right is exercised, neither the Sellers nor any of their subsidiaries
have received any written notice nor do any senior executives of the Sellers
have any knowledge that any such Section 365 Assumed Right will not be, or is
not likely to be, so renewed or that any such extension option will not be
exercised. As of the Closing, there will be no event of default or occurrence,
condition or act on the part of the Sellers or any of their affiliates or, to
the knowledge of the Sellers, on the part of the other parties to the Section
365 Assumed Rights, which constitutes or would constitute (with notice or lapse
of time or both) a breach of or default under any of the Section 365 Assumed
Rights.
5.9 Labor Relations.
---------------
(a) Except as set forth in Section 5.9(a) of the Disclosure Schedule
or as disclosed in the Parent SEC Reports, (i) there are no written personnel
policies applicable to employees of the Seller; (ii) the Seller is not a party
to any labor agreement with any labor organization, group or association with
respect to employees of the Seller; (iii) to the knowledge of the Sellers, there
is no labor strike, dispute, slowdown or work stoppage or lockout actually
pending or threatened by the employees of the Sellers against or affecting the
Business; (iv) to the knowledge of the Sellers, no union organizational campaign
is in progress with respect to the Seller's employees; (v) the Business is in
substantial compliance with all applicable material laws relating to employment
and employment practices, terms and conditions of employment, wages, hours of
work, and occupational safety and health, and is not engaged in any unfair labor
practices; (vi) there is no pending unfair labor practice, charge or complaint
against the Seller before the National Labor Relations Board; (vii) there is no
pending labor grievance by the Sellers' employees that could reasonably be
expected to have a material adverse effect on the Business nor any pending
arbitration proceeding by the Sellers' employees arising out of or under any
collective bargaining agreements relating to the Business which could reasonably
be expected to have a material adverse effect on the Business; (viii) to the
knowledge of the Sellers, no charges with respect to or relating to the Seller
are pending before the Equal Employment Opportunity Commission or any comparable
state, local or foreign agency responsible for the prevention of unlawful
employment practices; and (ix) neither the Sellers nor any of their affiliates
have received notice of the intent of any federal or state agency responsible
for the enforcement of labor or employment laws to conduct an investigation with
respect to the Business that could reasonably be expected to have a material
adverse effect on the Business.
(b) Except to the extent set forth on Section 5.9(b) of the
Disclosure Schedule or as disclosed in the Parent SEC Reports, since the
enactment of the Worker Adjustment and Retraining Notification Act ("WARN Act"),
the Sellers have not effectuated (i) a "plant closing" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or operating
17
units within any site of employment or facility of the Seller; or (ii) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or
facility of the Seller; nor has the Seller been affected by any transaction or
engaged in layoffs or employment terminations sufficient in number to trigger
application of any similar state or local law.
5.10 Employee Benefit Plans; ERISA.
-----------------------------
(a) Section 5.10(a) of the Disclosure Schedule contains a true and
complete list of each material pension, profit sharing, retirement savings,
employee stock ownership, stock option, restricted stock, incentive, severance,
termination, employment, consulting, change in control, fringe benefit, welfare,
collective bargaining, bonus, insurance, medical or other employee benefit plan,
program, agreement or arrangement, including each "employee benefit plan" as
defined in section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") and including any multi-employer plan (as defined in
section 4001(a)(3) of ERISA) (each, a "Plan"), sponsored, maintained or
contributed to or required to be contributed to by the Sellers for the benefit
of current or former employees (the "Business Employees") of the Business (each,
a "Business Benefit Plan").
(b) True and complete copies of the following documents relating to
each Business Benefit Plan, where applicable, have been delivered to the Buyer:
(i) the Plan, including all amendments thereto; (ii) the most recent summary
plan description, summary of material modifications and all material general
employee communications relating to such Plan; (iii) a copy of the most recent
annual report, if required under ERISA, with respect to each such Plan; (iv) a
copy of the most recent actuarial report, if required under ERISA, with respect
to each such Plan; (v) if the Plan is funded through a trust or any other
funding vehicle, a copy of the trust or other funding agreement (including all
amendments thereto) and the latest financial statements thereof, and (vi) the
most recent determination letter received from the Internal Revenue Service with
respect to each Plan that is intended to be qualified under section 401 of the
Internal Revenue Code of 1986, as from time to time amended (the "Code").
(c) Except as disclosed in Section 5.10(c) of the Disclosure Schedule
or in the Parent SEC Reports, the Business Benefit Plans are in substantial
compliance with all applicable provisions of ERISA and the Code except for
instances of noncompliance or liabilities or obligations that would not,
individually or in the aggregate, result in a Lien on the Purchased Assets or in
any liability of the Buyer therefor. Except to the extent any of the following
either individually or in the aggregate would not have a Material Adverse
Effect, or result in any liability to Buyer following the Closing Date, (i)
neither the Seller nor any trade or business, whether or not incorporated (an
"ERISA Affiliate"), which together with the Seller would be deemed a "single
employer" within the meaning of section 4001 (b) of ERISA, has incurred any
unsatisfied liability under title IV of ERISA and no condition exists that could
reasonably be expected to present a risk to the Seller or any ERISA Affiliate of
incurring any such liability (other than liability for premiums to the Pension
Benefit Guaranty Corporation arising in the ordinary course), and (ii) no
"employee benefit plan," maintained or contributed to by the Seller or any ERISA
Affiliate has incurred an "accumulated funding deficiency" (within the meaning
of section 302 of ERISA or section 412 of the Code) whether or not waived.
18
(d) Except as expressly provided in this Agreement, the Transition
Services Agreement or as set forth in Section 5.10(d) of the Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not, either alone or in combination with another event, (i) entitle any
current or former employee of the Sellers to severance pay or any other payment,
or (ii) accelerate the time of payment or vesting, or increase the compensation
or benefits provided to such employee, in either case for which Buyer would have
any liability.
5.11 Litigation. Except as set forth in Section 5.11 of the Disclosure
----------
Schedule or as disclosed in the Parent SEC Reports, there are no actions, suits
or proceedings by or before any Governmental Entity which are pending or, to the
knowledge of the Sellers, threatened, against the Sellers, relating to the
Business, except for those that would not, individually or in the aggregate,
result in a Lien on the Purchased Assets or result in any liability to the Buyer
following the Closing Date. As of the date hereof, there are no actions, suits
or proceedings by or before any Governmental Entity which are pending or, to the
knowledge of the Sellers, threatened against the Sellers, that challenge the
validity of this Agreement or any action taken by the Seller pursuant to this
Agreement or in connection with the transactions contemplated hereby. Except as
disclosed in Section 5.11 of the Disclosure Schedule or as disclosed in the
Parent SEC Reports, the Sellers are not subject to any judgments, orders or
decrees entered in any lawsuits or proceedings relating to the Business, except
those that would not, individually or in the aggregate, result in a Lien on the
Purchased Assets or result in any liability to the Buyer following the Closing
Date.
5.12 Consents and Approvals of Governmental Authorities. Except for (i)
--------------------------------------------------
any filings pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (ii) necessary approvals of the Bankruptcy
Court, including, without limitation, the Section 363/365 Order, or (iii) as
otherwise set forth in Section 5.12 of the Disclosure Schedule, no consent,
approval, certificate, license, permit, waiver, authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority or agency (whether U.S. federal, state, local or foreign) (each a
"Governmental Entity") is required in connection with the execution, delivery
and performance of this Agreement by the Sellers, the purchase and sale of the
Purchased Assets or the consummation by the Sellers of the transactions
contemplated hereby.
5.13 Third Party Consents. Except as set forth in Section 5.13 of the
--------------------
Disclosure Schedule and subject to Section 8.22(f) hereof, no consent or waiver
of any person (other than a Governmental Entity) is required in connection with
the execution, delivery and performance of this Agreement by the Sellers, the
purchase and sale of the Purchased Assets, the assumption and assignment of the
Section 365 Assumed Rights or the consummation by the Sellers of the
transactions contemplated hereby.
5.14 Compliance with Law. Except as disclosed in Section 5.14 of the
-------------------
Disclosure Schedule or as disclosed in the Parent SEC Reports, the Business has
been and is being conducted in accordance with all applicable laws, regulations
and other requirements of all Governmental Entities, except where such
noncompliance would not, individually or in the aggregate, result in a Lien on
the Purchased Assets or result in any liability to the Buyer following the
Closing Date.
19
5.15 Environmental Matters. Except as set forth in Section 5.15 of the
---------------------
Disclosure Schedule or as disclosed in the Parent SEC Reports:
(a) The Seller has obtained all permits, licenses and other
authorizations which are required under the Environmental Laws in order for them
to operate and conduct the Business, all such permits, licenses and
authorizations are in effect, no appeal nor any other action is pending to
revoke any such permit, license or authorization, and the Seller is in material
compliance with all terms and conditions of all such permits, licenses and
authorizations;
(b) The Seller is in compliance with all Environmental Laws
applicable to the conduct of the Business, except for noncompliance that
individually or in the aggregate, has not had or could not reasonably be
expected to have a Material Adverse Effect;
(c) The Seller has heretofore delivered to the Buyer true and
complete copies of all final environmental studies made in the last three (3)
years relating to any of the Leased Properties and the Tempe Property (the
"Environmental Studies");
(d) There is no pending or, to the knowledge of the Sellers,
threatened, claim, lawsuit, or administrative proceeding against the Seller
under any Environmental Law in connection with the conduct of the Business.
Neither the Sellers nor any of their affiliates have received written notice
from any person, including a Governmental Entity, alleging that the Sellers are
in violation of any applicable Environmental Law in connection with the conduct
of the Business or otherwise may be liable under any applicable Environmental
Law, including, but not limited to, liability for Cleanups (as hereinafter
defined) which violation or liability is unresolved;
(e) Except as set forth in the Environmental Studies, there have been
no releases, spills or discharges of Hazardous Substances on or underneath any
of the Leased Properties that individually or in the aggregate would have a
Material Adverse Effect;
(f) Except as set forth in the Environmental Studies, none of the
Leased Properties has been listed on the National Priorities List or the
Comprehensive Environment Response Cleanup Liability Information System List
prepared pursuant to the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or on similar lists maintained
pursuant to an equivalent state statute, and the Sellers have not been
identified in writing, or to the knowledge of Sellers, orally, as a potentially
responsible party under CERCLA or an equivalent state statute; and
(g) Except as set forth in the Environmental Studies, to the Sellers'
knowledge, the Leased Properties do not contain any: (i) underground storage
tanks; (ii) asbestos; (iii) equipment using PCBs; (iv) underground injection
▇▇▇▇▇; or (v) septic tanks in which process wastewater or any Hazardous
Substances have been disposed, except those that have been installed or
maintained in material compliance with Environmental Laws.
As used in this Agreement:
20
"Cleanup" means all actions required to: (i) cleanup, remove, treat or
remediate Hazardous Substances in the indoor or outdoor environment; (ii)
prevent the release of Hazardous Substances so that they do not migrate,
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment; (iii) perform pre-remedial studies and investigations and
post-remedial monitoring and care; (iv) respond to any government requests for
information or documents in any way relating to cleanup, removal, treatment or
remediation or potential cleanup, removal, treatment or remediation of Hazardous
Substances in the indoor or outdoor environment; or (v) any legal or
administrative proceedings related to items (i) through (iv), including, but not
limited to, actions brought by third-parties to recover costs incurred with
respect to Cleanup.
"Environmental Laws" means all laws, regulations, rules and ordinances
relating to pollution or protection of the environment, including, without
limitation, laws relating to releases or threatened releases of Hazardous
Substances into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, release, transport or handling of
Hazardous Substances.
"Hazardous Substances" means all substances defined as toxic, wastes,
hazardous or dangerous or otherwise regulated under any Environmental Law
including, but not limited to, petroleum, asbestos, or polychlorinated
biphenyls.
5.16 Brokers and Finders. No broker or finder has acted directly or
-------------------
indirectly for the Sellers or any of their affiliates in connection with this
Agreement or the transactions contemplated hereby, except for ▇▇▇▇▇▇, Del Genio,
▇▇▇▇▇ & Co. L.L.C. whose fees and expenses will be paid by the Sellers.
5.17 Customers and Suppliers. Except as described in Section 5.17 of the
-----------------------
Disclosure Schedule or as disclosed in any Parent SEC Reports, since October 31,
2000 there has not been any change in the business relationship of the Seller
with any Principal Client or with any Supplier that, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect. "Supplier" means any supplier from whom the Seller purchased more than
five percent (5%) of the goods or services (on a consolidated basis) which it
purchased during the period between January 1, 2000 and October 31, 2000.
Contemporaneously with the execution of this Agreement, the Sellers provided the
Buyer with a true and complete list of the one hundred and fifty (150) largest
clients of the Business by revenue for the period of January 1, 2000 to October
31, 2000 (the "Principal Clients").
5.18 Personnel. The Sellers have previously provided to the Buyer a
---------
true, correct and complete list of: (i) the names and current salaries of all
officers and employees of the Sellers engaged in the conduct of the Business,
and (ii) the wage rates for non-salaried and non-executive salaried employees of
the Sellers engaged in the conduct of the Business by classification (the
"Employee Schedule").
5.19 Conduct of Activities. Each of the Parent and the Seller is a
---------------------
debtor in its Chapter 11 Case. All of the operations of the Business are
operated by the Seller.
21
5.20 Condition and Sufficiency of the Equipment. The equipment that
------------------------------------------
constitutes any part of the Purchased Assets is in good operating condition and
repair (except for normal wear and tear), and such equipment is adequate for the
uses to which it is being put, and none of such Purchased Assets are in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. Except as set forth in Section 5.20 of the
Disclosure Schedule, the Purchased Assets are sufficient for the continued
conduct of the Business after the Closing by the Buyer in substantially the same
manner as conducted prior to the Closing.
ARTICLE VI
[Intentionally Omitted]
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Sellers as follows:
7.1 Organization, Etc. Buyer is a corporation duly organized, validly
------------------
existing and in good standing under the laws of the State of Delaware. Buyer has
full corporate power and authority to carry on its business and to own its
properties. Buyer is duly qualified or authorized to do business as a foreign
corporation in each jurisdiction in which such qualification is required, except
where the failure to be so qualified would not, individually or in the
aggregate, have a material adverse effect on the ability of Buyer to consummate
the transactions contemplated hereby.
7.2 Authorization, Etc. Buyer has full corporate capacity, power and
-------------------
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby in accordance with the terms
of this Agreement. The board of directors and stockholders of Buyer have taken
all action required by law and Buyer's Certificate of Incorporation and By-Laws
to authorize the execution and delivery of this Agreement by Buyer and the
consummation by Buyer of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Buyer. Assuming that it constitutes a
valid and binding obligation of the Sellers and Buyer, this Agreement will
constitute a valid and binding obligation of Buyer, enforceable in accordance
with its terms, subject to enforcement of bankruptcy, reorganization,
moratorium, insolvency and other laws of general applicability relating to or
affecting creditors' rights and general equity principles (regardless of whether
such enforceability is considered in a proceeding in equity or law).
7.3 No Violation. Except as set forth on Section 7.3 of the Disclosure
------------
Schedule, neither the execution or delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (a) violate any
provisions of the Certificate of Incorporation or By-Laws of Buyer, (b) violate
any statute, law, judgment, decree, order, regulation or rule of any court or
governmental authority applicable to Buyer or (c) violate, or be in conflict
with, or constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or cause the acceleration of the
maturity of any debt or obligation pursuant to, any agreement or commitment to
which Buyer is a party or by
22
which Buyer is bound, except in the case of clauses (b) and (c) for such
violations, conflicts, defaults, terminations and accelerations, which would not
in the aggregate materially interfere with or delay the consummation by Buyer of
the transactions contemplated by this Agreement.
7.4 Litigation. As of the date hereof, there are no actions, suits or
----------
proceedings by or before any Governmental Entity pending, or, to the knowledge
of Buyer, threatened against Buyer which challenge the validity of this
Agreement or any action taken by Buyer pursuant to this Agreement or in
connection with the transactions contemplated hereby.
7.5 Consents and Approvals. Except for any filings pursuant to the HSR
----------------------
Act, approvals or authorizations which may be required under the Bankruptcy Code
and other filings to be made by Buyer and the consents and approvals to be
obtained by Buyer as set forth in Section 7.5 of the Disclosure Schedule, no
consent, approval, certificate, license, permit, waiver, authorization of, or
declaration, filing or registration with, any third party or any Governmental
Entity is required in connection with the execution, delivery and performance by
Buyer of this Agreement or the consummation by Buyer of the transactions
contemplated hereby (other than consents, approvals, licenses, permits, waivers,
authorizations, declarations, filings and registrations which, if not obtained
or made, would not, individually or in the aggregate, materially interfere with
or delay the consummation by Buyer of the transactions contemplated by this
Agreement).
7.6 Brokers and Finders. No broker or finder has acted directly or
-------------------
indirectly for Buyer in connection with this Agreement or the transactions
contemplated hereby.
ARTICLE VIII
COVENANTS OF THE PARTIES
8.1 Access. From and after the date hereof until the Closing, the
------
Sellers, upon reasonable advance notice by the Buyer, will afford to the Buyer
and its counsel, accountants, and other representatives reasonable access during
normal business hours to the plants, information technology systems, management,
offices, warehouses, properties, books and records (including all employee
records) of the Sellers reasonably requested by the Buyer, to the extent
provision of such access or information is not prohibited by applicable law and
relates to the Business or the Purchased Assets and will furnish (subject to
applicable law) as promptly as practicable to the Buyer any and all such
information as the Buyer may reasonably request, including, but not limited to,
all pleadings and other documents or schedules filed with the Bankruptcy Court
or the Office of the United States Trustee; provided, however, that such access
-------- -------
and information will not constitute an enlargement of, or any addition to the
representations and warranties of, the Sellers expressly set forth herein.
8.2 Conduct of Business. Subject to any obligations as debtors-in-
-------------------
possession under the Bankruptcy Code and except as otherwise contemplated herein
or in the Transition Services Agreement or as set forth on Section 8.2 of the
Disclosure Schedule, or with the prior consent of Buyer, not to be unreasonably
withheld, from the date of this Agreement to the Effective Time, the Sellers
will use their reasonable efforts to conduct the Business consistent with the
ordinary and normal course existing prior to the date of this Agreement and
preserve their relationships (such as they exist on the date hereof) with their
customers and suppliers and will use reasonable efforts to
23
retain the services of their officers, employees and agents. In addition, from
the date of this Agreement to the Effective Time, without the prior written
consent of the Buyer, not to be unreasonably withheld, the Sellers will not:
(a) (i) make any loans, advances or capital contributions to, or
investments in, any other person other than short-term investments of cash on
hand in the ordinary course of business; or (ii) except in the ordinary course
of business consistent with past practice, mortgage or pledge any Purchased
Assets or create or suffer to exist any Lien thereupon;
(b) enter into, adopt or (except as may be required by law) amend
or terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement, trust,
plan, fund or other arrangement for the benefit or welfare of any director,
officer or employee (except, in the case of employees who are not officers or
directors, for normal compensation increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense), increase in any manner
the compensation or benefits of any director, officer or employee or pay to such
persons any benefit not required by any plan or arrangement as in effect as of
the date hereof (including, without limitation, the granting of stock options,
restricted stock, stock appreciation rights or performance units);
(c) except with respect to any competing bid for the Purchased
Assets in the Chapter 11 Case that is approved by the Bankruptcy Court, acquire,
sell, lease or dispose of any Purchased Assets outside the ordinary course of
business which in the aggregate are material to the Business or enter into or
amend any contract, agreement, commitment or transaction outside the ordinary
course of business;
(d) (i) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof; (ii) authorize any new capital expenditure or expenditures
which, individually, is in excess of five hundred thousand dollars ($500,000)
or, in the aggregate, are in excess of one million dollars ($1,000,000) to the
extent that such capital expenditure or expenditures relates to the Purchased
Assets, could reasonably be expected to, individually or in the aggregate,
result in a Lien on the Purchased Assets or could reasonably be expected to
result in any liability to the Buyer following the Closing Date; (iii) settle
any litigation for amounts in excess of the greater of five hundred thousand
dollars ($500,000) or the amount reserved therefor individually or one million
dollars ($1,000,000) in the aggregate to the extent that such litigation relates
to the Purchased Assets, could reasonably be expected to, individually or in the
aggregate, result in a Lien on the Purchased Assets or could reasonably be
expected to result in any liability to the Buyer following the Closing Date; or
(iv) enter into or amend any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(e) make any Tax election, settle or compromise any Tax liability
or change any method of Tax accounting to the extent such action would have a
Material Adverse Effect following the Closing Date;
24
(f) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in the Sellers' financial
statements (or the notes thereto) or incurred in the ordinary course of business
consistent with past practice to the extent such action could reasonably be
expected to have a Material Adverse Effect following the Closing Date;
(g) terminate, modify, amend or waive compliance with any provision
of, any of the Contracts, or fail to take any reasonable action necessary to
preserve the benefits of any of the Section 365 Assumed Rights;
(h) revalue any Purchased Assets; or
(i) take, or agree in writing to take, any of the actions described
above in this Section 8.2 of this Agreement.
8.3 Confidentiality.
---------------
(a) Each Seller covenants that, after the Closing, it will not, nor
will it permit any of its subsidiaries to, without the prior written consent of
the Buyer, disclose to any person confidential information relating to or
concerning the Purchased Assets or the Business (the "Confidential
Information"), except to its subsidiaries and their respective officers,
directors, employees, advisors and representatives who need to know such
information for purposes of taxes, accounting, legal and other matters necessary
in respect of Seller's ownership, prior to the Effective Time, of the Purchased
Assets. In the event that the Sellers or any of their affiliates are requested
or required by subpoena, civil investigative demand, interrogatories, requests
for information, or other similar process to disclose any Confidential
Information, the Sellers will provide the Buyer with prompt notice of such
request or demand or other similar process so that the Buyer may, at their sole
cost, seek an appropriate protective order or, if such request, demand or other
similar process is not mandatory, waive the Sellers or their affiliates'
compliance with the provisions of this Section 8.3, as appropriate. For purposes
of this Section 8.3, the Sellers and their subsidiaries will include any of
their respective directors, officers, employees and representatives.
(b) The restrictions and prohibitions set forth in subsection (a)
above will not apply to Confidential Information that (i) is known by the
receiving party at the time of its receipt, other than through a prior
disclosure by any of the Sellers or their subsidiaries not otherwise permitted
under this Section 8.3, (ii) at the time of disclosure is already available in
the public domain other than as a result of a breach of this Section 8.3, (iii)
is disclosed by either of the Sellers or any subsidiary thereof in order to
permit the Sellers to perform their obligations or enforce their rights under
this Agreement (provided, that, such disclosure entails only the minimum
-------- ----
information required to be disclosed in order to perform their obligations or
enforce their rights under this Agreement), or (iv) is required to be disclosed
by applicable law or judicial order (provided, that, such disclosure entails
only the minimum information required to be disclosed in order to comply with
the law or order).
(c) This Section 8.3 will survive the Closing indefinitely.
25
8.4 Consents and Approvals. The Sellers and the Buyer will use their
----------------------
reasonable efforts to obtain at the earliest practicable date and prior to the
Closing all governmental and non-governmental consents, approvals,
authorizations and waivers required in connection with the transactions
contemplated hereby, including, without limitation, all clearances under the HSR
Act and any Bankruptcy Court approvals, consents and orders required to
consummate the transactions contemplated hereby (collectively, "Approvals"), and
will provide to each other copies of each such Approval promptly after it is
obtained. The parties will furnish to each other such necessary information and
reasonable assistance as each may request in connection with their preparation
of necessary filings or submissions to any Governmental Entity, including,
without limitation, any filings necessary under the provisions of the HSR Act
and any other required filings in any jurisdiction. Except as otherwise
expressly set forth in the Bid Procedures, the Sellers will use their reasonable
best efforts to obtain from the Bankruptcy Court all orders, consents and
approvals necessary to consummate the transactions contemplated by this
Agreement.
8.5 Covenants Not to Compete. Each of the Sellers and their respective
------------------------
subsidiaries will not at any time during the five (5) year period immediately
following the Effective Time, directly or indirectly, in sole proprietorship, in
any partnership or joint venture, or as owner of an equity interest in any
corporation, limited liability company or other business entity (other than the
ownership of five percent (5%) or less of the outstanding equity securities of
any publicly-traded corporation or entity), or as an agent of or consultant to
any of the foregoing: (i)(A) engage in any business of substantially the same
character as the Business, or provide any services of substantially the same
character as the services provided by the Business, to any of the Principal
Clients anywhere in the world; or (B) engage in the business of providing field-
based hardware and operating systems infrastructure and integration services
anywhere in the world, or (ii) actively solicit or attempt to solicit for
employment any person who is, at the time of such solicitation, employed by the
Buyer as an executive, manager, professional, supervisor or in any other
managerial capacity, or induce or attempt to induce any such person to terminate
his or her employment with the Buyer; provided, however, that such
noncompetition and non-solicitation agreement will in no way prohibit either the
Seller or the Parent or any subsidiary or affiliate thereof from employing or
contracting for services of any such person who voluntarily and without
solicitation from any of the Seller, the Parent or any subsidiary, other than a
general solicitation to the public (including, without limitation, any job fairs
or advertising to fill one or more positions in any newspaper of general
solicitation or industry publication on a basis consistent with past practice),
seeks or requests direct or contractual employment with the Seller, the Parent
or any subsidiary or affiliate thereof.
8.6 Employee Matters.
----------------
(a) The Sellers and Buyer agree that the Transferred Employees will
receive credit for their service with Buyer following the Effective Time, for
purposes of the Sellers' Retention and Severance Plan (the "Retention and
Severance Plan"), and that Buyer or Sellers, as the case may be, will pay each
Transferred Employee a retention bonus (a "Retention Bonus Payment") in
accordance with the terms of the Retention and Severance Plan to the extent such
Transferred Employee remains employed by Buyer as set forth immediately below.
Sellers shall take all actions which are reasonably necessary and appropriate,
including without limitation, providing any required notice to employees of the
Seller and seeking any necessary approval of the Bankruptcy
26
Court, to (i) implement the actions described in the first sentence of this
Section 8.6(a) and (ii) confirm that Transferred Employees will be ineligible to
receive severance payments as a result of the sale of the Purchased Assets or at
any time after the Effective Time under any plan or policy, including without
limitation, the Retention and Severance Plan. Buyer will assume and be
responsible for the payment of up to the first $2,624,457 of Retention Bonus
Payments and the Sellers will retain liability and be responsible for any
Retention Bonus Payments in excess of such amount.
(b) Effective as of the Effective Time, Buyer will offer employment
to those employees of the Sellers set forth on the Employee Schedule selected by
Buyer in its sole discretion who are actively employed at the Effective Time
(including those employees, if any, on sick leave or short-term leave of absence
as of the Effective Time), on terms and conditions no less favorable in the
aggregate than those provided to similarly situated employees of Buyer. Buyer,
in its sole discretion, may also offer employment to additional employees of the
Sellers engaged in conduct of the Business hired after the date hereof in the
ordinary course of business, as disclosed to Buyer. Buyer agrees that it will
provide the Sellers with a list of those employees of Sellers to whom Buyer will
make offers no later than two (2) days prior to the Effective Time. Each such
employee who accepts Buyer's offer of employment will hereinafter be referred to
as a "Transferred Employee." Seller acknowledges and agrees that after the day
of this Agreement and prior to Closing, Buyer shall have the right to meet with
those employees of the Seller set forth on the Employee Schedule for the
purposes of discussing with such employees possible employment with Buyer,
extending offers of employment to such employees (contingent on and effective
only on or after the Closing) and transitional issues relating to transferring
the Business to Buyer.
(c) The Sellers will take any action that may be necessary or
appropriate to ensure that each Transferred Employee is one hundred percent
(100%) vested in his or her account balance under all applicable savings plans
of the Sellers (the "Sellers Savings Plans") as of the Effective Time and will
cause the trustee of each applicable Seller Savings Plan to pay such account
balance to such Transferred Employee or his or her beneficiary in accordance
with the terms of the Seller Savings Plan.
(d) With respect to employee pension, welfare and fringe benefits
provided by Buyer to Transferred Employees as of the Effective Time, (i) Buyer
will use commercially reasonable efforts to provide that service with the Seller
credited as service for purposes of the Sellers' plans, policies, programs,
agreements and arrangements, will be recognized for purposes of participation,
eligibility and vesting, but not for purposes of benefit accrual, under Buyer's
plans, policies, programs, agreements and arrangements and (ii) Buyer will use
commercially reasonable efforts to cause its benefit providers to waive all
waiting periods and pre-existing condition requirements under any plans that
have any such requirements or restrictions. Without limiting the foregoing,
Buyer agrees that it will assume all of the accrued but unused vacation days,
and up to five (5) days of earned but unused sick days, credited to each
Transferred Employee under the applicable vacation and sick leave policies of
Sellers as of the Effective Time; it being understood that each Transferred
Employee will accrue vacation days and earn sick days for service following the
Effective Time in accordance with the applicable vacation and sick leave
policies of Buyer and
27
that each Transferred Employee will only be allowed to use or be paid for unused
vacation days and sick days assumed by Buyer in accordance with the policies of
Buyer.
(e) The obligation to pay all benefits, including, without
limitation, health, dental, life, accidental death and disability, and related
benefits, which are payable to current or former employees of the Seller under
the Business Benefit Plans and, in the case of Transferred Employees, that
arise, are incurred or are based on events that occur on or prior to the
Effective Time (whether or not claims for such benefits are submitted on or
prior to the Effective Time) will remain the responsibility of the Sellers.
Buyer will be responsible for all benefits that are payable to Transferred
Employees hired by Buyer under the terms of Buyer's benefit plans and that
arise, are incurred or are based on events that occur after the Effective Time;
provided, however, except as specifically provided by Section 8.6(a), that the
-------- -------
Buyer will not be responsible for any Retention Bonus Payment that becomes due
to any Transferred Employee following the Effective Time and the Sellers will
retain the liability to make such payments in accordance with Section 8.6(a)
hereto. For the purpose of this Section 8.6(e), the term "events" means the item
that is the subject matter of the claim (i.e., medical services, layoff,
----
vacation, etc.) but not the condition or injury leading to the filing of the
claim. Buyer will not assume or be responsible for any liability in respect of
any benefits that are payable at any time to, or in respect of, current or
former employees of the Seller not employed by Buyer at any time on or after the
Effective Time. For the avoidance of doubt, the Sellers will continue to provide
disability and other benefits coverage, if applicable, to any Transferred
Employee who is unable to report to work with Buyer as of the Effective Time due
to short- or long-term disability until such employee returns to work for Buyer.
(f) After the Closing, Buyer and the Sellers will each provide the
other on a continuing basis at no cost to the other such information regarding
Transferred Employees who are employed by Buyer as the other reasonably requests
in order to permit proper administration of benefit plans applicable to such
employees, provided, however, that (i) any consents or releases from such
-------- -------
Transferred Employees, to the extent required by applicable law, must have been
obtained, and (ii) provision of such information is not prohibited by applicable
law.
(g) To the extent assignable without the consent of any party
thereto (other than Sellers) and without Bankruptcy Court approval, Sellers
agree to assign and transfer to Buyer at Closing all of Sellers' rights under
any confidentiality, non-disclosure, non-solicitation, non-competition or
similar agreements between Sellers and any of the Transferred Employees of which
Seller has knowledge (after reasonable investigation). To the extent that Buyer
may seek to obtain Bankruptcy Court approval for the assignment of any such
agreement to Buyer, Sellers will, upon request of Buyer and at Buyer's expense,
provide reasonable assistance to Buyer in such regard. Effective upon the
termination of any Transferred Employee's employment with Buyer, whether by
Buyer or by such Transferred Employee, and provided that Seller or Parent is in
existence at such time, Buyer hereby assigns and transfers to Sellers all of
Buyer's rights under any confidentiality, non-disclosure, non-solicitation, non-
competition or similar agreement between Sellers and such Transferred Employee
that were previously assigned and transferred to Buyer pursuant to this
Subsection (g). Sellers agree, upon request of Buyer and at Buyer's expense, to
take such actions as may be reasonably necessary to enforce any confidentiality
or non-disclosure (but not any non-solicitation, non-competition) agreements
between Sellers and those employees of Seller who do not
28
become Transferred Employees in order to protect Buyer's interest in the
Purchased Assets; provided, however, that nothing in this Subsection (g) shall
-------- -------
prohibit Sellers or their affiliates from rejecting any employment contract to
which such entity and any such employee are parties.
8.7 Consummation of Transactions. Each of the parties to this Agreement
----------------------------
will use its commercially reasonable efforts to cause all conditions set forth
in Article IX and X to be satisfied.
8.8 Tax Matters.
-----------
(a) The Sellers will be responsible for and will indemnify and hold
the Buyer harmless from and against all sales, use, transfer (including, without
limitation, real estate transfer), stamp duty, recording, value added, and other
similar taxes and fees, including, without limitation, all bulk sales taxes
("Transfer Taxes"), arising out of or in connection with the transactions
contemplated by this Agreement. The party which has the primary responsibility
under applicable law for the payment of any particular Transfer Tax will prepare
and file the relevant Tax Return, pay the Transfer Taxes shown on such Tax
Return, and notify the other party in writing of the Transfer Taxes shown on
such Tax Return and how such Transfer Taxes were calculated, and if the other
party is the Sellers, the Sellers will reimburse the Buyer for the amount of
such Transfer Taxes in immediately available funds within ten (10) days of
receipt of such notice. The Buyer and the Sellers will cooperate and take any
and all actions necessary to claim the benefit of any exemption from Transfer
Taxes that may be available, including, without limitation, in accordance with
Section 12.15 of this Agreement.
(b) The Buyer and the Sellers will furnish or cause to be furnished
to each other, upon request, as promptly as practicable, such information and
assistance relating to the Purchased Assets (including, without limitation,
access to books and records) as is reasonably necessary for the filing of all
Tax Returns, and making of any election related 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 Return. The Buyer and the Sellers will
retain all books and records with respect to Taxes pertaining to the Purchased
Assets for a period of at least six (6) years following the Effective Time;
provided, however, that the parties hereto will be entitled to terminate their
-------- -------
obligations pursuant to this sentence by transferring such books and records (or
true and complete copies thereof) to the other parties hereto (at the other
parties' expense). At the end of such period, each party will provide the other
with at least thirty (30) days' prior written notice before destroying any such
books and records, during which period the party receiving such notice may elect
to take possession, at its own expense, of such books and records. The Buyer and
the Sellers will cooperate with each other in the conduct of any audit or other
proceeding related to Taxes and each will execute and deliver such powers of
attorney and other documents as are necessary to carry out the intent of this
Section 8.8(b).
(c) Prior to the Closing, the Buyer and the Sellers will agree on a
schedule which sets forth the allocation of the Purchase Price among the
Purchased Assets. The parties will follow such purchase price allocation for
purposes of filing Internal Revenue Service Form 8594 and all Tax Returns and
for all other Tax purposes, and will not voluntarily take any position
inconsistent therewith (including, without limitation, in any audit or judicial
or administrative proceeding). Each party hereto will prepare and timely file
all applicable Internal Revenue Service and other forms, to
29
cooperate with the other party in the preparation of such forms, and to furnish
the other party with a copy of such forms prepared in draft, within a reasonable
period before the filing due date thereof.
(d) For the purposes of clarity: (i) the Buyer will be responsible
for, and will indemnify and hold the Sellers harmless from and against, all
Taxes attributable to the Purchased Assets for all taxable years or periods
beginning after the Effective Time (the "Post-Closing Taxes"); (ii) the Sellers
will be responsible for, and will indemnify and hold the Buyer harmless from and
against, all Taxes attributable to the Purchased Assets for all taxable years or
periods ending at or before the Effective Time (including, without limitation,
any income, franchise or other similar Taxes imposed on the Sellers arising from
the transactions contemplated by this Agreement); and (iii) Taxes attributable
to any Straddle Period will be calculated and allocated between the Sellers and
the Buyer, in the case of income, payroll, sales, franchise and other similar
Taxes, pursuant to a closing of the books method as if the relevant taxable
period ended at the Effective Time, and in the case of property and other
similar taxes pursuant to a per diem method.
8.9 Transitional Services Agreement. At the Closing Date, the Buyer and
-------------------------------
each of the Sellers will enter into a Transitional Services Agreement in the
form of Exhibit D (the "Transitional Services Agreement").
---------
8.10 Disclosure Schedule Supplements. From time to time prior to the
-------------------------------
Closing, the Sellers will promptly supplement or amend the Disclosure Schedule
with respect to any matter hereafter arising which if existing or occurring at
the date of this Agreement, would have been required to be set forth or
described in the Disclosure Schedule. No such supplement or amendment of the
Disclosure Schedule will be deemed to cure any breach of any representation or
warranty made in this Agreement or to affect the conditions to the obligations
of the parties under this Agreement.
8.11 No-shop Clause. From the date hereof until termination of this
--------------
Agreement, the Sellers will not, and will not permit any person acting for or on
behalf of the Sellers to, without the prior written consent of the Buyer,
solicit offers to buy the Business or the Purchased Assets (other than sales of
Inventory in the ordinary course of business).
8.12 Financing. The Sellers will provide to the Buyer all reasonable
---------
cooperation in connection with the arrangement of the Financing and any other
financing to be consummated contemporaneous with or after the Closing in respect
of the transactions contemplated by this Agreement. "Financing" means the
financing required to consummate the transactions contemplated by this
Agreement, including without limitation, any financing required to meet the
Buyer's increased working capital requirements as a result of the transactions
contemplated by this Agreement and financing for the payment of all transaction
fees and expenses associated with the transactions contemplated by this
Agreement.
8.13 Bankruptcy Court Approval.
-------------------------
(a) The Sellers will use commercially reasonable efforts to obtain
the Section 363/365 Order no later than December 31, 2000. The Section 363/365
Order will be substantially in the form attached to this Agreement as Exhibit A
---------
(with such changes thereto proposed by the Sellers as the Buyer in its sole
discretion accept).
30
(b) Subject to the Bid Procedures Order, the Sellers will promptly
make any filings, take all actions, and use reasonable efforts to obtain any and
all other approvals and orders necessary or appropriate for consummation of the
transactions contemplated hereby, subject to their obligations to comply with
any order of the Bankruptcy Court.
(c) In the event an appeal is taken, or a stay pending appeal is
requested or reconsideration is sought, from the Section 363/365 Order, the
Sellers will immediately notify the Buyer of such appeal or stay request and
will provide to the Buyer within one business day a copy of the related notice
of appeal or order of stay or application for reconsideration. The Sellers will
also provide the Buyer with written notice, (and copies of) any other or further
notice of appeal, motion or application filed in connection with any appeal from
or application for reconsideration of, either of such orders arid any related
briefs.
8.14 Bankruptcy Notices. The Sellers will notify, as is required by the
------------------
Bankruptcy Code and the Buyer, all parties entitled to notice of all motions,
notices and orders required to consummate the transactions contemplated by this
Agreement, including, without limitation, the Section 363/365 Motion and the
Section 363/365 Order, as modified by orders in respect of notice which may be
issued at any time and from time to time by the Bankruptcy Court.
8.15 Bid Procedures. Sellers (a) will conduct the auction process in
--------------
accordance with the Open Auction Procedures of the Bid Procedures provided for
in the Bid Procedures Order entered by the Bankruptcy Court on December 13, 2000
and (b) will not amend, waive, modify or supplement in any material respect the
Bid Procedures except as set forth herein or therein or as required by the
Bankruptcy Court.
8.16 [Intentionally Omitted]
8.17 [Intentionally Omitted]
8.18 [Intentionally Omitted]
8.19 Transfer of Lockbox Account, Servicing of Lockbox Account.
---------------------------------------------------------
(a) The parties agree that at the Closing the Sellers will transfer
control of the Lockbox Account to Buyer. The parties hereto acknowledge that
certain of the funds thereafter deposited in the Lockbox Account will be
generated from the payment of trade and vendor accounts receivable of the
Business that are not Eligible Accounts Receivable or Eligible Vendor Accounts
Receivable ("Retained Receivables"). In determining whether or not a payment
relates to a Retained Receivable, payments received from a customer on or after
the Closing Date will be applied to the unpaid trade or vendor accounts
receivable of such customer (other than those with respect to which valid
offsets have been claimed by such customer for promotions payable and customary
customer cash discounts to the extent of such valid offsets) in the order of the
dates of the invoices (i.e., the earliest dated invoices will be deemed to have
been paid first). Notwithstanding the immediately preceding sentence, if,
without solicitation from the Buyer, a customer designates in writing a
different application at the time of payment or submits with a payment a
different invoice of such customer, or a different application is clearly
established from the timing and amount of a payment,
31
then the application of such payment will be as so designated, or to the trade
or vendor accounts receivable evidenced by such different invoice or as so
clearly established, as the case may be. Buyer will provide the Sellers with a
weekly aging of the Retained Receivables on the last day of each week and will
promptly pay to the Seller all amounts received by Buyer in respect of the
Retained Receivables.
(b) Subject to the Sellers' confidentiality obligations under Section 7.3
of this Agreement, the Sellers and their representatives will have reasonable
access from time to time after the Closing to Buyer's books and records relating
to the Retained Receivables and Lockbox Account for purposes of verifying the
status of the payment or sale of such Retained Receivables.
(c) On and after the Closing Date, the Buyer will have the sole
irrevocable right and authority to collect, for the Buyer's own account and sole
benefit, all monies or credits payable in respect of the Purchased Assets, no
matter how or when earned. If any of the Sellers or any affiliate thereof
receive any such monies or credit memos, it will hold all such monies or credit
memos in trust for the sole benefit of the Buyer. Promptly after receipt
thereof, the Sellers will cause the transfer and delivery to the Buyer of any
monies, credit memos or other property which any such Sellers may receive after
the Closing Date in payment in respect of the Purchased Assets, including
without limitation, the Eligible Vendor Accounts Receivable, the Eligible Trade
Accounts Receivable or the Inventory. Each of the Sellers authorizes the Buyer
to endorse in such Seller's name all notes, checks, draft money orders or other
instruments of payment or utilize credit memos in respect of the foregoing which
may come into the possession of the Buyer, and each of the Sellers hereby
ratifies all that the Buyer may lawfully do or cause to be done by virtue
hereof.
8.20 Intellectual Property Assets. If at any time during the one hundred
----------------------------
and fifty (150) day period after the Effective Time, the Buyer determines that
the Sellers or their respective subsidiaries own or have the right to use any
Business Intellectual Property (other than Excluded Assets) that was not
conveyed to the Buyer pursuant to this Agreement ("Retained Intellectual
Property") and that such Intellectual Property is required for the Buyer to
continue to operate the Business in the manner in which it had previously been
conducted by the Sellers, the Buyer will provide notice of such determination to
the Sellers. The Sellers will transfer, convey, assign and deliver (or cause to
be transferred conveyed assigned and delivered) to the Buyer, for no
consideration, all of the right, title and interest of the Sellers and their
respective subsidiaries in and to such Retained Intellectual Property. If the
Sellers use such Retained Intellectual Property in the operation of its
business, the Buyer will reasonably cooperate with the Seller in any lawful and
feasible arrangement reasonably satisfactory to the Buyer (which may include a
royalty free license) designed to provide the Sellers (at the sole cost and
expense of Sellers) with the right to continue to use such Retained Intellectual
Property; provided, that, any such arrangement will not include any profit for
-------- ----
the Buyer.
8.21 Cooperation Regarding Financial Statements. In connection with any
------------------------------------------
filings to be made by Buyer under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, with respect to or as a result of
the transactions contemplated by this Agreement, Sellers shall (a) provide to
Buyer the financial and other information and documents pertaining to the
Business that Buyer will be required by applicable Securities and Exchange
Commission rules
32
and regulations to include in its filings (including audited financial
statements of the Sellers), (b) cause the accountants and management for Sellers
to deliver such consents, management representations and reports in and provide
access to files and work papers in connection therewith as Buyer or its
accountants may reasonably request and to otherwise provide assistance as Buyer
may require and (c) cooperate with Buyer in connection therewith. Buyer agrees
to pay for any incremental out-of-pocket professional accounting fees incurred
by Sellers which Sellers would not have otherwise incurred in enabling Buyer to
timely meet Buyer's Securities Exchange Commission filing requirements. Sellers
agree promptly following execution of this Agreement to engage their outside
auditors to begin preparation of the financial statements of Sellers that Buyer
will need to comply with such filing requirements.
8.22 Transition Leases. For the period commencing on the Closing Date and
-----------------
expiring on March 31, 2001 (the "Transition Period"), Sellers shall use their
commercially reasonable efforts to provide Buyer with full access to and use of
the premises covered by the specific leases set forth in Section 8.22 of the
Disclosure Schedule (collectively, the "Transition Leases"), subject to the
terms of the Transition Leases, to permit Buyer to continue conducting the
operation of the Business, as conducted by Seller on the Closing Date, from such
premises; provided, however, that such access to and use of such premises shall
-------- -------
be subject to the following:
(a) Buyer shall pay to Seller, on the first day of each calendar
month during the Transition Period, the full amount of rent payable by Seller
under each Transition Lease for such calendar month, notwithstanding that Buyer
may occupy the premises covered by such Transition Lease for less than the full
duration of such month; provided, however, that for purposes of the month of
-------- -------
January 2001, Buyer shall only be required to pay to Seller, at Closing, a
prorated amount of rent for each Transition Lease in respect of the remaining
number of days in such month, commencing on, and including, the first day after
the Closing Date;
(b) Buyer shall promptly, and in any event within ten (10) days after
demand or receipt of invoice therefor together with reasonable documentation
thereof, reimburse Sellers for all other payments required to be made by Sellers
or their affiliates under any Transition Lease during or in respect of the
Transition Period, including, without limitation, taxes, utilities, maintenance
and insurance costs;
(c) Interest shall accrue on any late payment required under
Subsection (a) or Subsection (b) at the rate of eighteen per cent (18%) per
annum;
(d) Buyer shall at all times during the Transition Period and during
any subsequent holdover period comply in all respects with the terms and
conditions of each Transition Lease, and Sellers and their agents shall be
entitled at any time during normal business hours during the Transition Period,
upon twenty-four (24) hours' prior written notice to Buyer, to enter upon and
inspect any of the premises covered by the Transition Leases to ensure Buyer's
compliance with such terms and conditions;
(e) Buyer shall indemnify, defend and hold harmless Sellers and their
affiliates, and Sellers' and such affiliates' respective directors, officers,
employees, agents and representatives from and against any and all claims,
liabilities, obligations, losses, costs, interest, rents, expenses,
33
penalties, fines, judgments (at equity or at law) and damages whenever and
howsoever arising or incurred (including, without limitation, amounts paid in
settlement of claims, costs of investigation and reasonable attorneys' fees and
expenses) arising out of, relating to or in respect of Buyer's access to or use
of any such premises pursuant to the provisions of this Agreement;
(f) The parties hereto agree that Buyer's access to and use and
occupancy of the premises covered by the Transition Leases pursuant to this
Section 8.22 shall not constitute a sublease or assignment of any Transition
Lease to Buyer. However, to the extent that a sublease or assignment of any
Transition Lease could be construed from this Section 8.22, Buyer solely shall
be obligated to obtain any consent or approval required of the landlord or
lessor under any Transition Lease that may be required in respect of such
sublease or assignment, and Sellers make no representation or warranty
concerning the necessity for obtaining any such consent or approval.
ARTICLE IX
CONDITIONS TO THE BUYER'S OBLIGATIONS
The obligation of the Buyer under this Agreement to consummate the Closing
is subject to the satisfaction, on or before the Closing, of each of the
following conditions, unless waived in writing by the Buyer:
9.1 Representations and Warranties. The representations and warranties of
------------------------------
the Sellers contained in this Agreement shall be true and correct in all
respects (in the case of any representation or warranty qualified as to
materiality) or in all material respects (in the case of any representation or
warranty not so qualified) at and as of the date hereof and at and as of the
Closing Date with the same effect as though such representations and warranties
were made at and as of the Closing Date, except (i) for changes expressly
contemplated by this Agreement and (ii) that representations and warranties
given as of a specific date or time shall be true and correct in all respects
(in the case of any representation or warranty qualified as to materiality) or
in all material respects (in the case of any representation or warranty not so
qualified) as of such date or time.
9.2 Performance. The Sellers shall have performed and complied in all
-----------
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Closing.
9.3 No Injunction. There shall not be any statute, rule or regulation,
-------------
enjoining or prohibiting the consummation of the Closing and no court of
competent jurisdiction shall have issued, and there shall not have been
commenced and be continuing any action by any Governmental Entity seeking, any
order, decree or ruling enjoining or prohibiting the consummation of the
Closing.
9.4 Governmental Authorizations. All waiting periods applicable to this
---------------------------
Agreement and the transactions contemplated hereby under the HSR Act shall have
expired or been terminated and all other authorizations, consents, orders and
approvals of Governmental Entities and of the Bankruptcy Court necessary for the
consummation of the transactions contemplated by this Agreement shall have been
obtained.
34
9.5 [Intentionally Omitted]
9.6 Material Adverse Change. Since October 31, 2000, there shall not have
-----------------------
been a change that has had or could reasonably be expected to have a material
adverse effect on the operations of the Business or the Purchased Assets.
9.7 Bankruptcy Court Approval. The Section 363/365 Order shall have been
-------------------------
entered by the Bankruptcy Court and such order shall not have been stayed,
modified, reversed or amended in any manner adverse to the Buyer; and the
Sellers shall have received from the Bankruptcy Court all other orders,
approvals and consents required to transfer the Purchased Assets and to
consummate the transactions contemplated by this Agreement, and the Buyer shall
have received evidence thereof satisfactory to the Buyer and its counsel.
9.8 Certificates. The Sellers shall have furnished the Buyer with a
------------
certificate of an executive officer or member, as the case may be, of the
Sellers to the effect that the conditions set forth in Sections 9.1 and 9.2
hereof have been satisfied.
9.9 Transitional Services Agreement. The Buyer and the Sellers shall have
-------------------------------
entered into the Transitional Services Agreement and such agreement shall be in
full force and effect.
9.10 [Intentionally Omitted]
9.11 [Intentionally Omitted]
9.12 [Intentionally Omitted]
9.13 [Intentionally Omitted]
9.14 Third Party Consents. All other consents and approvals of third
--------------------
parties necessary to assign and transfer the Purchased Assets to the Buyer shall
have been received by the Sellers and delivered to the Buyer at or prior to the
Closing Date.
ARTICLE X
CONDITIONS TO THE SELLERS' OBLIGATIONS
The obligation of the Sellers under this Agreement to consummate the
Closing are subject to the satisfaction, on or before the Closing, of each of
the following conditions, unless waived in writing by the Sellers:
10.1 Representations and Warranties. The representations and warranties of
------------------------------
the Buyer contained in this Agreement shall be true and correct in all respects
(in the case of any representation or warranty qualified as to materiality) or
in all material respects (in the case of any representation or warranty not so
qualified) at and as of the date hereof and at and as of the Closing Date with
the same effect as though such representations and warranties were made at and
as of the Closing Date, except (i) for changes expressly contemplated by this
Agreement and (ii) that representations and warranties given as of a specific
date or time, which shall be true and correct in all respects (in the
35
case of any representation or warranty qualified as to materiality) or in all
material respects (in the case of any representation or warranty not so
qualified) as of such date or time.
10.2 Performance. The Buyer shall have performed and complied in all
-----------
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Closing.
10.3 No Injunction. There shall not be any statute, rule or regulation,
-------------
enjoining or prohibiting the consummation of the Closing and no court of
competent jurisdiction shall have issued, and there shall not have been
commenced and be continuing any action by any Governmental Entity seeking, any
order, decree or ruling enjoining or prohibiting the consummation of the
Closing.
10.4 Governmental Authorizations. All waiting periods applicable to this
---------------------------
Agreement and the transactions contemplated hereby under the HSR Act shall have
expired or been terminated and all other authorizations, consents, orders and
approvals of Governmental Entities and the Bankruptcy Court necessary for the
consummation of the transactions contemplated by this Agreement shall have been
obtained.
10.5 Certificates. The Buyer shall have each furnished the Sellers with a
------------
certificate of an executive officer of Buyer to the effect that the conditions
set forth in Sections 10.1 and 10.2 hereof have been satisfied.
10.6 Transitional Services Agreement. The Buyer shall have executed and
-------------------------------
delivered the Transitional Services Agreement and such agreement shall be in
full force and effect.
10.7 Bankruptcy Court Approval. The Section 363/365 Order shall have been
-------------------------
entered by the Bankruptcy Court and such order shall not have been stayed,
modified, reversed or amended; and the Sellers shall have received from the
Bankruptcy Court all other orders, approvals and consents required to transfer
the Purchased Assets and to consummate the transactions contemplated by this
Agreement, and the Sellers shall have received evidence thereof satisfactory to
the Sellers and their counsel.
ARTICLE XI
TERMINATION AND ABANDONMENT
11.1 Methods of Termination. This Agreement may be terminated:
----------------------
(a) by mutual written agreement of the Sellers and the Buyer prior to
the Closing Date;
(b) by Sellers or the Buyer if a Competing Transaction is approved by
the Bankruptcy Court, whether or not in accordance with the Bid Procedures as
the same may be modified by order of the Bankruptcy Court;
36
(c) at any time before the Closing, by either of the Buyer if any of the
conditions set forth in Article IX shall have become incapable of fulfillment or
cure and shall not have been waived by the Buyer, provided that the Buyer is not
then in breach of this Agreement;
(d) at any time before the Closing, by the Sellers if any of the
conditions set forth in Article X shall have become incapable of fulfillment or
cure and shall not have been waived by the Sellers, provided that the Sellers
are not then in breach of this Agreement;
(e) at any time after February 1, 2001, by the Sellers if the Closing
fails to occur on or before such date, unless such failure is due to the action
or inaction of, or breach of this Agreement by, the Sellers;
(f) at any time after February 1, 2001, by Buyer if the Closing fails to
occur on or before such date, unless such failure is due to the action or
inaction of, or breach of this Agreement by, the Buyer;
(g) [Intentionally Omitted]
(h) at any time after December 31, 2000, by Sellers or by the Buyer if by
such date the Section 363/365 Order has not been entered;
(i) by the Sellers if the Closing has not occurred as the result of the
failure of the Buyer to consummate the transactions contemplated by this
Agreement within ten (10) days after the satisfaction of the conditions set
forth in Article VIII, provided that Sellers are ready to close;
(j) by the Buyer if the Closing has not occurred as the result of the
Sellers failure to consummate the transactions contemplated by this Agreement
within ten (10) days after the satisfaction of the conditions set forth in
Article IX, provided that the Buyer is ready to close; or
(k) by Buyer in the event of a material breach of the covenants contained
in Section 8.5.
11.2 Effect of Termination.
---------------------
(a) If this Agreement is terminated under Section 11.1, written
notice thereof will forthwith be given to the other party and this Agreement
will thereafter become void and have no further force and effect and, except for
those provisions that expressly survive the termination of this Agreement, all
further obligations of the Sellers and the Buyer to each other under this
Agreement will terminate without further obligation or liability of the Sellers
or the Buyer to the other, except that:
(i) if each party will return all documents, work papers and
other material of any other party relating to the transactions contemplated by
this Agreement, whether so obtained before or after the execution of this
Agreement, to the party furnishing the same, and all confidential information
received by any party to this Agreement with respect to the business of any
other party
37
will be treated in accordance with the letter agreement between the Parent and
Buyer, dated August 1, 2000, as amended by Addendum to Non-Disclosure Letter
dated as of December 5, 2000;
(ii) [Intentionally Omitted]
(iii) if this Agreement is terminated by Sellers pursuant to
Section 11.1(i), provided that the Sellers either have satisfied or are
reasonably likely to satisfy the conditions set forth in this Agreement which
are within the Sellers' control to satisfy, then the Buyer will be liable to the
Sellers for any damages resulting from such breach, including, without
limitation, reasonable fees and expenses incurred by the Sellers in connection
herewith;
(iv) if this Agreement is terminated by the Buyer pursuant to
Section 11.1(j), provided that the Buyer has either satisfied or is reasonably
likely to satisfy the conditions set forth in this Agreement which are within
the Buyer's control to satisfy, then the Sellers will be jointly and severally
liable to the Buyer for any damages resulting from such breach, including,
without limitation, reasonable fees and expenses incurred by the Buyer in
connection herewith; and
(v) this Section 11.2(a) will survive any termination of this
Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of each of the Sellers and the Buyer contained in this Agreement will
not survive the Closing, and no party will have any liability therefor after the
Closing.
12.2 Execution in Counterparts. This Agreement may be executed in two or
-------------------------
more counterparts, in original form or by facsimile, each of which shall be
deemed an original, but all of which together will constitute one and the same
document.
12.3 Notices. All notices, requests, demands and other communications that
-------
are required or may be given pursuant to the terms of this Agreement must be in
writing and delivered by hand, fax, or reputable overnight courier service as
follows:
If to Buyer: CompuCom Systems, Inc.
c/o ▇▇. ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
38
With a copy to: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇▇ & Price, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Sellers: MicroAge, Inc.
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party may have designated by notice in writing
to the other parties. Any such notice, request, demand or communication, (i) if
sent by a reputable overnight courier service will be effective on the first
business day after deposit of such notice, request, demand or communication with
such reputable overnight courier service, and (ii) if sent by fax will be
effective on the date of such fax transmission or if such transmission is not
made on a business day, then on the first business day after the date of such
transmission, provided that any such transmission is confirmed by written
transmission confirmation printout.
12.4 Waivers. At any time prior to the Closing, any party hereto may (i)
-------
extend the time for the performance of any of the obligations or other acts of
the other party hereto, (ii) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements or
conditions contained herein subject to any specific provisions governing the
-------
effect of such extensions or waivers. Any agreement on the part of a party
hereto to any such extension or waiver will be valid only if set forth in a
written instrument signed on behalf of such party.
12.5 Amendment. This Agreement may be modified, supplemented, amended only
---------
by a written instrument executed by all of the parties hereto.
12.6 Entire Agreement. This Agreement (together with the other agreements,
----------------
sections of the Disclosure Schedule and Exhibits expressly identified or
referred to in this Agreement) constitutes the entire agreement of the parties
with respect to its subject matter, and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to its subject
matter.
39
12.7 APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
--------------
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY
OF THE CONFLICT OF LAW RULES THEREOF.
12.8 FORUM FOR DISPUTES. THE BANKRUPTCY COURT WILL HAVE JURISDICTION
------------------
OVER ANY AND ALL DISPUTES BETWEEN OR AMONG THE PARTIES HERETO, WHETHER IN LAW OR
EQUITY, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY AGREEMENT
CONTEMPLATED HEREBY; PROVIDED, THAT IF THE BANKRUPTCY COURT IS UNWILLING OR
UNABLE TO HEAR ANY SUCH DISPUTE, THE COURTS OF THE STATE OF DELAWARE AND THE
FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF DELAWARE
WILL HAVE SOLE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN OR AMONG THE
PARTIES HERETO, WHETHER IN LAW OR EQUITY, ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY AGREEMENT CONTEMPLATED HEREBY.
12.9 Relationship of the Parties. The relationship between each of the
---------------------------
Sellers and the Buyer established by this Agreement is solely that of vendor and
vendee and nothing contained herein will be deemed to create a joint venture
among the Buyer and each of the Sellers. No party, its agents or employees will
be deemed the agent or servant of another party and no party will have the right
or authority to enter into any contract or commitment, in the name of or on
behalf of the other party, or purport to bind the other party in any manner
whatsoever.
12.10 Headings. The headings contained in this Agreement are for the sole
--------
purpose of convenience of reference, and will not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.
12.11 Assignments.
-----------
(a) This Agreement may not be assigned by any party without the prior
written consent of the other party, which consent will not be unreasonably
withheld; provided, that without such prior consent, the Buyer have the right to
-------- ----
assign all or any part of their right, title, interest or obligations in and to
this Agreement to any corporation or other entity, or any affiliate of such
corporation or other entity, directly or indirectly controlling or controlled by
or under direct or indirect common control with the Buyer. Notwithstanding
anything to the contrary set forth herein, the Buyer and their affiliates may
assign and transfer to any entity providing financing for the transactions
contemplated by this Agreement (or any refinancing of such financing) as
security for such financing all of the interest, rights and remedies of such
parties in, to and with respect to this Agreement. All parties to this Agreement
and their assigns expressly consent to such assignment. Any such assignment will
be made for collateral security purposes only and will not release or discharge
the Buyer from any obligations it may have pursuant to this Agreement.
Notwithstanding the foregoing, the Buyer may (i) authorize and empower such
financing sources to assert, either directly or on behalf of the Buyer, any
claims the Buyer may have against any other party to this Agreement under this
Agreement and (ii) make, constitute and appoint one agent bank in respect of
such financing (and all officers, employees and agents designated by such agent)
as the true and
40
lawful attorney and agent-in-fact of such party for the purpose of enabling the
financing sources to assert and collect any such claims.
(b) Notwithstanding anything to the contrary in this Agreement,
without the prior consent of the Sellers, after the Closing the Buyer will have
the right to sell, transfer, assign, or otherwise dispose of all or any part of
their right, title, interest or obligations in and to any of the Purchased
Assets (either directly through an asset sale or indirectly through a sale of
stock or securities) to any acquiring person or entity and the Sellers each
agrees that it will continue to perform all of its covenants, agreements and any
other obligations, if any, as specified in this Agreement with respect to any of
the Purchased Assets so sold, transferred, assigned or otherwise disposed of.
12.12 Binding Effect, Benefits. This Agreement is for the benefit of, and
------------------------
is binding upon, the parties to it and their respective permitted successors and
permitted assigns. Nothing contained in this Agreement, express or implied, is
intended to confer upon any person other than the parties to it and their
respective successors and permitted assigns, any rights or remedies under or by
reason of this Agreement.
12.13 Severability. If any provision of this Agreement is held to be
------------
invalid or unenforceable, such provision will (so far as invalid or
unenforceable) be given no effect and will be deemed to be excluded from this
Agreement, but without invalidating any of the remaining provisions of this
Agreement.
12.14 All Obligations Joint and Several. Whenever this Agreement provides
---------------------------------
for an obligation of the Sellers, such obligation will be deemed to have been
intended as, and to be interpreted and enforced as, a joint and several
obligation of each of the Sellers.
12.15 Transfer Taxes. In accordance with section 1146(c) of the Bankruptcy
--------------
Code, the making or delivery of any instrument of transfer under a plan
confirmed under section 1129 of the Bankruptcy Code will not be taxed under any
law imposing a stamp tax or similar tax. The instruments transferring the
Purchased Assets to the Buyer will contain the following endorsement (if
permitted by applicable law):
Because this instrument has been authorized pursuant to Order of the
United States Bankruptcy Court for the District of Arizona relating to
a plan of reorganization of the Grantor, it is exempt from transfer
taxes, stamp taxes or similar taxes pursuant to 11 U.S.C. (S) 1146(c).
In the event Transfer Taxes are assessed at Closing or at any time thereafter on
the transfer of any Purchased Assets, such Taxes incurred as a result of the
transactions contemplated hereby will be paid by the Sellers. The Buyer and the
Sellers will cooperate in providing each other with any appropriate resale
exemption certifications and other similar documentation.
12.16 Plan of Reorganization. The Sellers will use their best efforts to
----------------------
include in any plan of reorganization in any of the Chapter 11 Cases supported
by it provision for the assumption of this
41
Agreement and all agreements related to this Agreement, and will use its best
efforts to oppose any such plan of reorganization which fails to include such
provisions.
[Remainder of Page Intentionally Left Blank]
42
IN WITNESS WHEREOF, this Agreement has been executed by duly authorized
officers of each of the parties all as of the date first above written.
COMPUCOM SYSTEMS, INC.
By:_____________________________________
Name:
Title:
MICROAGE TECHNOLOGY SERVICES, L.L.C.
By:_____________________________________
Name:
Title:
MICROAGE, INC.
By:_____________________________________
Name:
Title:
43