EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
BY AND BETWEEN
KENT ELECTRONICS CORPORATION
AND
▇▇▇▇▇▇-▇▇▇▇ FUNDING II, L.L.C.
Dated as of October 10, 2000
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Table of Contents
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Page
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ARTICLE I TRANSFER OF REAL PROPERTY; SALE OF SHARES; CLOSING........................... 1
SECTION 1.1 Transfer of Real Property and Other Assets........................... 1
SECTION 1.2 Purchase of Shares................................................... 2
SECTION 1.3 Purchase Price....................................................... 2
SECTION 1.4 Purchase Price Adjustment............................................ 2
SECTION 1.5 Closing.............................................................. 4
SECTION 1.6 Closing Deliveries................................................... 4
SECTION 1.7 Certain Assignments.................................................. 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER................................ 7
SECTION 2.1 Organization and Qualification....................................... 7
SECTION 2.2 Company Capitalization............................................... 7
SECTION 2.3 Authority Relative to Agreement...................................... 8
SECTION 2.4 No Violation......................................................... 8
SECTION 2.5 Consents and Approvals............................................... 9
SECTION 2.6 Company Financial Statements......................................... 9
SECTION 2.7 Accounts Receivable.................................................. 9
SECTION 2.8 Inventory............................................................ 10
SECTION 2.9 Absence of Changes................................................... 10
SECTION 2.10 Undisclosed Liabilities.............................................. 11
SECTION 2.11 Litigation........................................................... 12
SECTION 2.12 Tax Matters.......................................................... 12
SECTION 2.13 Employee Benefit Plans............................................... 13
SECTION 2.14 Employment Matters................................................... 15
SECTION 2.15 Customers............................................................ 15
SECTION 2.16 Suppliers............................................................ 15
SECTION 2.17 Environmental Compliance............................................. 15
SECTION 2.18 Title to Properties; Encumbrances.................................... 16
SECTION 2.19 Permits and Licenses................................................. 17
SECTION 2.20 Contracts; No Defaults............................................... 17
SECTION 2.21 Affiliated Transactions.............................................. 19
SECTION 2.22 Brokers' Fees........................................................ 19
SECTION 2.23 Compliance with Law.................................................. 19
SECTION 2.24 Intellectual Property................................................ 19
SECTION 2.25 Accounts; Lockboxes; Safe Deposit Boxes.............................. 20
SECTION 2.26 FCPA................................................................. 20
SECTION 2.27 Insurance............................................................ 20
SECTION 2.28 Disclaimer of Additional and Implied Warranties...................... 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............................ 20
SECTION 3.1 Organization and Qualification....................................... 20
SECTION 3.2 No Prior Business Activity........................................... 21
SECTION 3.3 Authority Relative to Agreement...................................... 21
SECTION 3.4 No Violation......................................................... 21
SECTION 3.5 Consents and Approvals............................................... 21
SECTION 3.6 Purchaser Capitalization............................................. 22
SECTION 3.7 Accredited Investor.................................................. 22
SECTION 3.8 Investment Purposes.................................................. 22
SECTION 3.9 Restricted Securities................................................ 22
SECTION 3.10 Disclaimer of Additional and Implied Warranties...................... 22
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Table of Contents
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(continued)
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ARTICLE IV ADDITIONAL AGREEMENTS....................................................... 22
SECTION 4.1 Books and Records.................................................... 22
SECTION 4.2 Covenants With Respect to Employees and Employee Benefit Plans....... 23
SECTION 4.3 Purchaser Covenant with Respect to Applied Materials Guaranty, Letter
of Credit and NESLAB Guaranty........................................ 25
SECTION 4.4 Audited Historical Financial Statement Assistance.................... 26
ARTICLE V TAX MATTERS.................................................................. 26
SECTION 5.1 Tax Sharing Agreements............................................... 26
SECTION 5.2 Section 338(h)(10) Election.......................................... 26
SECTION 5.3 Indemnification for Post-Closing Transactions........................ 27
SECTION 5.4 Post-Closing Transactions Not in the Ordinary Course................. 27
SECTION 5.5 Allocation of Purchase Price......................................... 27
SECTION 5.6 Conveyance Taxes..................................................... 28
ARTICLE VI REMEDIES.................................................................... 28
SECTION 6.1 Indemnification by Seller............................................ 28
SECTION 6.2 Indemnification by Purchaser and the Company......................... 30
SECTION 6.3 Proceedings.......................................................... 30
SECTION 6.4 Notice and Defense of Third-Party Claims............................. 30
SECTION 6.5 Litigation and Environmental Matters................................. 31
SECTION 6.6 Limitations of Liability............................................. 32
SECTION 6.7 Exclusive Remedies................................................... 34
SECTION 6.8 Treatment of Indemnity Provisions.................................... 35
SECTION 6.9 Payment of Indemnification Obligation................................ 35
SECTION 6.10 Consent/Approval Losses.............................................. 35
SECTION 6.11 Asset Drop Down and Subsidiary Losses................................ 36
ARTICLE VII SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS...................... 36
SECTION 7.1 Survival of Representations and Warranties........................... 36
SECTION 7.2 Survival of Covenants................................................ 36
ARTICLE VIII MISCELLANEOUS............................................................. 37
SECTION 8.1 Expenses............................................................. 37
SECTION 8.2 Public Announcements................................................. 37
SECTION 8.3 Brokers and Finders.................................................. 37
SECTION 8.4 Entire Agreement; Assignment......................................... 37
SECTION 8.5 No Assignment; Binding Effect........................................ 37
SECTION 8.6 Amendment and Modification........................................... 37
SECTION 8.7 Waiver; Consents..................................................... 37
SECTION 8.8 Further Assurances................................................... 38
SECTION 8.9 Severability......................................................... 38
SECTION 8.10 Notices.............................................................. 38
SECTION 8.11 Governing Law........................................................ 39
SECTION 8.12 Jurisdiction and Venue............................................... 39
SECTION 8.13 Descriptive Headings................................................. 39
SECTION 8.14 Parties in Interest; No Third-Party Beneficiary...................... 40
SECTION 8.15 Counterparts......................................................... 40
SECTION 8.16 Incorporation by Reference........................................... 40
SECTION 8.17 Certain Definitions.................................................. 40
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EXHIBITS
EXHIBIT A Note.................................................. A-1
EXHIBIT B Adjustment Note....................................... B-1
EXHIBIT C Transitional Services Agreement....................... C-1
EXHIBIT D Post-Closing Lease.................................... D-1
EXHIBIT E Non-Competition Agreement............................. E-1
EXHIBIT F Environmental Laws.................................... F-1
SCHEDULES
Schedule 1.1 - Transferred Real Property and Assigned Contracts and Leases
Schedule 1.4(d) - Closing Net Assets Calculation
Schedule 2.1 - Organization and Qualification
Schedule 2.4 - No Violation
Schedule 2.5 - Consents and Approvals
Schedule 2.6 - Company Financial Statements
Schedule 2.7 - Accounts Receivable
Schedule 2.9 - Absence of Changes
Schedule 2.10 - Undisclosed Liabilities
Schedule 2.11 - Litigation
Schedule 2.12 - Tax Matters
Schedule 2.13 - Employee Benefit Plans
Schedule 2.14 - Employment Matters
Schedule 2.15 - Customers
Schedule 2.16 - Suppliers
Schedule 2.17 - Environmental Compliance
Schedule 2.18 - Title to Properties and Encumbrances
Schedule 2.19 - Permits and Licenses
Schedule 2.20 - Contracts; No Defaults
Schedule 2.21 - Affiliated Transactions
Schedule 2.22 - Brokers' Fees
Schedule 2.23 - Compliance with Law
Schedule 2.24 - Intellectual Property
Schedule 2.25 - Accounts; Lockboxes; Safe Deposit Boxes
Schedule 2.27 - Insurance
Schedule 3.6 - Purchaser Capitalization Schedule
Schedule 4.1 - Retained Records
Schedule 4.2 - Employees
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of October
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10, 2000, by and between Kent Electronics Corporation, a Texas corporation (the
"Seller"), and ▇▇▇▇▇▇-▇▇▇▇ Funding II, L.L.C., a Delaware limited liability
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company (the "Purchaser").
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RECITALS
WHEREAS, the Seller is the owner of 1,000 shares of the issued and
outstanding shares of common stock, $.01 par value per share (the "Common
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Stock"), of K*TEC Electronics Corporation, a Delaware corporation (the
"Company"), and such Common Stock constitutes all of the issued and outstanding
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capital stock (of all classes) of the Company;
WHEREAS, the Purchaser desires to purchase from the Seller, and the Seller
desires to sell to the Purchaser, all such shares of Common Stock (the "Shares")
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upon the terms and conditions set forth herein;
WHEREAS, the Seller is making certain representations, warranties,
covenants and indemnities herein as an inducement to the Purchaser to enter into
this Agreement, and the Purchaser is making certain representations, warranties,
covenants and indemnities herein as an inducement to the Seller to enter into
this Agreement; and
WHEREAS, capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to them in Section 8.17.
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NOW, THEREFORE, in consideration of the recitals and the respective
representations, warranties, covenants and indemnities contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereby agree as follows:
ARTICLE I
TRANSFER OF REAL PROPERTY; SALE OF SHARES; CLOSING
SECTION 1.1 Transfer of Real Property and Other Assets.
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(a) Transfer of Real Property and Leases. Before the transfer of the
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Shares to the Purchaser in accordance with Section 1.2, the Seller has
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transferred to the Company good and indefeasible title to the real property (and
any improvements thereon) described on Schedule 1.1 (the "Transferred Real
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Property") pursuant to the Deeds (as defined below), and the Seller has assigned
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to the Company the contracts and leases described on Schedule 1.1 (the "Assigned
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Contracts and Leases") pursuant to the Assignment (as defined below).
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(b) Drop Down of Assets. After the transfer of the Transferred Real
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Property and Assigned Contracts and Leases described in Section 1.1(a) and
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before the transfer of the Shares to the Purchaser in accordance with Section
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1.2, the Company has transferred to one or more
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non-corporate Company subsidiaries, all of which are directly or indirectly
wholly-owned by the Company and have not conducted business prior to the
transfers of the assets contemplated by this Section 1.1(b) (collectively, the
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"Non-Corporate Subsidiaries"), certain of its assets (the "Asset Drop Down").
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SECTION 1.2 Purchase of Shares. Subject to the terms and conditions of
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this Agreement, the Seller hereby sells to the Purchaser, and the Purchaser
hereby purchases from the Seller, all of the Seller's right, title and interest
in the Shares on the Closing Date (as defined below).
SECTION 1.3 Purchase Price. Subject to the terms and conditions of this
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Agreement, and as consideration for the Shares, the Purchaser shall pay to the
Seller the aggregate sum of $225,000,000 (the "Purchase Price"). The Purchase
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Price shall be paid by the Purchaser to the Seller as follows: (i) at the
Closing (as defined below), the Purchaser shall pay to the Seller $175,000,000,
less any amount previously or contemporaneously paid to the Seller from the
funds held in escrow pursuant to the Escrow Agreement, by wire transfer of
immediately available funds, and (ii) at the Closing, the Purchaser, as maker,
shall execute and deliver to the Seller, as payee, the note in the original
principal amount of $50,000,000 attached hereto as Exhibit A (the "Note"), and
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the Note shall be secured by the execution and delivery of a deed of trust (the
"Deed of Trust") and one or more security agreements (collectively, the
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"Security Agreement"), and guaranteed by the execution and delivery of a
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Guaranty (the "Guaranty"), each executed by the Company or one or more of the
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Non-Corporate Subsidiaries in favor of the Seller. The Purchase Price shall be
adjusted after the Closing Date in accordance with Section 1.4.
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SECTION 1.4 Purchase Price Adjustment.
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(a) The Purchase Price shall be adjusted in the amount equal to the Net
Asset Adjustment. For purposes hereof, the "Net Asset Adjustment" shall equal
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the difference of (i) the Closing Net Assets (as defined in Section 1.4(d)) as
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of 11:59 p.m. on October 7, 2000 minus (ii) $177,000,000 (the "Net Asset
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Threshold"). If the Net Asset Adjustment is positive (i.e., Closing Net Assets
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are greater than the Net Asset Threshold), the Purchase Price shall be increased
by the amount of the Net Asset Adjustment. Any such positive Net Asset
Adjustment shall be paid by the execution and delivery by the Purchaser to the
Seller within five days of the Determination Date (as defined below) of a note
in the original principal amount of the Net Asset Adjustment, in the form
attached hereto as Exhibit B (the "Adjustment Note"), which shall bear interest
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at the Stated Rate (as defined in the Note) from the Closing Date and shall be
guaranteed by the Company and one or more of its Non-Corporate Subsidiaries
under the Guaranty. If the Net Asset Adjustment is negative (i.e., if Closing
Net Assets are less than the Net Asset Threshold), the Purchase Price shall be
decreased by the amount of the Net Asset Adjustment. Any such negative Net
Asset Adjustment shall be made by a reduction to the principal amount of the
Note, such reduction to be effective as of the Closing Date. If the Note is no
longer outstanding on the Determination Date, or has been assigned by the Seller
as permitted under the Note, any such negative Net Asset Adjustment shall be
made by a cash payment by the Seller to the Purchaser of the amount of the Net
Asset Adjustment, plus interest from the Closing Date at
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the Stated Rate. Any such reduction of the Note or payment shall be made within
five days of the Determination Date.
(b) Within 60 days after the Closing Date, the Seller will provide the
Purchaser with a reasonably detailed calculation of the Net Asset Adjustment for
the Purchaser's review and approval (the "Calculation"). The Calculation shall
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be deemed to be final and conclusive and agreed to by the Purchaser and the
Seller, and shall be the basis for the Net Asset Adjustment provided for in
Section 1.4(a), unless the Purchaser gives written notice to the Seller, within
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90 days of the Purchaser's receipt of the Calculation, that Purchaser disputes
the Calculation. The Purchaser and the Seller shall attempt, within 30 days
after any such dispute notice is given, to resolve such dispute. If the parties
are unable to resolve such dispute within such 30 days, the Purchaser and the
Seller shall resolve the dispute in accordance with the procedure set forth in
Section 1.4(c).
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(c) If the parties do not agree on the amount of the Net Asset Adjustment
within 30 days after a dispute notice is given (as described in Section 1.4(b)),
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they shall engage the Houston office of Ernst & Young LLP for the limited
purpose of resolving only the disagreements of the parties with respect to the
Calculation, provided that all determinations made by such accounting firm shall
be made in accordance with this Section 1.4. The determinations of such
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accounting firm shall be conclusive and binding on the parties, and the fees and
expenses of such accounting firm shall be divided equally between the Seller and
the Purchaser. For purposes hereof, "Determination Date" shall mean the date on
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which the final determination of the Net Asset Adjustment is made in accordance
with either Section 1.4(b) or Section 1.4(c).
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(d) For the purpose of Section 1.4, the Company's "Closing Net Assets"
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means the excess of the assets of the Company over the liabilities of the
Company as of 11:59 p.m. on October 7, 2000, determined in accordance with GAAP,
except as set forth on Exhibit C, and on a basis consistent with the Company's
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preparation of the Balance Sheet (as defined below); provided, however, that (i)
the Company's assets shall not include any cash or trading securities (other
than ▇▇▇▇▇ cash and checking accounts associated with branch offices of the
Company); (ii) the Company's liabilities shall not include any liabilities for
"held checks"; (iii) the Company's inventory shall be valued based on the
Standard Cost Method, and the amount of such inventory shall be determined
solely based on the values and amounts reflected in the Books and Records (as
defined below) of the Company without any physical count of such inventory,
provided that the amount of such inventory as reflected in the Books and Records
shall be increased or decreased, as appropriate, if and only if, the aggregate
amount of all Clerical Inventory Errors (the "Inventory Adjustment") (which
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Inventory Adjustment shall be calculated by taking into account all Clerical
Inventory Errors that either increase or decrease the amount of such inventory)
exceeds $100,000, and in such event, the Company's inventory shall be increased
or decreased, as appropriate, by the full amount of the Inventory Adjustment;
(iv) the Company's capitalized overhead variances which have not been allocated
to specific parts shall not exceed $1,000,000; (v) the Company's Accounts
Receivable (as defined below) (other than the Company's Accounts Receivable from
Applied Materials, Inc. which shall not be governed by this clause (v), but
instead shall be governed by clause (vi)) as reflected in the
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Company's Books and Records shall be reduced, if, and only if, the Company is
required, in accordance with GAAP, to establish an allowance for doubtful
receivables in excess of $1,000,000, and in such event, the Company's Accounts
Receivable shall be reduced only by the amount of such allowance for doubtful
receivables in excess of $1,000,000; (vi) the Company's Accounts Receivable from
Applied Materials, Inc. as of October 7, 2000 (the "Applied Materials
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Receivables") as reflected in the Company's Books and Records shall be reduced
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by fifty percent of the amount of any of the Applied Materials Receivables that
the Company agrees to write off before the Determination Date in settlement of
the Company's dispute with Applied Materials, Inc. as to the amount of the
Applied Materials Receivables; (vii) the loss of any leasehold improvements due
to the termination of the related lease as a result of the transactions
contemplated by this Agreement shall not result in an adjustment to Closing Net
Assets; (viii) the Company's assets and liabilities shall not include any
federal, state, local or foreign Taxes attributable to the Section 338(h)(10)
Election (as defined below); (ix) the Transferred Real Property shall have a
value of $3,178,000 as reflected on the Balance Sheet as of the Balance Sheet
Date; (x) the value of all assets transferred by the Seller to the Company as
contemplated by this Agreement is reflected in the Balance Sheet as of the
Balance Sheet Date, except for the value of the deposits under certain leases;
(xi) the Company's Closing Net Assets shall not include any capitalized leases;
and (xii) the Company's Closing Net Assets shall not include any intercompany
accounts between the Seller and the Company. An example of the calculation of
Closing Net Assets as of August 26, 2000 is set forth on Schedule 1.4(d) hereto.
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SECTION 1.5 Closing. The purchase and sale of the Shares (the "Closing")
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provided for in this Agreement shall take place at the offices of ▇▇▇▇▇ Liddell
& ▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. For purposes of this
Agreement, the "Closing Date" shall be October 10, 2000.
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SECTION 1.6 Closing Deliveries.
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(a) The Seller will deliver to the Purchaser or the Company, at the
Closing, the following instruments, each executed by the Seller or the Company
or the Non-Corporate Subsidiaries, as appropriate:
(i) the deeds transferring the Transferred Real Property to the
Company (collectively, the "Deeds");
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(ii) an assignment transferring the Assigned Contracts and Leases to
the Company (the "Assignment");
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(iii) one or more deeds, bills of sale, assignments or other
conveyances to effect the Asset Drop Down;
(iv) the certificate(s) representing the Shares duly endorsed by the
Seller for transfer to the Purchaser;
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(v) the transitional services and system sharing agreement attached
hereto as Exhibit C (the "Transitional Services Agreement");
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(vi) the lease(s) between the Seller and the Company or one or more
of the Non-Corporate Subsidiaries attached hereto as Exhibit D
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(collectively, the "Post-Closing Lease");
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(vii) the resignation of each director and officer of the Company,
effective at the Closing (unless agreed otherwise in writing by the
Purchaser);
(viii) the non-competition agreement between the Company and the
Seller attached hereto as Exhibit E (the "Non-Competition Agreement");
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(ix) an opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, counsel to the Seller,
in a form reasonably acceptable to the Purchaser;
(x) an opinion of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to the
Seller, in a form reasonably acceptable to the Purchaser;
(xi) officer's certificates executed by an officer of each of the
Company and the Seller in a form reasonably acceptable to the Purchaser;
and
(xii) such additional instruments or documents as the Purchaser shall
have reasonably requested to evidence the consummation of the transactions
contemplated by this Agreement; provided that the Seller shall not be
required to provide any third-party consents, waivers or approvals.
(b) The Purchaser will deliver to the Seller, at the Closing, the cash
portion of the Purchase Price and the following instruments, each executed by
the Purchaser, the Company or one or more of the Non-Corporate Subsidiaries, as
appropriate:
(i) the Note;
(ii) the Deed of Trust;
(iii) the Security Agreement;
(iv) the Guaranty;
(v) the Transitional Services Agreement;
(vi) the Post-Closing Lease;
(vii) the Non-Competition Agreement;
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(viii) an opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to the Purchaser, in a
form reasonably acceptable to the Seller;
(ix) an opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel to the Purchaser, in
a form reasonably acceptable to the Seller;
(x) an officer's certificate executed by an officer of the
Purchaser in a form reasonably acceptable to the Seller; and
(xi) such additional instruments or documents as the Seller shall
have reasonably requested to evidence the consummation of the transactions
contemplated by this Agreement.
(c) The agreements, instruments and documents referred to in this Section
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1.6 and any other agreements, instruments or documents executed and delivered in
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connection with this Agreement are collectively referred to as the "Transaction
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Documents".
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SECTION 1.7 Certain Assignments. Except as provided in this Section 1.7,
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Section 6.10 or Section 6.11, the Seller shall not have any obligation under
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this Agreement with respect to any failure to obtain any third party consent,
waiver or approval that is required for transfer of any of the Assigned
Contracts and Leases or any other lease or contract and the Purchaser, the
Company or its Non-Corporate Subsidiaries shall be or remain liable with respect
to, and indemnify the Seller against any liability in respect of, any of such
Assigned Contracts and Leases or other lease or contract for which any such
third party consent, waiver or approval is not obtained. If (x) any required
consent, waiver or approval to the direct or indirect transfer or assignment to
the Purchaser, the Company or its Non-Corporate Subsidiaries of any Assigned
Contracts and Leases or other lease or contract is not obtained, (y) an
attempted transfer or assignment would be ineffective or would adversely affect
the rights of the Seller, the Purchaser, the Company or its Non-Corporate
Subsidiaries thereunder so that the Purchaser, the Company or its Non-Corporate
Subsidiaries would not receive substantially all of such rights, or (z) any
lease or contract is assigned to the Company or its Non-Corporate Subsidiaries
pursuant to the provisions hereof and the other contracting party thereafter
raises objections to the assignment and refuses to allow the Company or its Non-
Corporate Subsidiaries to perform the lease or contract on the terms therein
provided, or threatens to terminate the lease or contract or ▇▇▇ for damages,
the Purchaser, the Company or its Non-Corporate Subsidiaries and the Seller, as
appropriate, shall cooperate in any arrangement the Purchaser may reasonably
request to provide for the Purchaser the benefits under such lease or contract.
If any consent, waiver or approval of any Person is required for any such
transfer or assignment and is not obtained, then at the request of the Purchaser
the Seller shall take all reasonable and appropriate steps ("Actions") to
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provide the Purchaser, the Company or its Non-Corporate Subsidiaries the
benefits under any such lease or contract in accordance with the terms thereof
(provided such Actions are not prohibited by the terms of such lease or
contract) including, without limitation, (i) entering into subcontracts,
sublicenses, subleases, sale and leasebacks, use and service agreements or other
contractual arrangements which will provide such benefits to the Purchaser's
reasonable satisfaction, and (ii) enforcing, at the expense of the Purchaser and
for the benefit of the Purchaser, any and all rights
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of the Company, its Non-Corporate Subsidiaries or the Seller against the other
party thereto arising out of the breach or cancellation thereof by such party or
otherwise. If any request is made of the Seller pursuant to this Section 1.7 or
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the Seller is required to take any Action as provided herein, then any material
expense of complying with such request or taking such Action shall be borne by
the Purchaser, except to the extent provided in Section 6.10 or Section 6.11.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller makes the representations and warranties set forth in this
Article II to the Purchaser. Notwithstanding anything to the contrary herein,
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Purchaser acknowledges and agrees that none of the representations and
warranties set forth in Sections 2.6, 2.8, 2.9(b), 2.9(g), 2.9(k), 2.9(p)(as
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such subsection relates to Sections 2.9(b),(g) and (k)), 2.18, 2.20 and 2.21
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shall be deemed inaccurate or breached solely because certain of the Company's
assets shall be owned by the Non-Corporate Subsidiaries as a result of the Asset
Drop Down. In addition, references to the Company shall be deemed to be
references to an applicable Non-Corporate Subsidiary where the context so
requires. The Seller has delivered to the Purchaser the Schedules to this
Agreement referred to in this Article II on the date hereof and such Schedules
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have been reviewed and accepted by the Purchaser. The Schedules shall be
arranged to correspond to the Sections contained in this Article II, and the
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disclosures in any Schedule shall qualify only (a) the corresponding Section of
this Article II and (b) other Sections of this Article II to the extent that
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either (i) a Schedule includes a specific cross reference to another Schedule or
(ii) it is clear (notwithstanding the absence of a specific cross reference)
from a reading of the disclosure that such disclosure is applicable to such
other Sections.
SECTION 2.1 Organization and Qualification. The Company is duly
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incorporated, validly existing and in good standing under the laws of the State
of Delaware. The Company has all requisite corporate power and authority to
carry on its business as it has been and is now being conducted, and to own,
lease and operate its properties and assets, and to perform all its obligations
under the agreements and instruments to which it is a party or by which it is
bound. The Company is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each state or other jurisdiction in
which the properties and assets owned, leased or operated by it or the nature of
the business conducted by it make such qualification necessary, except in such
jurisdictions where the failure to be duly qualified or in good standing, either
alone or together with any other such failure, does not and could not reasonably
be expected to result in a Material Adverse Effect on the Company. Each such
jurisdiction in which the Company is so qualified is listed on Schedule 2.1.
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Except for the Non-Corporate Subsidiaries, the Company has no Subsidiaries. The
Company is not a member of (nor is any part of its business conducted through)
any partnerships, nor is it a participant in any joint venture or similar
arrangement.
SECTION 2.2 Company Capitalization.
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(a) The authorized capital stock of the Company consists of 3,000 shares
of Common Stock, of which 1,000 shares of Common Stock are issued and
outstanding, and no shares of
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Common Stock are held in treasury. There are no outstanding subscriptions,
options, phantom stock, convertible securities, rights, warrants, calls,
irrevocable proxies or other agreements or commitments of any kind directly or
indirectly obligating the Company to issue any security of or equity interest in
the Company, or irrevocable proxies or any agreements restricting the transfer
of or otherwise relating to any security or equity interest in the Company. All
of the Shares have been duly authorized, validly issued and are fully paid and
nonassessable, and are free of preemptive rights and constitute all of the
issued and outstanding capital stock of the Company.
(b) The Seller (i) owns, beneficially and of record, the Shares, free and
clear of any and all liens, claims and encumbrances, (ii) is in rightful
possession of duly and validly authorized and issued certificates evidencing its
ownership of record of such Shares and (iii) has full right, power and authority
to sell, transfer, convey and deliver to the Purchaser, in accordance with the
terms of this Agreement, indefeasible title to all such Shares, free and clear
of all liens, claims and encumbrances. Upon consummation of the transactions
contemplated in this Agreement, Purchaser will acquire good, valid and
indefeasible title to the Shares, free and clear of all liens, claims and
encumbrances, and the Shares will be fully paid and non-assessable.
SECTION 2.3 Authority Relative to Agreement. The Seller has all requisite
-------------------------------
corporate power and authority to execute, deliver and perform this Agreement,
and no further corporate proceedings on the part of the Seller are necessary to
consummate the transactions contemplated hereby, which have been duly and
validly authorized by the Board of Directors of the Seller. This Agreement has
been duly and validly executed and delivered by the Seller, and this Agreement
constitutes the valid and binding obligation of the Seller enforceable against
the Seller in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, or other similar laws relating to
creditors' rights generally and general equitable principles.
SECTION 2.4 No Violation. Except as set forth on Schedule 2.4, neither the
------------ ------------
execution, delivery nor performance of this Agreement, in its entirety, nor the
consummation of the transactions contemplated hereby, as of the Closing Date,
(i) violates (a "Company Violation") any law, order, writ, judgment, injunction,
-----------------
award, decree, rule, statute, ordinance or regulation applicable to the Company
or the Seller, (ii) is in conflict with, results in a breach or termination of
any provision of, causes the acceleration of the maturity of any debt or
obligation pursuant to, constitutes or after notice or the passage of time would
constitute a default (or gives rise to any right of termination, cancellation or
acceleration) under, or results in the creation of any security interest, lien,
charge or other encumbrance upon any currently owned property of the Company
pursuant to, any terms, conditions or provisions of any note, license,
instrument, indenture, mortgage, deed of trust or other agreement or
understanding or any other restriction of any kind or character, to which the
Company or the Seller is a party or by which any currently owned property of the
Company is subject or bound (collectively, a "Company Default"), or (iii)
---------------
conflicts with or results in any breach of any provision of the certificate or
articles of incorporation or by-laws of the Company or the Seller, which Company
Violation or Company Default, either alone or together with any other Company
Violation or Company Default, could reasonably be expected to have a Material
Adverse Effect on the Company.
8
SECTION 2.5 Consents and Approvals. Subject to Section 6.10, no prior
---------------------- ------------
consent, approval or authorization of, or declaration, filing or registration
with any Governmental Authority or other Person, domestic or foreign, is
required of or by the Seller or the Company in connection with the execution,
delivery and performance by the Seller of this Agreement and the transactions
contemplated hereby, except as described on Schedule 2.5 hereto and except for
------------
filing a Notification and Report Form pursuant to the applicable requirements of
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
---
Act"), and the expiration or termination of the applicable waiting period under
---
the HSR Act.
SECTION 2.6 Company Financial Statements. Schedule 2.6 contains copies of
----------------------------- ------------
the unaudited statement of assets and liabilities (the "Balance Sheet") of the
-------------
Company as of August 26, 2000 (the "Balance Sheet Date"), the unaudited
------------------
statement of assets and liabilities of the Company as of April 1, 2000, and the
unaudited divisional operating statements of the Company for the five-month
period ended August 26, 2000, the fiscal year ended March 28, 1998, the fiscal
year ended April 3, 1999, and the fiscal year ended April 1, 2000 (collectively,
the "Financial Statements"). The Financial Statements present fairly, in all
--------------------
material respects, the assets and liabilities of the Company (on a stand-alone
basis) as of the Balance Sheet Date and the results of operations of the Company
(on a stand-alone basis) for the periods referenced above, in accordance with
GAAP, except as described on Schedule 2.6. The Seller maintains a system of
------------
internal accounting controls sufficient to provide reasonable assurance that
transactions of the Company are executed with authorizations necessary from the
Seller's management, and such transactions are recorded as necessary to permit
preparation of the consolidated financial statements of the Seller in accordance
with GAAP and to maintain accountability for assets. The books of account,
stock record books and other business records of the Company (the "Books and
---------
Records") accurately and fairly reflect, in all material respects, in reasonable
-------
detail, the activities of the Company and have been made available to Purchaser
for its inspection. The Company has not engaged in any monetary transaction,
maintained any bank account or used any corporate funds except for monetary
transactions, bank accounts or funds which have been and are reflected, in the
Books and Records.
SECTION 2.7 Accounts Receivable. All trade accounts receivable of the
--------------------
Company (the "Accounts Receivable") that were or are reflected in the Financial
-------------------
Statements or the Books and Records as of the Closing Date represent valid
obligations arising from sales actually made in the ordinary course of business.
All of such Accounts Receivable arose out of bona fide, arms-length transactions
for the sale of goods or performance of services. Except as set forth on
Schedule 2.7, to the Seller's Knowledge, there is no contest, claim, or right of
------------
set-off, other than returns in the ordinary course of business, under any
agreement with any obligor of an Accounts Receivable relating to the amount or
validity of such Accounts Receivable (it being understood and agreed that the
aggregate amount of Accounts Receivable that are the subject of any such
contest, claim or right of set-off that would constitute a breach of the
representation and warranty set forth in this sentence shall be included in the
calculation of any allowance for doubtful receivables established in accordance
with, Section 1.4(d)(iv), and the Seller's responsibility therefor shall be
-----------------
limited to its obligations under Section 1.4(d)(iv)). The Seller has provided
------------------
to the Purchaser a complete and accurate list of all Accounts Receivable as of
the Balance Sheet Date, which list sets forth the aging of such Accounts
Receivable and reconciles the amount of
9
such Accounts Receivable as stated on such list to the amount of such Accounts
Receivable as stated on the Balance Sheet. A summary aging schedule of such
Accounts Receivable as of the Balance Sheet Date is set forth on Schedule 2.7.
------------
SECTION 2.8 Inventory. The Company's inventory has been acquired and
---------
disposed of in the usual and ordinary course of business for the period
beginning on October 1, 1999 through the date hereof. All inventory reflected
in the Financial Statements is valued based on the Standard Cost Method.
Notwithstanding any other provision of this Agreement to the contrary, the
Seller makes no representations or warranties regarding the value (other than
the representation and warranty set forth in the preceding sentence), quantity
or quality of the Company's inventory.
SECTION 2.9 Absence of Changes. Except as and to the extent set forth on
------------------
Schedule 2.9, since the Balance Sheet Date there has not been any:
------------
(a) Material Adverse Effect on the Company;
(b) acquisition by merger, consolidation or purchase (including by
purchase of all or substantially all of the assets, or any material assets or
business) of the Company;
(c) acquisition, directly or indirectly, by redemption or otherwise, of
any shares of capital stock of the Company;
(d) declaration of any dividends on any shares of capital stock of the
Company other than in cash;
(e) (i) increase in the compensation payable or to become payable by the
Company to any of its officers, employees or agents (collectively, "Personnel")
---------
whose individual total compensation for services rendered to the Company is
currently at an annual rate of more than $50,000 (except for normal periodic
increases in the ordinary course of business consistent with past practice),
(ii) bonus, incentive compensation, service award or other like benefit granted,
made or accrued, contingently or otherwise, for or to the credit of any of the
Personnel (except in the ordinary course of business), (iii) employee welfare,
pension, retirement, profit-sharing, insurance or similar payment or arrangement
made or agreed to by the Company for any Personnel except pursuant to the
existing plans and arrangements described in the Schedules hereto or (iv) new
employment agreement to which the Company is a party;
(f) except for additions, amendments or modifications in the ordinary
course of business to any Seller "employee benefit plan" (within the meaning of
Section 3(3) of ERISA) or any other material employee plan, program or
arrangement maintained by the Seller in which Seller's employees participate,
addition to or modification of any Company Plans affecting Personnel other than:
(i) contributions made for 2000 in accordance with the normal practices of the
Company or the Seller or (ii) the extension of coverage to other Personnel who
became eligible after the date of the Balance Sheet;
10
(g) sale (other than sales of inventory in the ordinary course of
business), lease, assignment, transfer or other disposition of any material
assets or properties of the Company other than in the ordinary course of
business;
(h) cancellation of any indebtedness or waiver of any claims or rights of
substantial value to the Company or mortgage, pledge or imposition of any liens,
claims and encumbrances on any material asset or property of the Company, except
in the ordinary course of business;
(i) entry into, amendment, cancellation or termination of any contract,
agreement or commitment described on Schedule 2.20, license or other instrument
-------------
material to the Company or any Subsidiary, except in the ordinary course of
business;
(j) the execution of any lease or any incurring of liability for a capital
expenditure by the Company, involving payments in excess of $50,000 individually
or $200,000 in the aggregate;
(k) failure to operate the business of the Company in the ordinary course
so as to use reasonable efforts to preserve the business intact, to keep
available the services of the Personnel, and to preserve the goodwill of the
suppliers, customers and others having business relations with the Company;
(l) revaluation by the Company of any of its assets, including without
limitation, writing off notes or accounts receivable or inventory, other than in
the ordinary course of business and consistent with past practice;
(m) change in accounting methods or practices by the Company;
(n) damage, destruction or loss (whether or not covered by insurance) of
any asset or property of the Company which could have a Material Adverse Effect;
(o) any indebtedness incurred by the Company for borrowed money or any
commitment to borrow money entered into by the Company, or any loans made or
agreed to be made by the Company, other than intercompany accounts; or
(p) agreement, whether oral or written, by the Company to do any of the
foregoing.
SECTION 2.10 Undisclosed Liabilities. Except as set forth on Schedule 2.10
----------------------- -------------
and except to the extent of any excess accruals for liabilities or obligations
established by the Company and reflected on the Balance Sheet in one or more of
the categories of accruals reflected on Schedule 1.4(d), to the Seller's
---------------
Knowledge, the Company has no liabilities or obligations of any nature (whether
absolute or contingent, liquidated or unliquidated, or due or to become due)
except for liabilities and obligations (i) reflected or reserved for on the
Balance Sheet, (ii) that have arisen since the date of the Balance Sheet in the
ordinary course of the operation of business and consistent with past practice
of the Company (all of which are current liabilities similar in type to those
reflected on the Balance Sheet), (iii) as reflected on other
11
Schedules hereto, or (iv) under contracts or agreements not required to be
disclosed on other Schedules hereto.
SECTION 2.11 Litigation. Except as set forth on Schedule 2.11, there are no
---------- -------------
actions, suits, or other proceedings pending or, to the Knowledge of the Seller,
threatened against the Company or involving any of the properties or assets of
the Company, at law or in equity or before or by any foreign, federal, state,
municipal, or other governmental court, department, commission, board, bureau,
agency, or other instrumentality or person or any board of arbitration or
similar entity that (i) involves a claimed amount equal to or greater than
$100,000, (ii) would reasonably be expected to result in the payment of damages
or settlement in an amount equal to or greater than $100,000, (iii) seeks
injunctive relief, or (iv) involves claims by a Governmental Authority against
any aspect of the assets, business or operations of the Company. Schedule 2.11
-------------
also lists each judgment, order, decree, stipulation or injunction binding upon
the Company or its property and each workers' compensation claim made by an
employee of the Company in an amount greater than $10,000 during the past three
complete fiscal years.
SECTION 2.12 Tax Matters. Except as set forth on Schedule 2.12: (a) all
----------- -------------
returns and reports of or with respect to any Tax ("Tax Returns") which are
-----------
required to be filed on or before the Closing Date by or with respect to the
Company have been or will be on or prior to the Closing Date duly and timely
filed; (b) all items of income, gain, loss, deduction and credit or other items
("Tax Items") required to be included in each such Tax Return have been or will
---------
be so included and all information provided in each such Tax Return is true,
correct and complete in all material respects; (c) all Taxes that accrue or are
payable by the Company for any Pre-Closing Taxable Period have or will have been
timely paid on or before the Closing Date unless a reserve for the full amount
of such Tax has been or will be established therefor in the Closing Balance
Sheet (other than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income); (d) all Tax withholding requirements
imposed on or with respect to the Company have been satisfied in full; (e) the
Company does not have a Tax deficiency or claim assessed or, to the best of
Seller's Knowledge based upon personal contact with an agent of any taxing
authority, proposed or threatened (whether orally or in writing) against the
Company, except to the extent that adequate liabilities or reserves with respect
thereto are accrued on the Closing Balance Sheet or (i) such deficiency or claim
is being contested in good faith by appropriate proceedings, (ii) no such
accrual is required and (iii) the nature and amount of the disputed Tax is set
forth on Schedule 2.12; (f) there is not in force any extension of time with
-------------
respect to the due date for the filing of any Tax Return that relates to or
includes the Company or any waiver or agreement for any extension of time for
the assessment or payment of any Tax due with respect to the period covered by
any such Tax Returns; (g) no payments are due or will become due by the Company
pursuant to any tax indemnity or tax sharing agreement or arrangement; (h) the
Company has never been a member of an affiliated group filing a consolidated
federal income Tax Return other than a group the common parent of which is
Seller; (i) the consolidated group of corporations that has the Seller as its
common parent has filed all Tax Returns that it was required to file for each
taxable period during which the Company was a member of the group and has paid
all Taxes due for such taxable periods; (j) the Company has no liability for the
Taxes of any person other than the Company under Reg. (S)1.1502-6 (or any
similar provision of state, local, or foreign law); (k) no claim has ever been
12
made in writing by an authority in a jurisdiction where the Company does not
file Tax Returns that the Company is or may be subject to taxation by that
jurisdiction; (l) the Company (i) has not filed a consent under Code Section
341(f) concerning collapsible corporations or (ii) has not been a United States
real property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii); (m)
none of the assets of the Company (i) are required to be treated as being owned
by any other person pursuant to the so-called safe harbor lease provisions of
former Section 168(f)(8) of the Code, (ii) secures any debt the interest on
which is tax-exempt under Code Section 103(a), or (iii) is tax-exempt use
property within the meaning of Code Section 168(h); (n) the Company has not
agreed to and is not required to make any adjustment pursuant to Code Section
481(a) by reason of a change in accounting method initiated by the Company and
neither the Company nor the Seller has knowledge that the Internal Revenue
Service has proposed any such adjustment or change in accounting method; (o)
there are no liens or encumbrances related to Taxes on any of the assets of the
Company (other than for current Taxes not yet due and payable); (p) the Company
has not made any payments, is not obligated to make any payments, nor is it a
party to any agreement that could obligate it to make any payment that would not
be deductible under Code Section 280G; and (q) the Seller is and will be
eligible as of the Closing Date to make an election under Section 338(h)(10) of
the Code with respect to the Shares; the Seller will not be a target corporation
within the meaning of Section 338 of the Code for the taxable year that includes
the Closing Date; and for United States federal income tax purposes, the Company
is, and on the Closing Date will be, a member of the consolidated group of
corporations that has the Seller as its common parent.
SECTION 2.13 Employee Benefit Plans.
----------------------
(a) Schedule 2.13 lists each "employee benefit plan" (within the meaning
-------------
of Section 3(3) of the Employee Retirement Income Security Act of 1974 as
amended ("ERISA")) and any other employee plan, program or arrangement
-----
maintained by the Company at any time during the five (5) year period ending on
the Closing Date which covers or has covered any current or former employees,
consultants or directors of the Company and pursuant to which the Company has
any liability (whether fixed or contingent) (the "Company Plans"). True and
-------------
correct copies of each of the following, to the extent applicable, have been
made available to the Purchaser with respect to each Company Plan: the three
most recent annual reports (Form 5500) filed with the Internal Revenue Service
("IRS"), the plan document, the trust agreement, if any, the most recent summary
---
plan description if required by ERISA or the Code, the most recent determination
letter, if any, issued by the IRS with respect to any Company Plan intended to
be qualified under Section 401 of the Code, and any insurance policy related to
such Company Plan. Each Company Plan has been administered and is in compliance
in all material respects with the terms of such plan and all applicable laws,
rules and regulations.
(b) The Company does not contribute to any "multi-employer plan" (within
the meaning of Section 3(37) of ERISA) and neither the Company nor any entity
that, together with the Company, is treated as a single employer under Code (S)
414(b), (c), (m) or (o) or ERISA (S) 4001(a) (14) or 4001(b) ("Controlled
----------
Entity") has incurred any withdrawal liability with respect to any multi-
------
employer plan. Neither the Company nor any Controlled Entity maintains or
13
sponsors or has any liability (whether fixed or contingent) under any pension
benefit plan which is a defined benefit plan which is or has been subject to
Title IV of ERISA.
(c) No "prohibited transaction," as such term is used in Section 406 of
ERISA or Section 4975 of the Code, and no litigation or administrative or other
proceeding involving any Company Plans have occurred or, to the Knowledge of the
Company, is threatened where an adverse determination would have a Material
Adverse Effect.
(d) In connection with the consummation of the transactions contemplated
by this Agreement, no payments of money or other property, acceleration of
benefits or provision of other rights have been or will be made hereunder, under
any agreement contemplated herein, under any Company Plan or under any agreement
with any employee of the Company that would be reasonably likely to be
nondeductible under Section 280G, 162(a)(i) or 404 of the Code, whether or not
some other subsequent action or event would be required to cause such payment,
acceleration or provision to be triggered. No Company Plan provides retiree
medical or retiree life insurance benefits to any present or former Company
employee, and the Company is not contractually or otherwise obligated (whether
or not in writing) to provide any present or former Company employee with life
insurance or medical benefits upon retirement or termination of employment,
other than as required by the provisions of Sections 601 through 608 of ERISA
and Section 4908B of the Code.
(e) Each Company Plan which has at any time been intended to qualify under
Section 401(a) of the Code, and each associated trust which at any time has been
intended to be exempt from taxation pursuant to Section 501(a) of the Code, is
the subject of a favorable determination, opinion or approval letter from the
Internal Revenue Service ("IRS") regarding its qualification or exemption from
taxation, as applicable, under such section. To the Knowledge of the Seller, no
event or omission has occurred which would cause any such Company Plan to lose
its qualification under the applicable Code Section.
(f) None of the Seller, the Company nor any Controlled Entity has
announced any plan or legally binding commitment to create any additional
Company Plan which is intended to cover employees or former employees of the
Company or any Controlled Entity or to amend or modify any existing Company Plan
to provide for additional benefits.
(g) No event has occurred in connection with which the Company, any
Controlled Entity or any Company Plan, directly or indirectly, could be subject
to any liability which would have a Material Adverse Effect (i) under any
statute, regulation or governmental order relating to any Company Plan or (ii)
pursuant to any obligation of the Company or any Controlled Entity to indemnify
any person against liability incurred under any such statute, regulation or
order as they relate to the Company Plans.
(h) All contributions required to be made by Seller, the Company or any
Controlled Entity with respect to any Company Plan due as of any date through
and including the Closing Date have been made, or will be made, when due.
14
SECTION 2.14 Employment Matters. Except as set forth on Schedule 2.14, the
------------------ -------------
Company has not entered into any severance or similar arrangement in respect of
any present employee of the Company that will result in any obligation (absolute
or contingent) of the Company to make any payment to any present employee of the
Company following termination of employment. Except as set forth on Schedule
--------
2.14, the Company has not agreed to pay any transaction bonus or similar payment
-----
to any present employee of the Company contingent upon consummation of the
transactions contemplated by this Agreement (it being understood and agreed that
any such bonus or similar payment shall be paid by the Seller). Except as
disclosed on Schedule 2.14, the Company has complied in all material respects
-------------
with all laws relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and health
and plant closings (hereinafter collectively referred to as the "Employment
----------
Laws"). The Company is not currently liable for the payment of taxes, fines,
----
penalties or other amounts, however designated, for failure to comply with any
of the foregoing Employment Laws. Except as disclosed on Schedule 2.14, the
-------------
Company is not a party to any collective bargaining agreement or any other
contracts or agreements granting benefits or rights to employees or consultants,
or any conciliation agreement with the Department of Labor, the Equal Employment
Opportunity Commission or any federal, state or local agency which requires
equal employment opportunities or affirmative action in employment. Except as
disclosed on Schedule 2.14, there have been no unfair labor practice complaints
-------------
or similar claims against the Company in the past three years, and there are no
unfair labor practice complaints pending against the Company before the National
Labor Relations Board and no similar claims pending before any similar state,
local or foreign agency. There are no strikes, slowdowns, work stoppages,
lockouts, or to the Knowledge of the Seller, threats thereof, by or with respect
to any such employees. To the Knowledge of Seller, there are no organizational
efforts being made or threatened by or on behalf of any labor union with respect
to non-unionized employees of the Company.
SECTION 2.15 Customers. Listed on Schedule 2.15 are the names and addresses
--------- -------------
of the top ten customers of the Company for the five months ended August 26,
2000. Except as disclosed on Schedule 2.15, neither the Company nor the Seller
-------------
has received any actual notice or has any valid reason to believe that any of
its customers listed on Schedule 2.15 has any current plans to cease using its
-------------
products, equipment, goods or services, or has substantially reduced, or has any
current plans to reduce substantially, the use of such products, equipment,
goods or services.
SECTION 2.16 Suppliers. Listed on Schedule 2.16 are the names and addresses
--------- -------------
of the top ten suppliers of the Company for the five months ended August 26,
2000. Except as disclosed on Schedule 2.16, neither the Company nor the Seller
-------------
has received any actual notice or has any valid reason to believe that any such
supplier intends to discontinue or materially alter its relationship with the
Company upon consummation of the transactions contemplated hereby, subject to
general and customary price increases.
SECTION 2.17 Environmental Compliance. Except as set forth on Schedule
------------------------ --------
2.17, to the Knowledge of the Seller, as of the date of this Agreement:
----
15
(a) no Hazardous Substances have been released on real property currently
or formerly owned or leased by the Company in quantities which would reasonably
be expected to give rise to material liability against the Company under
applicable Environmental Laws;
(b) the Company has not received written notice from any Governmental
Authority or third party alleging a material violation of or liability under
applicable Environmental Laws;
(c) the Company is not the subject of or involved in any investigation,
inspection, response or corrective action undertaken by, or under the direct
oversight of, a Governmental Authority and relating to or in connection with the
release into the environment of any Hazardous Substance;
(d) the properties and operations of the Company are in material
compliance with the requirements of applicable Environmental Laws;
(e) there has been no exposure of any Person or property to any Hazardous
Substances in connection with the properties or operations of the Company caused
by the operations of the Company that could reasonably be expected to give rise
to a material claim for damages or compensation;
(f) none of the Company nor its facilities is subject to any outstanding
written order or agreement with any Governmental Authority relating to any
actual or potential violation of or liability under any Environmental Laws; and
(g) the Company has not disposed of any Hazardous Substances in a manner
that would reasonably be expected to give rise to liability under any
Environmental Laws that would have a Material Adverse Effect.
"Hazardous Substances" shall mean substances the release of which into the
--------------------
environment is regulated under applicable Environmental Laws.
"Environmental Laws" shall mean the laws, including the related rules,
------------------
regulations, orders, requirements, judgments and decrees listed on attached
Exhibit F, and any state or local analogue of the same, all as in effect on the
---------
date of this Agreement.
SECTION 2.18 Title to Properties; Encumbrances. Except as set forth on
---------------------------------
Schedule 2.18, the Company has good title to all of the assets reflected in the
-------------
Financial Statements other than any assets therein reflected that have been sold
or otherwise disposed of in the ordinary course of business since the date
thereof, free and clear of liens, claims and encumbrances other than (i) liens
for current Taxes, payments of which are not yet delinquent or that are being
contested in good faith by appropriate proceedings set forth on Schedule 2.18,
-------------
(ii) liens in respect of pledges or deposits under workers' compensation laws or
similar legislation, carriers', warehousemen's, mechanics', laborers' and
materialmen's and similar liens, if the obligations secured by such liens are
not then delinquent or are being contested in good faith by appropriate
proceedings, (iii) liens relating to accounts payable incurred in the ordinary
course of
16
business and consistent with past practice, and (iv) such imperfections of title
which do not materially detract from the value of the Company's assets
(collectively, the "Permitted Liens"). The Company holds under valid lease
---------------
agreements all real and personal properties that are subject to the operating
leases to which reference is made on Schedule 2.20 and enjoys peaceful and
-------------
undisturbed possession of such properties under such leases, other than any
properties as to which such leases have terminated in the ordinary course of
business since such date. Following the consummation of the transactions
contemplated by this Agreement, the Company will continue to own, pursuant to
good and indefeasible title, or lease, under valid and subsisting leases, or
otherwise retain, its interest in the assets without incurring any penalty or
any increase in rentals, royalties or licenses or other fees imposed as a result
of, or arising from, the consummation of the transactions contemplated by this
Agreement.
SECTION 2.19 Permits and Licenses. Except as set forth on Schedule 2.19,
-------------------- -------------
(i) the Company has all permits, licenses, certificates and authorities from
Governmental Authorities (collectively, "Permits") required to conduct its
-------
business as it is now being conducted, (ii) the consummation of the transactions
contemplated by this Agreement will not constitute a violation of any Permit or
give a Governmental Authority the right to revoke, withdraw, suspend, cancel,
terminate or modify any such Permit, (iii) such Permits are in full force and
effect unimpaired by any act or omission of the Company and have not been
suspended or revoked, and (iv) Company has complied with the terms and has taken
all actions necessary to renew and maintain in effect such Permits.
SECTION 2.20 Contracts; No Defaults.
----------------------
(a) Schedule 2.20 contains a complete and accurate list of all leases,
-------------
contracts and arrangements described below in clauses (i) through (x) below to
which the Company is a party or relating primarily to the Company's business
("Contracts"):
---------
(i) each contract or arrangement with any of the customers of the
Company listed on Schedule 2.15 involving performance of services or
-------------
delivery of goods or materials by the Company of an amount or value in
excess of $100,000, other than purchase orders received by the Company in
the ordinary course of business requiring the Company to perform services
or deliver goods;
(ii) each contract or arrangement with any of the suppliers to the
Company listed on Schedule 2.16 involving performance of services or
-------------
delivery of goods or materials to the Company of an amount or value in
excess of $100,000, other than purchase orders entered into by the Company
in the ordinary course of business for the purchase of services or goods by
the Company;
(iii) each note, debenture, other evidence of indebtedness,
guarantee, loan, letter of credit, surety bond or financing agreement or
instrument or other contract for money borrowed, including any agreement or
commitment for future loans, credit or financing entered into by the
Company or by which the Company or any of its properties or assets are
bound;
17
(iv) each lease, rental or occupancy agreement, license, installment
and conditional sale agreement, and other contract or arrangement affecting
the ownership of, leasing of, title to, use of, or any leasehold or other
interest in, any real or personal property and involving aggregate payments
in excess of $100,000;
(v) each licensing agreement or other agreement with respect to
patents, trademarks, copyrights, or other intellectual property and
involving aggregate payments in excess of $100,000, and each agreement with
current or former employees, consultants, or contractors regarding the
appropriation or the nondisclosure of any Intellectual Property;
(vi) each collective bargaining agreement or other agreement to or
with any labor union or other employee representative of a group of
employees relating to wages, hours and other conditions of employment;
(vii) each joint venture agreement, partnership agreement, or limited
liability company agreement or other agreement (however named) involving a
sharing of profits, losses, costs or liabilities by the Company with any
other Person;
(viii) each agreement that commits capital expenditures after the
date hereof in an amount in excess of $100,000;
(ix) each power of attorney which is currently effective and
outstanding; and
(x) each written warranty, guaranty or other similar undertaking
with respect to contractual performance extended by the Company other than
in the ordinary course of business.
(b) True and correct copies of each written Contract have been delivered
to Purchaser.
(c) Except as set forth on Schedule 2.20, each of the Contracts listed on
-------------
Schedule 2.20: (i) is in full force and effect, (ii) represents the legally
-------------
valid and binding obligation of the Company and is enforceable against the
Company in accordance with its terms, and (iii) to the Seller's Knowledge,
represents the legally valid and binding obligation of the other parties thereto
and is enforceable against such parties in accordance with its terms. Except as
set forth on Schedule 2.20, the Company is not in material breach of any
-------------
Contract and, to the Seller's Knowledge, no condition exists or event has
occurred which, with notice or lapse of time or both, would constitute a
material default or a basis for force majeure or the claim of excusable delay or
nonperformance under such Contracts.
(d) Except as set forth on Schedule 2.20, there are no renegotiations of,
-------------
or, to the Seller's Knowledge, attempts to renegotiate, or outstanding rights to
renegotiate, any material amounts paid or payable to the Company under current
or completed Contracts, with any Person or entity having the contractual or
statutory right to demand or require such renegotiation. The
18
Company has not received any written demand for such renegotiation in respect of
any such Contract.
(e) Except as specifically noted on Schedule 2.5, no notice, consent or
------------
approval of any part to any Contract is required in connection with the purchase
of the Shares or the consummation of the other transactions contemplated hereby.
(f) Except as set forth on Schedule 2.20, the Company has not committed
-------------
any act or omission which would result in, and there has been no occurrence
which would give rise to, any material product liability or liability for breach
of warranty on the part of the Company.
SECTION 2.21 Affiliated Transactions. Except as set forth on Schedule 2.21,
----------------------- -------------
neither the Seller nor any of the officers, directors or other Affiliates of the
Seller, the Company or members of their families is a party to any agreement,
understanding, indebtedness or proposed transaction with the Company or is
directly or indirectly interested in any material contract with the Company.
The Company has not guaranteed or assumed any obligations of its officers,
directors or other Affiliates or members of any of their families. As of April
1, 2000 and August 26, 2000, respectively, there were no intercompany accounts
receivable or accounts payable between the Seller and the Company.
SECTION 2.22 Brokers' Fees. Except as otherwise disclosed on Schedule 2.22,
------------- -------------
no broker, finder, investment banker or other Person is entitled to any
brokerage fee, finders' fee or other commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by the
Company, the Seller or any of its Affiliates.
SECTION 2.23 Compliance with Law. Except as set forth on Schedule 2.23, to
------------------- -------------
the Seller's Knowledge, the Company has at all times since January 1, 1998 been
in compliance in all material respects with all applicable laws and all
applicable rules and regulations of Governmental Authorities.
SECTION 2.24 Intellectual Property. Except as set forth on Schedule 2.24
--------------------- -------------
and to the Seller's Knowledge, the Company has the right to use, free and clear
of any and all royalty or other payment obligations, claims of infringement or
other liens, claims or encumbrances, (i) all marks, brand names, trademarks,
service marks, patents, patent rights, assumed names, logos, trade secrets,
copyrights and trade names that are owned by or licensed to the Company or used
in the conduct of the business of the Company and (ii) all computer software,
programs and similar systems owned by or licensed to the Company or used in the
conduct of the business of the Company (collectively, "Intellectual Property")
---------------------
(of which a true and complete list is disclosed on Schedule 2.24). To the
-------------
Seller's Knowledge, the Company is not in conflict with or in violation or
infringement of, nor has the Seller or the Company received any notice of any
conflict with or violation or infringement of, any asserted rights of any other
Person with respect to any such Intellectual Property. The Purchaser and the
Seller acknowledge and agree that this Agreement shall not confer upon the
Company, the Purchaser or any of their Affiliates any license or other right to
use the names "Kent Electronics Corporation," "▇▇ ▇▇▇▇ Electronics," "Kent
Datacomm," "Kent," "KE," "▇▇ ▇▇▇▇ Components," "Kent Connection," "KentCan,"
19
"Kent-Care," "▇▇▇▇ ▇▇▇▇▇," "Smart," "KEQ Total Quality Management," "▇▇ ▇▇▇▇
Datacomm," "Discovery," "Power Channel," "We Do Networks," or any name
confusingly similar to any of the foregoing or derived therefrom.
SECTION 2.25 Accounts; Lockboxes; Safe Deposit Boxes. Schedule 2.25 is a
--------------------------------------- -------------
true and complete list of:
(a) the names of each bank, savings and loan association, securities or
commodities broker or other financial institution in which the Company has an
account, including cash contribution accounts, and the names of all persons
authorized to draw thereon or have access thereto; and
(b) the location of all lockboxes and safe deposit boxes of the Company.
SECTION 2.26 FCPA. The Company has complied in all material respects with
----
the United States Foreign Corrupt Practices Act of 1977, as amended (the
"FCPA"), in obtaining any consents, licenses, approvals, authorizations, rights,
----
and privileges in connection with the conduct of its business and, has otherwise
conducted its business in compliance with all material respects with the FCPA.
The Company's internal management and accounting practices and controls are
adequate to ensure compliance in all material respects with the FCPA.
SECTION 2.27 Insurance. Schedule 2.27 sets forth a list of all policies of
--------- -------------
property, fire and casualty, product liability, workers' compensation and other
forms of insurance (excluding insurance providing employee benefits) held by the
Company or the Seller or insuring the Company's properties. True, correct and
complete copies of such insurance policies have been made available to the
Purchaser. All such policies are in amounts determined by the management of the
Seller and the Company to be appropriate and are in full force and effect. All
premiums due with respect to such policies have been paid or accrued.
SECTION 2.28 Disclaimer of Additional and Implied Warranties. The Seller is
-----------------------------------------------
making no representations or warranties, express or implied, of any nature
whatsoever except as specifically set forth in Article II of this Agreement.
----------
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby makes the representations and warranties set forth in this
Article III to the Seller.
-----------
SECTION 3.1 Organization and Qualification. The Purchaser is duly formed,
------------------------------
validly existing and in good standing under the laws of the State of Delaware.
The Purchaser has all requisite company power and authority to carry on its
business as it is now being conducted, and to own, lease and operate its
properties and assets, and to perform all its obligations under the agreements
and instruments to which it is a party or by which it is bound. The Purchaser
is duly qualified to do business as a foreign company and is in good standing
under the laws of each
20
state or other jurisdiction in which the properties and assets owned, leased or
operated by it or the nature of the business conducted by it make such
qualification necessary, except in such jurisdictions where the failure to be
duly qualified or in good standing does not and could not reasonably be expected
to result in a material adverse effect on the Purchaser. The Purchaser has no
Subsidiaries.
SECTION 3.2 No Prior Business Activity. The Purchaser is a newly formed
--------------------------
Delaware limited liability company, which, prior to the transactions
contemplated by this Agreement, has had no prior business activities other than
those related to the Purchaser's corporate organization.
SECTION 3.3 Authority Relative to Agreement. The Purchaser has all
-------------------------------
requisite company power and authority to execute, deliver and perform this
Agreement, and no further company proceedings on the part of the Purchaser are
necessary to consummate the transactions contemplated hereby, which have been
duly and validly authorized by the Board of Managers of the Purchaser. This
Agreement has been duly and validly executed and delivered by the Purchaser, and
this Agreement constitutes the valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium, or other similar
laws relating to creditors' rights generally and general equitable principles.
SECTION 3.4 No Violation. Neither the execution, delivery nor performance
------------
of this Agreement, in its entirety, nor the consummation of all of the
transactions contemplated hereby, as of the Closing Date, (i) violates (a
"Purchaser Violation") in any material respect any law, order, writ, judgment,
-------------------
injunction, award, decree, rule, statute, ordinance or regulation applicable to
the Purchaser, (ii) is in conflict with, results in a breach or termination of
any provision of, causes the acceleration of the maturity of any debt or
obligation pursuant to, constitutes a default (or gives rise to any right of
termination, cancellation or acceleration) under, or results in the creation of
any security interest, lien, charge or other encumbrance upon any property or
assets of the Purchaser pursuant to any terms, conditions or provisions of any
note, license, instrument, indenture, mortgage, deed of trust or other agreement
or understanding or any other restriction of any kind or character, to which the
Purchaser is a party or by which any of its assets or properties is subject or
bound (collectively, a "Purchaser Default"), or (iii) conflicts (a "Purchaser
----------------- ---------
Conflict") with or results in any breach of any provision of the certificate of
--------
formation or limited liability company agreement of the Purchaser, which
Purchaser Violation, Purchaser Default or Purchaser Conflict could reasonably be
expected to have a material adverse effect on the Purchaser.
SECTION 3.5 Consents and Approvals. No prior consent, approval or
----------------------
authorization of, or declaration, filing or registration with any Governmental
Authority or other Person, domestic or foreign, is required of or by the
Purchaser in connection with the execution, delivery and performance by the
Purchaser of this Agreement and the transactions contemplated hereby, except for
filing a Notification and Report Form pursuant to the applicable requirements of
the HSR Act and the expiration or termination of the applicable waiting period
under the HSR Act, all of which have been obtained or have occurred.
21
SECTION 3.6 Purchaser Capitalization. Schedule 3.6 sets forth the pro
------------------------ ------------
forma capitalization of the Purchaser as of the Closing Date (the "Purchaser
---------
Capitalization Schedule"), which Purchaser Capitalization Schedule reflects all
-----------------------
short-term and long-term Indebtedness and equity securities of the Purchaser and
its Subsidiaries as of the Closing Date.
SECTION 3.7 Accredited Investor. The Purchaser is an "Accredited Investor"
-------------------
as such term is defined in Rule 501(a) promulgated under the Securities Act of
1933 as amended (the "Securities Act"). The Purchaser represents and warrants
--------------
that it has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment in the
Shares.
SECTION 3.8 Investment Purposes. The Purchaser hereby represents and
-------------------
warrants that it is acquiring the Shares for investment purposes only, and not
with a view to, or for resale in connection with, any distribution thereof that
would require registration under the Securities Act or any applicable state
securities laws or regulations.
SECTION 3.9 Restricted Securities. The Purchaser acknowledges that the
---------------------
Seller is transferring the Shares to it without registration under the
Securities Act or any applicable state securities laws or regulations, and
therefore, the Shares cannot be sold unless such Shares are subsequently so
registered or exemptions from such registration requirements are available.
SECTION 3.10 Disclaimer of Additional and Implied Warranties. The Purchaser
-----------------------------------------------
is making no representations or warranties, express or implied, of any nature
whatsoever except as specifically set forth in Article III of this Agreement.
-----------
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.1 Books and Records.
-----------------
(a) The Purchaser acknowledges and agrees that after the Closing Date the
Seller will be entitled to the originals of all Books and Records that relate to
both the Seller and the Company (the "Mutual Books and Records"), subject to the
------------------------
rights of the Company with respect to Mutual Books and Records set forth in this
Section 4.1(a). The Seller will afford duly authorized representatives of the
--------------
Company reasonable full access to all Mutual Books and Records and will permit
such representatives, at the Company's expense, to make abstracts from, or to
take copies of any such records, or to obtain temporary possession of any
thereof as may be reasonably required by the Company. The Purchaser will
cooperate with the Seller, and will cause the Company to cooperate with the
Seller, at Seller's expense, in furnishing information, evidence, testimony, and
other assistance as may be reasonably requested by the Seller in connection with
any action, proceeding or investigation by a third party relating to the conduct
of the business of the Company prior to the Closing.
(b) The Seller acknowledges and agrees that after the Closing Date the
Company will be entitled to the originals of all Books and Records that relate
exclusively to the Company (the
22
"Company Books and Records"), subject to the rights of the Seller with respect
-------------------------
to the Company Books and Records set forth in this Section 4.1(b). The Purchaser
--------------
will afford duly authorized representatives of the Seller reasonable full access
to all Company Books and Records and will permit such representatives, at
Seller's expense, to make abstracts from, or to take copies of such records, or
to obtain temporary possession of any thereof as may be reasonable required by
the Seller. The Seller will cooperate with the Purchaser and the Company, at the
Purchaser's or the Company's expense, in furnishing information, evidence,
testimony, and other assistance as may be reasonably requested by the Purchaser
or the Company in connection with any action, proceeding or investigation by a
third party relating to the conduct of the business of the Company prior to the
Closing.
SECTION 4.2 Covenants With Respect to Employees and Employee Benefit
--------------------------------------------------------
Plans.
-----
(a) For the period beginning as of the Closing and ending on July 1, 2001,
the Purchaser shall, or shall cause the Company to, make available to each
person who is an active employee of the Company immediately following the
Closing (the "Company Employees") employee benefit plans (within the meaning of
-----------------
ERISA (S) 3(3)) and other similar plans, programs and arrangements which are
substantially equivalent in the aggregate to the Company Plans in which they
were participating immediately prior to the Closing (it being understood by the
parties that the Company 401(k) Plan (as defined below) which will be in place
following the Closing will be considered substantially equivalent in the
aggregate to the Seller 401(k) Plan (as defined below) prior to Closing
notwithstanding the fact that the Company 401(k) Plan matching contribution
formula is fifty cents per one dollar up to six percent (6%) of employee
compensation); and Company Employees shall be given service credit based upon
their employment with the Company for all purposes under any such employee
benefit plans, programs and similar arrangements, other than benefit accruals
under any defined benefit plan. In addition, with regard to any employee
benefit plan of the Purchaser which is a "welfare benefit plan" within the
meaning of Section 3(1) of ERISA and in which a Company Employee participates
after the Closing, (x) to the extent such plan imposes any pre-existing
condition limitation or waiting period, such condition or waiting period shall
be waived to the extent such pre-existing conditions were waived under the
applicable Company Plan and (y) to the extent such plan has a deductible or
requires a co-payment by the Company Employee that is subject to a maximum out-
of-pocket limitation, there shall be credited against any such deductible or
limitation any costs incurred by such Company Employee during the comparable
period under the terms of the corresponding Company Plan, if any, prior to the
Closing. Purchaser shall be obligated to provide health care continuation
coverage under Section 4980B of the Code and Section 601 et. seq. ("COBRA")
-----
under ERISA to Company Employees who incur a COBRA event in connection with any
events that occur after the Closing (collectively, "COBRA Recipients").
----------------
Purchaser agrees to indemnify and hold Seller harmless from any COBRA claims
made by or on behalf of COBRA Recipients, which indemnification shall be in
addition to any other indemnification otherwise provided in this Agreement.
(b) Effective as of the Closing Date, or as soon as is practicable
thereafter, the Company, or the Purchaser or an affiliate thereof, shall
establish or maintain a defined contribution pension plan intended to be
qualified under Sections 401(a) and 401(k) of the Code
23
for the benefit of Company Employees (the "Company 401(k) Plan"), which Company
Employees shall be eligible to participate in to the same extent each such
Company Employee was eligible to participate in the Kent Electronics Corporation
Tax-Deferred Savings and Retirement Plan (the "Seller 401(k) Plan") immediately
prior to the Closing Date and Company Employees shall no longer be eligible to
make contributions under the Seller 401(k) Plan. The Purchaser or the Company
shall, prior to the end of the remedial amendment period under Section 401(b) of
the Code, submit the Company 401(k) Plan to the IRS for a favorable
determination letter. Prior to any trust-to-trust transfer as described in this
paragraph (b), the Company shall provide to the Seller a copy of the applicable
board resolutions and an executed Company 401(k) Plan and accompanying trust
document, which together shall evidence the establishment of the Company 401(k)
Plan. As soon as reasonably practicable following the Closing Date, the Company
401(k) Plan shall accept a direct trust-to-trust transfer from the Seller 401(k)
Plan equal to the total account balances with respect to such Company Employees.
Such transfer shall be in the form of cash, except with respect to any
outstanding 401(k) Plan loan balances, in which case such outstanding loan
balances (and such liabilities relating thereto) and accompanying promissory
notes evidencing such loans, shall be transferred to the Company 401(k) Plan.
Following such transfer of account balances, the Company 401(k) Plan shall
assume all liability for benefits with respect to the amounts transferred from
the Seller 401(k) Plan. The Seller shall cause the Company Employees to be fully
vested in their account balances under the Seller 401(k) Plan as of the Closing
Date.
(c) The Seller or one of its Affiliates shall retain responsibility under
all health and welfare plans in which the Company Employees participate for all
amounts payable by reason of, or in connection with, any and all health care
claims made by Company Employees to the extent such claims relate to events
which occur prior to the Closing, provided such claims are filed within the
appropriate time frame and in accordance with the terms of such health and
welfare plan.
(d) Notwithstanding any other provision of this Agreement, Seller shall
retain all liability with respect to all of the Company's COBRA beneficiaries
whose qualifying event occurred on or prior to the Closing.
(e) No provision of this Agreement shall create any third party
beneficiary rights in any Company Employee, any beneficiary or dependents
thereof, or any collective bargaining representative thereof, with respect to
the compensation, terms and conditions of employment and benefits that may be
provided to any Company Employee by Purchaser or the Company or under any
benefit plan which Purchaser or the Company may maintain following the Closing.
(f) Purchaser will indemnify and hold Seller harmless from any Loss which
Seller may incur due to terminations of the Company Employees with respect to,
arising under or relating to the Worker Adjustment and Retraining Notification
Act and any other similar state or local "plant-closing" law as a result of the
transactions contemplated by this Agreement and any such Loss which may occur
due to termination of the Company Employees' employment or Company Employees'
loss of employment on or after the Closing Date. This indemnification shall be
in addition to any other indemnification otherwise provided in this Agreement.
24
(g) For purposes of determining the benefit of each Company Employee for
the year in which the transactions contemplated by this Agreement occur under
the Company's vacation program, any vacation taken by a Company Employee
preceding the Closing for the year for which the transactions contemplated by
this Agreement occur will be deducted from the total vacation benefits available
to such employee for such year.
(h) As of the Closing, the Company and the Non-Corporate Subsidiaries
shall cease to be participating employers in any and all Company Plans
maintained or sponsored by the Seller, and the Seller and the Company shall take
all such action as is necessary to effect this.
(i) The Seller shall, and the Purchaser shall cause the Company to,
terminate as of the Closing Date the employment of the individuals listed as
employed by each of the Seller and the Company, respectively, as set forth on
Schedule 4.2, and, as of the Closing Date the Seller shall, and the Purchaser
------------
shall cause the Company to, offer employment to the employees so terminated by
the other company as of the Closing Date.
SECTION 4.3 Purchaser Covenant with Respect to Applied Materials Guaranty,
--------------------------------------------------------------
Letter of Credit and NESLAB Guaranty.
------------------------------------
(a) The Purchaser agrees to use its commercially reasonable efforts to
cause the Seller to be released from its obligations pursuant to that certain
Performance and Purchase Price Guaranty Agreement dated as of February 2, 2000
executed by the Seller for the benefit of Applied Materials, Inc., a Delaware
corporation (the "Applied Guaranty"). The Purchaser shall indemnify and hold
----------------
Seller harmless against and from any Loss which Seller may incur arising under
the Applied Guaranty relating to events, conditions, operations, facts,
circumstances or acts of Purchaser or the Company or any of their respective
Affiliates which shall occur subsequent to the Closing.
(b) The Purchaser shall indemnify and hold Seller harmless against and
from any Loss which Seller may incur arising under that certain Irrevocable
Letter of Credit, File Number 3750787191 in favor of Fremont Industrial
Portfolio, Inc. in the amount of $198,833.84 issued by The Chase Manhattan Bank
relating to events, conditions, operations, facts, circumstances or acts of
Purchaser or the Company or any of their respective Affiliates which shall occur
subsequent to the Closing. The Seller shall have no obligation to renew such
letter of credit beyond the expiration of the term of the Lease Agreement
described on item 6 of the Leases on Schedule 2.5 (relating to the leased
------------
property at 44560-44660 ▇▇▇▇▇▇ Road, Fremont, California 94539) as in effect on
the Closing Date.
(c) The Purchaser shall indemnify and hold Seller harmless against and
from any Loss which Seller may incur arising under that certain Purchase
Agreement by and between NESLAB Instruments, Inc., a New Hampshire corporation,
and K*TEC Electronics Corporation dated August 14, 2000 relating to events,
conditions, operations, facts, circumstances or acts of Purchaser or the Company
or any of their respective Affiliates which shall occur subsequent to the
Closing.
25
SECTION 4.4 Audited Historical Financial Statement Assistance. The Seller
-------------------------------------------------
shall provide, or cause to be provided, to the Purchaser or its accountants
access to the books, work papers, records and personnel of Seller and its
Affiliates with respect to the Company in connection with, and shall use
commercially reasonable efforts to facilitate the Purchaser's or the Purchaser's
accountants' work in connection with, their preparation and delivery to the
Purchaser of any historical financial statements and results of operations
(including, without limitation, an opinion of the Purchaser's accountants
thereon) of the Company as of dates and for periods ending on or before the
Closing Date as may be required for the Purchaser or its Affiliates to comply
with Regulation S-X (including, without limitation, financial information
required by Rule 3-05 and Article 11 of Regulation S-X) of the Securities
Exchange Act of 1934, as amended, including, without limitation, by providing
any necessary and appropriate management representation letters to the Purchaser
or its accountants as may be reasonably requested by the Purchaser's accountants
in connection therewith. The Purchaser shall be solely responsible for all fees
and disbursements incurred by the Seller's and the Purchaser's accountants in
connection with the preparation, delivery and review of such historical results.
The Purchaser acknowledges and agrees that the Seller has no obligation in
connection with the delivery of such historical results or otherwise in
connection therewith except to the extent expressly set forth herein.
ARTICLE V
TAX MATTERS
SECTION 5.1 Tax Sharing Agreements. Any tax sharing agreement between the
----------------------
Seller and the Company is terminated as of the Closing Date and will have no
further effect for any taxable year (whether the current year, a future year, or
a past year).
SECTION 5.2 Section 338(h)(10) Election. The Purchaser and the Seller
---------------------------
shall make a joint election under Section 338(h)(10) of the Internal Revenue
Code of 1986, as amended (the "Code") (and any corresponding elections under
----
state, local, or foreign tax law) (collectively a "Section 338(h)(10) Election")
---------------------------
with respect to the purchase and sale of the Shares. The Seller will pay any
federal, state, local, or foreign Tax attributable to the making of the Section
338(h)(10) Election or an election under state, local, or foreign law similar to
the election available under Section 338(g) of the Code (or which results from
the making of an election under Section 338(g) of the Code) with respect to the
purchase and sale of the Shares and will indemnify the Purchaser and the Company
against any adverse consequences arising out of any failure to pay such Tax. To
facilitate the Section 338(h)(10) Election, within 45 days after the Closing the
Seller shall deliver to the Purchaser an Internal Revenue Service Form 8023 and
any similar form under applicable state tax law (the "Forms") with respect to
-----
the Section 338(h)(10) Election, which forms shall include the relevant taxpayer
information with respect to the Seller and the Company and which Forms shall
have been duly executed by an authorized person for the Seller. The Purchaser
shall complete the information required to be included in the forms, cause the
forms to be duly executed by an authorized person for the Purchaser, provide a
copy of the executed Forms to the Seller, and duly and timely file the Forms as
prescribed by Section 338 of the Code and the Treasury Regulations thereunder or
the corresponding provisions of applicable state tax law. The Purchaser and
the Seller shall provide to one another all necessary
26
information to permit the Section 338(h)(10) Election to be made, and the
Purchaser and the Seller shall take all necessary actions to effect and preserve
a timely Section 338(h)(10) Election.
SECTION 5.3 Indemnification for Post-Closing Transactions. The Purchaser
---------------------------------------------
agrees to indemnify the Seller for any additional Tax owed by the Seller
(including Tax owed by the Seller due to this indemnification payment) resulting
from any transaction not in the ordinary course of business occurring on the
Closing Date after the Purchaser's purchase of the Shares. For purposes of this
provision, the making of the Section 338(h)(10) Election shall not be treated as
a transaction that is not in the ordinary course of business that occurs on the
Closing Date after the Purchaser's purchase of the Shares.
SECTION 5.4 Post-Closing Transactions Not in the Ordinary Course. The
----------------------------------------------------
Purchaser and the Seller agree to report all transactions not in the ordinary
course of business occurring on the Closing Date after the Purchaser's purchase
of the Shares on the Purchaser's federal income tax return to the extent
permitted by Reg. (S) 1.1502-76(b)(1)(B).
SECTION 5.5 Allocation of Purchase Price. The Parties agree that the
----------------------------
Purchase Price and the liabilities of the Company (plus other relevant items)
will be allocated to the assets of the Company for tax purposes within 90 days
after the Determination Date. The Purchaser, the Company and Seller will file
all Forms, Tax Returns (including amended returns and claims for refund) and
information reports in a manner consistent with such allocation.
(a) Allocation of Responsibility. From and after the Closing Date, Seller
----------------------------
shall pay any Taxes of the Company (i) for all Pre-Closing Taxable Periods, (ii)
as a result of any breach of any representation or warranty in Section 2.12 or
------------
any covenant made by Seller in this Article V or (iii) imposed under Treas. Reg.
---------
(S) 1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise with respect to any Pre-
Closing Taxable Period. To the extent that any payment received by Purchaser
pursuant to this Section is treated as income, Seller shall gross-up the payment
to Purchaser such that Purchaser receives the amount of any payment required
under this subsection (a) on a net after-tax basis. Notwithstanding the
foregoing, no payment shall be required to be paid for Taxes to the extent of
any reserves for such Taxes that are established on the Closing Balance Sheet
(other than any reserves for deferred Taxes established to reflect timing
differences between book and Tax income).
(b) Payment of Tax Obligation. Purchaser shall notify Seller of any Tax
-------------------------
obligation of Company at least 15 days before such obligation is due to be paid,
provided that Purchaser's failure to notify Seller of any Tax obligation shall
not affect Purchaser's right to be reimbursed for the payment of any such Tax
obligation under Section 6.1 of this Agreement. Seller shall wire transfer
-----------
funds to Purchaser no later than three days before such payments are due.
(c) Returns. Seller shall cause to be prepared in a manner consistent with
-------
past practices all Tax Returns of the Company for taxable years or periods
ending on or before the Closing Date but which are due to be filed after the
Closing Date (taking into account all applicable extensions of time for filing),
and shall cause such Tax Returns to be delivered to
27
Purchaser for comment and approval, which approval shall not be unreasonably
withheld, no later than 30 days prior to the due date for filing any such Tax
Return. Seller shall file all such Tax Returns and shall cause to be timely paid
all Taxes required to be paid for the periods covered by such Tax Returns.
(d) Contests. Purchaser and the Seller agree to give prompt notice to each
--------
other of any proposed adjustment to Taxes for any Pre-Closing Taxable Periods.
Purchaser and the Seller shall cooperate with each other in the conduct of any
audit or other proceeding involving the Company for any such Pre-Closing Taxable
Period and each party may participate at its own expense. Seller shall have the
right to control the conduct of any such audit or proceeding for which the
Seller agrees that any resulting Tax allocable to any Pre-Closing Taxable Period
is covered by the indemnity in Section 6.1 of this Agreement, (such items,
-----------
"Seller's Items") provided that: (i) Seller shall keep Purchaser informed
--------------
regarding the progress and substantive aspects of the treatment of any Seller's
Items and (ii) Seller shall not compromise or settle any of Seller's Items
without obtaining Purchaser's consent, which consent shall not be unreasonably
withheld. Notwithstanding anything to the contrary in this Agreement, to the
extent that the provisions contained in Section 6.4 conflict with the provisions
-----------
contained in this Section 5.6(d), the provisions contained in this Section
------------- -------
5.6(d) shall control.
------
(e) Allocation of Taxes. For purposes of this Agreement, in the case of
-------------------
Taxes that are payable with respect to a taxable period that begins before and
ends after the Closing Date, the portion of such Taxes payable for the period
ending on the Closing Date shall be (a) in the case of any Tax based upon or
measured by income, and in the case of sale or use tax, the amount which would
be payable if the taxable year ended as of the end of the Closing Date and (b)
in the case of any other Tax, such as property taxes, the amount of such Tax for
the entire period multiplied by a fraction, the numerator of which is the number
of days in the period ending on the Closing Date and the denominator of which is
the number of days in the entire period.
SECTION 5.6 Conveyance Taxes. Any transfer, documentary, sales, use,
----------------
stamp, registration and other such Taxes and fees incurred in connection with
this Agreement and the transactions contemplated hereby shall be divided equally
between the Seller and the Purchaser and paid when due, and the Purchaser will,
at its own expense file all necessary Tax Returns and other documentation with
respect to all such transfer, documentary, sales, use, stamp, registration and
other Taxes and fees, if required by applicable law. Notwithstanding the
preceding sentence, the Seller shall pay any of the foregoing taxes and fees
incurred in connection with (i) the transfer of the Transferred Real Property or
Assigned Contracts and Leases from the Seller to the Company or (ii) the Asset
Drop Down.
ARTICLE VI
REMEDIES
SECTION 6.1 Indemnification by Seller. Except as otherwise expressly
-------------------------
provided in this Article VI and subject to the limitations stated in this
----------
Article VI, Seller agrees to and shall defend, indemnify and hold harmless
----------
Purchaser and the Company from and against, and shall
28
reimburse Purchaser and the Company for, each and every Loss relating to,
resulting from or arising out of the following (whether directly or as a result
of any allegation by a third party):
(a) any inaccuracy in any representation or warranty of the Seller under
this Agreement, the Schedules, any Transaction Document, or any certificate,
agreement or document executed and delivered by the Seller as required by this
Agreement;
(b) any breach or nonfulfillment of any covenant, agreement or other
obligation of the Seller under this Agreement, any Transaction Document or any
other agreement or document executed and delivered by the Seller as required by
this Agreement;
(c) any Proceeding (as defined below) relating to, resulting from or
arising out of the matter specifically described in item 1 on Schedule 2.11 (the
-------------
"Highway Master Matter"); or
---------------------
(d) (1) the performance of sampling, remediation, cleanup or monitoring
to the extent required to achieve closure for the Compressor/Vacuum Station
referenced in Item 1 of Schedule 2.17, in accordance with 30 Texas
-------------
Administrative Code Chapter 350, Remedy Standard A applicable to commercial
property, until no further action confirmation is obtained under 30 Texas
Administrative Code (S) 350.34,
(2) the performance of sampling, remediation, cleanup or monitoring
of environmental media affected by conditions referenced in item 2 of Schedule
--------
2.17 to the extent required to receive confirmation from the Texas Natural
----
Resource Conservation Commission ("TNRCC") to the effect that no further action
is necessary in connection with such environmental media, assuming commercial
use of the subject property,
(3) the preparation of a Spill Prevention Control and Countermeasure
Plan as referenced in Item 7 of Schedule 2.17, and
-------------
(4) any Proceeding brought or asserted by a third party arising from
the time of filing reports described in Item 5 and Item 6 of Schedule 2.17, but
--------------
solely to the extent such Proceeding relates to claims against the Company for
events occurring on or before the Closing Date.
The matters described in this Section 6.1(d), together with any Proceeding
--------------
brought or asserted by a third party arising from the matters described in this
Section 6.1(d)(1),(2), and (3), (but solely to the extent such Proceeding
------------------------------
relates to claims against the Company for events occurring on or before the
Closing Date) are referred to as the "Covered Environmental Matters".
-----------------------------
(e) the Proceeding identified in item 4 on Schedule 2.11 to the extent
-------------
such Proceeding relates to claims against the Company for events occurring on or
before the Closing Date, or relating to, resulting from or arising out of the
matters specifically described in items 5, 6 and 7 on Schedule 2.11,
-------------
(collectively, with the Highway Master Matter, the "Litigation Matters"). The
------------------
Covered Environmental Matters and the Litigation Matters are referred to herein
collectively as the "Litigation and Environmental Matters".
------------------------------------
29
SECTION 6.2 Indemnification by Purchaser and the Company. Except as
--------------------------------------------
otherwise expressly provided in this Article VI and subject to the limitations
----------
stated in this Article VI, the Purchaser and the Company, jointly and severally,
----------
agree to and shall defend, indemnify and hold harmless Seller from and against,
and shall reimburse Seller for each and every Loss relating to, resulting from
or arising out of the following (whether directly or as a result of any
allegation by a third party):
(a) any inaccuracy in any representation or warranty of the Purchaser
under this Agreement, the Schedules, any Transaction Document, or any
certificate, agreement or document executed and delivered by the Purchaser or
the Company as required by this Agreement;
(b) any breach or nonfulfillment of any covenant, agreement or other
obligation of the Purchaser or the Company under this Agreement, any Transaction
Document or any other agreement or document executed and delivered by the
Purchaser or the Company as required by this Agreement; or
(c) any Proceeding relating to events, conditions, operations, facts,
circumstances, or acts of Purchaser or the Company or any of their respective
Affiliates which shall occur subsequent to the Closing, including any Taxes of
the Company attributable to a Post-Closing Taxable Period.
SECTION 6.3 Proceedings. With respect to matters not involving any
-----------
judicial, administrative, arbitration, or investigatory proceeding or other
proceeding, claim or controversy (collectively, a "Proceeding") brought or
----------
asserted by third parties (and which are not Highway Master and Environmental
Matters which shall be governed by Section 6.5), within ten days after
-----------
notification from a party claiming a right to be indemnified (an "Indemnified
-----------
Party") supported by reasonable documentation setting forth the nature of the
-----
circumstances entitling the Indemnified Party to indemnity hereunder, the party
against whom a claim for indemnity is being made (an "Indemnifying Party"), at
------------------
no cost or expense to the Indemnified Party, shall diligently commence
resolution of such matters in a manner reasonably acceptable to the Indemnified
Party and shall diligently and timely prosecute such resolution to completion.
If the Indemnifying Party, within ten days after notice, fails to diligently
commence resolution of such matters in a manner reasonably acceptable to the
Indemnified Party, the Indemnified Party shall have the right to undertake the
resolution of such matters at the sole expense of the Indemnifying Party. With
respect to those claims that may be satisfied by payment of a liquidated sum of
money, including, without limitation, claims for reimbursement of expenses
incurred in connection with any circumstances entitling the Indemnified Party to
indemnity hereunder, the Indemnifying Party shall pay the full amount so claimed
to the extent supported by reasonable documentation within 15 days of such
resolution. If the Indemnifying Party disputes its liability in connection with
such claim, it shall pay any undisputed part of such liability, and the
Indemnified Party and the Indemnifying Party shall attempt for 30 days to
resolve any remaining dispute.
SECTION 6.4 Notice and Defense of Third-Party Claims. If any Proceeding
----------------------------------------
shall be brought or asserted by a third party against an Indemnified Party in
respect of which indemnity
30
may be sought under this Article from an Indemnifying Party, the Indemnified
Party shall give prompt written notice of such Proceeding to the Indemnifying
Party who shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all
reasonable expenses; provided, that any delay or failure so to notify the
Indemnifying Party shall relieve the Indemnifying Party of its obligations
hereunder to the extent, if at all, that it is prejudiced by reason of such
delay or failure. In no event shall any Indemnified Party be required to make
any expenditure or bring any cause of action to enforce the Indemnifying Party's
obligations and liability under and pursuant to the indemnifications set forth
in this Article. The Indemnified Party shall have the right to employ separate
counsel in any of the foregoing Proceedings and to participate in the defense
thereof, but the reasonable fees and expenses of such counsel shall be at the
expense of the Indemnified Party unless the Indemnified Party shall in good
faith determine that there exist actual or potential conflicts of interest which
make representation by the same counsel inappropriate, in which case the cost of
such additional counsel shall be at the expense of the Indemnifying Party. The
Indemnified Party's right to participate in the defense or response to any
Proceeding should not be deemed to limit or otherwise modify its obligations
under this Article. In the event that the Indemnifying Party, within 10 business
days after notice of any such Proceeding, fails to assume the defense thereof,
the Indemnified Party shall have the right to undertake the defense, compromise
or settlement of such Proceeding for the account of and at the expense of the
Indemnifying Party. Anything in this Article to the contrary notwithstanding,
the Indemnifying Party shall not, without the Indemnified Party's prior written
consent (which consent shall not be unreasonably withheld), settle or compromise
any Proceeding or consent to the entry of any judgment with respect to any
Proceeding unless (i) the terms of such compromise or settlement require no more
than the payment of money (i.e., such compromise or settlement does not require
the Indemnified Party to admit any wrongdoing or take or refrain from taking any
action), (ii) the full amount of such monetary compromise or settlement will be
paid by the Indemnifying Party, and (iii) the Indemnified Party receives as part
of such settlement a legal, binding and enforceable unconditional satisfaction
and/or release, in form and substance reasonably satisfactory to it, provided
that such third-party claim and any claimed liability of the Indemnified Party
with respect thereto is being fully satisfied by reason of such compromise.
Notwithstanding the foregoing provisions of this Section 6.4, this Section 6.4
----------- -----------
shall not apply to any Proceeding brought or asserted by a third party for which
the Purchaser or the Company shall be entitled to indemnification under Section
-------
6.1(c) or Section 6.1(d) which shall be governed solely by Section 6.5.
------ -------------- -----------
SECTION 6.5 Litigation and Environmental Matters. Notwithstanding any
------------------------------------
other provision of this Agreement to the contrary, this Section 6.5 shall govern
-----------
the resolution of the Litigation and Environmental Matters. Seller agrees to
timely pursue the resolution of the Litigation and Environmental Matters for
which further resolution is necessary, subject to, in the case of the Highway
Master Matter, the limit set forth in Section 6.6(b)(ii). Purchaser shall
-----------------
provide Seller with prompt written notice of any Proceeding which constitutes a
Litigation and Environmental Matter and any delay or failure to so notify Seller
shall relieve Seller of its obligations hereunder with respect to such
Proceeding to the extent that Seller is prejudiced by such delay or failure to
so notify. Seller shall retain exclusive control over the manner and means by
which to prosecute or defend or otherwise resolve any Litigation and
Environmental
31
Matters; provided Seller shall provide Purchaser with a copy of any document
relating to the pursuit of resolution of a Litigation and Environmental Matter.
At the Seller's expense, the Purchaser and the Company will cooperate with the
Seller, and will use reasonable efforts to cause the employees of the Company to
cooperate with the Seller, in furnishing information, evidence, testimony, and
other assistance as may be reasonably requested by the Seller in connection with
any Proceeding or other efforts by the Seller to resolve the Litigation and
Environmental Matters.
If Purchaser contends that Seller is not timely pursuing resolution of a
Litigation and Environmental Matter, Purchaser shall deliver written notice to
Seller of such belief, and if within 30 days after receipt of such notice by
Seller, Seller does not commence or resume resolution of such Litigation and
Environmental Matter, Purchaser may undertake resolution of the same for the
account of and at the expense of Seller. Resolution of the Covered
Environmental Matter described in Section 6.1(d)(1) shall be evidenced by
-----------------
receipt from the Texas Natural Resource Conservation Commission or other
applicable Governmental Authority of written evidence that Seller has remediated
the Compressor/Vacuum Storage Area referenced in Item 1 of Schedule 2.17 to
-------------
standards no less stringent than Remedy Standard A applicable to commercial
property under 30 Texas Administrative Code Chapter 350. Resolution of the
Covered Environmental Matter described in Section 6.1(d)(2) shall be evidenced
-----------------
by receipt from the TNRCC or other applicable Governmental Authority of written
confirmation to the effect that no further action is necessary in connection
with environmental media affected by conditions referenced in Item 2 of Schedule
--------
2.17, assuming the commercial use of the subject property. Purchaser
----
acknowledges that remediation to standards applicable to commercial property may
require the filing of documents in the real property records restricting the use
of the property at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ to non-residential
purposes, and Purchaser agrees to the filing of such documents.
SECTION 6.6 Limitations of Liability.
------------------------
(a) An Indemnifying Party shall have no liability for any inaccuracy in
any representation or warranty made under this Agreement unless written notice
of a claim for indemnity, or written notice of specific facts as to which an
indemnifiable Loss is expected to be incurred, shall have been given prior to
March 31, 2002; provided, however, that (i) the sole remedy for any breach or
inaccuracy of the representations and warranties contained in Section 2.6
-----------
(Financial Statements) (insofar as Section 2.6 relates to Accounts Receivable
-----------
and Inventory), Section 2.7 (Accounts Receivable) or Section 2.8 (Inventory)
----------- -----------
shall be the determination of the Net Asset Adjustment under Section 1.4; (ii)
-----------
with respect to the representations and warranties contained in Section 2.17
------------
(Environmental Compliance), written notice of a claim for indemnity, or written
notice of facts as to which an indemnifiable Loss is expected to be incurred,
shall have been given within four years after the Closing Date; (iii) with
respect to the representations and warranties contained in Section 2.12 (Tax
------------
Matters) and Section 2.13 (Employee Benefit Plans), written notice of a claim
------------
for indemnity, or written notice of facts as to which an indemnifiable Loss is
expected to be incurred, shall have been given within 30 days after the
expiration of the statute of limitations (including extensions) applicable to
such matter; and (iv) with respect to the representations and warranties
contained in Section 2.1
-----------
32
(Organization and Qualification), Section 2.2 (Company Capitalization), Section
----------- -------
2.3 (Authority Relative to Agreement), Section 3.1 (Organization and
--- -----------
Qualification), and Section 3.3 (Authority Relative to Agreement) or acts of
-----------
fraud or willful misrepresentation by the party making any representation or
warranty, written notice of a claim for indemnity, or written notice of facts as
to which an indemnifiable loss is expected to be incurred, may be given at any
time. The right to indemnification, payment of damages or other remedy based on
such representations, warranties, covenants and obligations will not be affected
by any investigation conducted, or any knowledge acquired (or capable of being
acquired) before the Closing Date, with respect to the accuracy or inaccuracy of
or compliance with, any such representation, warranty, covenant or obligation.
The written waiver of any condition based on the accuracy of any representation
or warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, payment of damages or
other remedy based on such representations, warranties, covenants and
obligations.
(b) Notwithstanding any other provision of this Agreement to the contrary,
the aggregate liability of the Seller for all events or occurrences giving rise
to the Seller being required to indemnify the Purchaser or the Company (i) under
Section 6.1(a) and Section 6.1(b) shall not exceed $30,000,000 and (ii) under
-------------- --------------
Section 6.1(c) shall not exceed $450,000.
--------------
(c) Notwithstanding any other provision of this Agreement to the contrary
(but subject to the last sentence of this Section 6.6(c), the Seller shall be
--------------
liable for indemnification under this Article VI only to the extent that the
----------
amount of any indemnifiable Loss, individually or in the aggregate with all
other such Losses covered by this Agreement, exceeds $1,000,000 (the "Basket");
------
provided, however, that Seller shall not be liable for indemnification under
this Article VI unless and until the amount of the Loss with respect to any
----------
individual claim exceeds $10,000 (the "Threshold"); and provided, further,
---------
however, that solely for purposes of determining when indemnifiable Losses
exceed the Basket or if a particular Loss exceeds the Threshold, all
representations and warranties of the Seller set forth in Article II shall be
----------
deemed to have been made without any qualifications relating to Knowledge or
materiality (it being understood and agreed that all such qualifications
relating to Knowledge and materiality shall apply after the aggregate of all
indemnifiable Losses exceeds the Basket). Notwithstanding the preceding
sentence, the Basket shall not apply to (i) claims for indemnification under (A)
the representation and warranties contained in Section 2.12 (Tax Matters) or
------------
Section 2.13 (Employee Benefit Plans), (B) Section 6.1(c), (C) Section 6.1(d),
------------ -------------- --------------
(D) Section 6.10 or (E) Section 6.11, or (ii) the determination of the Net Asset
------------ ------------
Adjustment under Section 1.4, and indemnifiable Losses arising from claims
-----------
described in clause (i) of this sentence shall not be applied toward the
satisfaction of the Basket.
(d) In calculating the amount of any Loss for which any Indemnifying Party
is liable under this Article, there shall be taken into consideration (i) the
value of any federal or state income tax benefits theretofore actually received
by the Indemnified Party and (ii) the amount of any insurance recoveries,
excluding any amounts which are in effect self-insured whether through retention
amounts or otherwise, to which the Indemnified Party is entitled, in each case
as a direct consequence of the circumstances to which the Loss related or from
which the Loss resulted or arose.
33
(e) The Purchaser and the Company shall use commercially reasonable
efforts to mitigate any Loss suffered, incurred or sustained by the Purchaser or
the Company arising out of any matter for which the Purchaser and the Company
are entitled to indemnification herein, upon the Purchaser or the Company having
obtained actual knowledge of such breach by the Seller. In the event that the
Purchaser and the Company shall fail to make such commercially reasonable
efforts to mitigate such Loss, then notwithstanding anything else to the
contrary contained herein, the Seller shall not be required to indemnify the
Purchaser or the Company for any Loss that could reasonably be expected to have
been avoided had the Purchaser and the Company made such efforts. The
obligations of the Purchaser and the Company under this Section 6.6(e) shall not
--------------
impose any duty on the Company to conduct its business and operations outside
the ordinary course of business.
(f) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NO PARTY HERETO
SHALL HAVE ANY LIABILITY UNDER THIS AGREEMENT FOR CONSEQUENTIAL DAMAGES (SUCH AS
LOSS OF PROFIT), OR TREBLE, EXEMPLARY OR PUNITIVE DAMAGES OF ANY TYPE UNDER ANY
CIRCUMSTANCES REGARDLESS OF WHETHER SUCH DAMAGES MAY BE AVAILABLE UNDER TEXAS
LAW, THE LAW OF ANY OTHER STATE, OR FEDERAL LAW; PROVIDED, HOWEVER, THAT THE
LIMITATIONS SET FORTH IN THIS SECTION 6.6(f) SHALL NOT APPLY TO (i) SUCH DAMAGES
-------------
SUBJECT TO POTENTIAL AWARD IN A THIRD-PARTY CLAIM GIVING RISE TO INDEMNIFICATION
UNDER THIS ARTICLE VI OR (ii) SUCH DAMAGES ARISING OUT OF ACTS OF FRAUD OR
----------
WILLFUL MISREPRESENTATION BY THE PARTY MAKING ANY REPRESENTATION OR WARRANTY
UNDER THIS AGREEMENT.
SECTION 6.7 Exclusive Remedies.
------------------
(a) The remedies of the parties specifically provided for by this
Agreement or specifically provided for in the Transaction Documents, including
the express indemnities provided in Section 1.7, Section 4.2, Section 4.3,
----------- ----------- -----------
Section 5.3, Section 6.10 and Section 6.11, shall be the sole and exclusive
----------- ------------ ------------
remedies of the parties for (i) any breach or inaccuracy of the representations
and warranties contained in this Agreement, the Schedules, any Transaction
Document or in any certificate, agreement or document furnished or delivered
pursuant hereto (other than a breach of the representations and warranties set
forth in Section 2.6 (Financial Statements) (insofar as Section 2.6 relates to
----------- ------------
Accounts Receivable and Inventory), Section 2.7 (Accounts Receivable) or Section
----------- -------
2.8 (Inventory), the sole remedy for which shall be the determination of the Net
---
Asset Adjustment under Section 1.4), (ii) the failure to perform any covenants,
-----------
agreements or obligations contained in this Agreement, any Transaction Document
or in any other agreement or document executed and delivered pursuant hereto, or
(iii) any Loss, relating to, resulting from or arising out of any transaction or
matter relating in any manner whatsoever to the Transferred Real Property and
the Assigned Contracts and Leases, the operation of the Company prior to or
after Closing, this Agreement or to any document furnished or delivered pursuant
hereto. Without limiting the generality of the foregoing, except with respect
to such remedies specifically set forth herein, Purchaser hereby releases,
waives, and agrees not to ▇▇▇ Seller or any of its shareholders, officers,
directors, affiliates,
34
employees, agents or representatives ("Seller's Related Parties") for any and
------------------------
all claims, causes of action, rights of contribution, cost recovery, losses,
liabilities, suits, costs, fees, judgments or expenses which may now exist or
which may hereafter arise, REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY
THE SOLE, CONTRIBUTORY, PASSIVE OR PARTIAL NEGLIGENCE OR STRICT LIABILITY OF ANY
OF THE SELLER'S RELATED PARTIES, in connection with (i) any material, waste or
substance the use, collection, handling, presence, recycling, generation,
treatment, storage, disposal, release or transportation of which is or may
become regulated or controlled by any Governmental Authority or the improper
management or disposal of which may affect human health or safety or the
environment, or (ii) the compliance by the Company or any of its predecessors or
any of its current or former real or personal property with applicable laws,
regulations, orders or directives pertaining directly or indirectly to human
health or safety or the environment, including without limitation, Environmental
Laws.
(b) Notwithstanding the foregoing provisions of Section 6.7(a) or anything
--------------
to the contrary in this Agreement, the Seller shall retain all legal and
equitable remedies available to it for any breach or failure to perform under
the Note or the Adjustment Note by the Purchaser or the Company as provided
under the term of the Note, the Adjustment Note or any document or instrument
governing the rights of the Seller under the Note or the Adjustment Note.
SECTION 6.8 Treatment of Indemnity Provisions. All indemnity payments made
---------------------------------
under Article VI of this Agreement shall be considered an adjustment to the
----------
Purchase Price.
SECTION 6.9 Payment of Indemnification Obligation. The parties hereto
-------------------------------------
agree that (i) if the Purchase Price is reduced pursuant to Section 1.4, or (ii)
-----------
if the Seller becomes liable to the Purchaser or the Company for indemnification
under this Article VI (other than pursuant to Section 6.1(c) or (d)), the Seller
---------- ----------------------
shall have the right, in its sole discretion, to pay the amount owed under
Section 1.4 or to satisfy such liability for indemnification by instructing the
-----------
Purchaser and the Company in writing as follows: (a) first, to reduce the
accrued but unpaid interest on the Note or the Adjustment Note; and (b) second,
to reduce the outstanding principal amount of the Note or the Adjustment Note,
until such liability is satisfied in full.
SECTION 6.10 Consent/Approval Losses. This Section 6.10 shall govern the
----------------------- ------------
liability of the Seller and the Purchaser for Losses suffered by the Seller, the
Purchaser or the Company due to the failure to obtain any third party consent,
waiver or approval that is required for transfer or assignment of the Assigned
Contracts and Leases or any other lease or contract, or any breach of or
inaccuracy in the Seller's representation and warranty in Section 2.5
-----------
(collectively, "Consent/Approval Losses"). The Seller shall have no liability
-----------------------
for any Consent/Approval Losses attributable to (i) any lease or contract which
is not required to be listed on Schedule 2.20, (ii) any contract listed within
--------------
items 1-34 on Schedule 2.20 and any other contract solely for the provision of
-------------
goods or services to a customer of the Company ("Customer Contract"), or (iii)
-----------------
the Lease Agreement described in item 3 of the Leases on Schedule 2.5 (relating
to the leased property at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-
8004, "Milpitas Lease"). The Seller shall be liable for, and indemnify the
--------------
Purchaser against, fifty percent (50%) of the Purchaser's or the Company's
Consent/Approval Losses in excess of
35
$250,000 attributable to any lease or contract set forth on Schedule 6.10. In
-------------
addition, the Seller shall be liable for, and indemnify the Purchaser against,
Consent/Approval Losses attributable to (i) any lease or contract (other than
any Customer Contract or the Milpitas Lease) required to be listed on Schedule
--------
2.20 and not listed on Schedule 6.10 or (ii) the Asset Drop Down or the
---- -------------
Subsidiary Merger. The Purchaser and the Company, shall be liable for, and
indemnify the Seller against, all of the Seller's Consent/Approval Losses except
to the extent the Purchaser is entitled to indemnity from the Seller pursuant to
the two preceding sentences. None of the Consent/Approval Losses of the
Purchaser, whether or not indemnifiable by the Seller, shall be applied toward
the satisfaction of the Basket.
SECTION 6.11 Asset Drop Down and Subsidiary Losses. The Seller shall
-------------------------------------
indemnify and hold harmless the Purchaser from and against any Loss attributable
to the Asset Drop Down or any subsequent merger of the Non-Compete Subsidiaries
into the Company (the "Subsidiary Merger"); provided, however, that Seller shall
-----------------
not indemnify Purchaser for any such Loss attributable to the existence,
ownership or operations of the Non-Corporate Subsidiaries after the Closing.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 7.1 Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of the parties hereto contained in Articles II
-----------
and III of this Agreement shall survive the Closing and any investigation by the
--------
other party with respect thereto but shall terminate and be of no further force
or effect on or after March 31, 2002, except that any representation and
warranty as to which written notice of a bona fide claim relating thereto is
received by the Indemnifying Party during the survival period shall, only with
respect to such claim, survive such survival period; provided, however, that (i)
the representations and warranties set forth in Section 2.6 (Financial
-----------
Statements) (insofar as Section 2.6 relates to Accounts Receivable and
-----------
Inventory), Section 2.7 (Accounts Receivable) and Section 2.8 (Inventory) shall
----------- -----------
be continuing and shall survive only until the Determination Date; (ii) the
representations and warranties set forth in Section 2.17 (Environmental
------------
Compliance) shall be continuing and shall survive only until four years after
the Closing Date; (iii) the representations and warranties set forth in Section
-------
2.12 (Tax Matters) and Section 2.13 (Employee Benefit Plans) shall be continuing
---- ------------
and shall survive until 30 days after the expiration of the statute of
limitations (including extensions) applicable to such matter; and (iv) the
representations and warranties set forth in Section 2.1 (Organization and
-----------
Qualification), Section 2.2 (Company Capitalization), Section 2.3 (Authority
----------- -----------
Relative to Agreement), Section 3.1 (Organization and Qualification) and Section
----------- -------
3.3 (Authority Relative to Agreement) shall be continuing and shall survive
---
indefinitely.
SECTION 7.2 Survival of Covenants. The covenants and agreements of the
---------------------
parties hereto, including, but not limited to, the indemnification obligations,
contained in this Agreement and in any certificate, instrument, agreement or
document executed and delivered in connection herewith shall survive the Closing
and any investigation by the other party with respect thereto.
36
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Expenses. All costs and expenses incurred in connection with
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the transactions contemplated by this Agreement shall be paid by the party
incurring such costs and expenses.
SECTION 8.2 Public Announcements. Any public announcement or similar
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publicity with respect to this Agreement or the transactions contemplated hereby
shall be issued, if at all, at such time and in such manner as the Purchaser and
the Seller shall jointly determine.
SECTION 8.3 Brokers and Finders. Except for ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
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Securities Corporation (whose fees and expenses shall be borne by the Seller),
each party represents and warrants to the other that all negotiations on behalf
of such party relating to this Agreement and the transactions contemplated by
this Agreement have been carried on by such party and its agents directly
without the intervention of any other Person in such manner as to give rise to
any claim against the Purchaser or the Seller for financial advisory fees,
brokerage or commission fees, finder's fees or other like payment in connection
with the consummation of the transactions contemplated hereby.
SECTION 8.4 Entire Agreement; Assignment. This Agreement constitutes the
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entire agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject matter hereof.
SECTION 8.5 No Assignment; Binding Effect. Neither this Agreement nor any
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right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be null and void ab initio, except (a) for assignments and transfers
by operation of law and (b) the Purchaser may collaterally assign its rights
under this Agreement to parties providing financing in connection with the
transactions contemplated hereby; provided, however, that the parties
acknowledge and agree that any such assignment (i) shall result in the assignee
obtaining the same (but not greater) rights than the Purchaser under this
Agreement (it being understood and agreed that the rights of any such assignee
shall be subject in all respects to this Agreement, including, without
limitation, the limits set forth in the provisions of Article VI of this
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Agreement) and (ii) shall not relieve the Purchaser or the Company from any of
their respective duties or obligations under this Agreement. Subject to the
preceding sentence, this Agreement is binding upon, inures to the benefit of and
is enforceable by the parties hereto and their respective successors in
interest, including without limitation any acquirer of the Seller's assets, and
assigns.
SECTION 8.6 Amendment and Modification. This Agreement may be amended,
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modified, terminated, rescinded or supplemented only by written agreement of the
parties hereto.
SECTION 8.7 Waiver; Consents. Any failure of a party to comply with any
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obligation, covenant, agreement or condition herein may be waived by the party
affected thereby
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only by a written instrument signed by the party granting such waiver. No
waiver, or failure to insist upon strict compliance, by any party of any
condition or any breach of any obligation, term, covenant, representation,
warranty or agreement contained in this Agreement, in any one or more instances,
shall be construed to be a waiver of, or estoppel with respect to, any other
condition or any other breach of the same or any other obligation, term,
covenant, representation, warranty or agreement. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver.
SECTION 8.8 Further Assurances. From time to time, the Purchaser and the
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Seller shall execute and deliver such further agreements, documents,
certificates and other instruments and shall take or cause to be taken such
other actions as shall be reasonably necessary or advisable to carry out the
purposes of and effect the transactions contemplated by this Agreement.
SECTION 8.9 Severability. The invalidity or unenforceability of any
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provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 8.10 Notices. All notices, requests, claims, demands and other
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communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by cable, telecopy or telex, or by
registered or certified mail (postage prepaid, return receipt requested), to the
respective parties as follows:
if to the Purchaser:
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇-▇▇▇▇ Funding II, L.L.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Telecopy: 202/371-0391
with a copy (which shall not constitute notice) to:
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ Capital Partners, L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: 415/434-3130
and
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Mr. ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Telecopy: 202/637-2200
if to the Seller:
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ Electronics Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: 281/243-5800
with a copy (which shall not constitute notice) to:
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: 713/223-3717
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 8.11 Governing Law. This Agreement shall be governed by and
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construed in accordance with the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws.
SECTION 8.12 Jurisdiction and Venue. Any process against the Purchaser or
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the Seller in, or in connection with, any suit, action or proceeding arising out
of or relating to this Agreement or any of the transactions contemplated by this
Agreement may be served personally or by certified mail at the address set forth
in Section 8.9 with the same effect as though served on it or him personally.
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The Purchaser and the Seller hereby irrevocably submit in any suit, action or
proceeding arising out of or relating to this Agreement or any of the
transactions contemplated by this Agreement to the exclusive jurisdiction and
venue of any court of competent jurisdiction in Delaware and irrevocably waive
any and all objections to jurisdiction and review or venue that they may have
under the laws of Delaware or the United States.
SECTION 8.13 Descriptive Headings. The descriptive headings are inserted
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for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement. No provision of this
Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision.
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SECTION 8.14 Parties in Interest; No Third-Party Beneficiary. This
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Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
SECTION 8.15 Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 8.16 Incorporation by Reference. Any and all Schedules, Exhibits,
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annexes, statements, reports, certificates or other documents or instruments
referred to herein or attached hereto are incorporated herein by reference
hereto as though fully set forth at the point referred to in the Agreement.
SECTION 8.17 Certain Definitions. For the purposes of this Agreement, the
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following terms shall have the meanings specified or referred to below whether
or not capitalized when used in this Agreement.
(a) "Affiliate" means, with respect to any person or other entity, any
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person or other entity that, directly or indirectly, controls, is controlled by,
or is under common control with, such person or other entity in question. For
the purposes of this definition and the definition of Subsidiary, "control"
(including "controlling," "controlled by" and "under common control with") as
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used with respect to any person or other entity, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such person or other entity, whether through the ownership of
voting securities, by contract or otherwise.
(b) "Clerical Inventory Errors" means any data entry or similar clerical
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error in the assignment of a standard cost to raw material (it being understood
and agreed that the Seller's reasonable judgment as to the appropriate standard
cost for any raw material shall not constitute a Clerical Inventory Error).
(c) "Code" means the Internal Revenue Code of 1986, as amended.
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(d) "Court" means any court of the United States, any foreign country or
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any domestic or foreign state, and any political subdivision thereof.
(e) "Escrow Agreement" means that certain Escrow Agreement (as the same
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may be amended or modified from time to time and including any and all written
instructions given to "Escrow Agent" (as defined therein) pursuant thereto) made
and entered into as of September 14, 2000, by and among Kent Electronics
Corporation, ▇▇▇▇▇▇-▇▇▇▇ Funding II, L.L.C. and The Chase Manhattan Bank.
(f) "GAAP" means generally accepted United States accounting principles,
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consistently applied.
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(g) "Governmental Authority" means any governmental agency or authority
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(other than a Court) of the United States, any foreign country, or any domestic
or foreign state, and any political subdivision thereof.
(h) "Indebtedness" means all indebtedness, obligations and liabilities of
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the Purchaser or its Subsidiaries for borrowed money or any extension of credit,
whether secured or unsecured by any lien or security interest in any property or
assets of the Purchaser or its Subsidiaries, including, without limitation: (i)
indebtedness, obligations, and liabilities which would be reflected on a
consolidated balance sheet of the Purchaser prepared in accordance with GAAP;
and (ii) all obligations of the Purchaser or its Subsidiaries in respect of any
guaranty.
(i) "Knowledge" or "known" -- An entity shall be deemed to have
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"knowledge" of or to have "known" a particular fact or other matter if any
director or executive officer of such entity has actual knowledge after due
inquiry of such fact or other matter. Without limiting the generality of the
preceding sentence, the Seller shall be deemed to have knowledge if any of ▇▇▇▇▇
▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has actual knowledge after due
inquiry of such fact or other matter.
(j) "Loss" means each and every claim, action, demand, cost, expense,
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liability (including without limitation STRICT LIABILITY), penalty and other
damage incurred by the Purchaser or the Seller, as appropriate, including,
without limitation, reasonable attorneys' fees.
(k) "Material Adverse Effect" means any change, effect or circumstance
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that (i) is materially adverse to the assets, financial condition, results of
operations or business of the Company taken as a whole (provided, however, that
for purposes of determining whether there has been a "Material Adverse Effect"
with respect to the Company (A) any adverse change resulting from or relating to
general business or economic conditions affecting the economy as a whole shall
be disregarded, and (B) any adverse change resulting from or relating to
conditions generally affecting the industries in which the Company competes or
participates shall be disregarded) or (ii) would prevent the Purchaser, the
Company or the Seller, as the case may be, from carrying out its obligations
under this Agreement.
(l) "Person" means any corporation, limited liability company,
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association, partnership, organization, business, individual, government or
political subdivision thereof or government agency.
(m) "Post-Closing Taxable Period" means (i) any taxable period beginning
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after the Closing Date and (ii) with respect to any taxable period beginning on
or before the Closing Date and ending after the Closing Date, the portion of
such taxable period that is after the Closing Date.
(n) "Pre-Closing Taxable Period" means (i) any taxable period ending on or
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before the Closing Date and (ii) with respect to any taxable period beginning on
or before the Closing Date and ending after the Closing Date, the portion of
such taxable period that is on or before the Closing Date.
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(o) "Seller Group" means the "affiliated group" of corporations (as
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defined in section 1504 of the Code) of which the Seller is the "common parent"
(as that term is used in section 1504(a) of the Code).
(p) "Standard Cost Method" means the method of costing inventory by the
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Company whereby costs are assigned to individual inventory components using
predetermined costs that are based on the Company's reasonable expectations of
actual costs, conducted in a manner consistent with the Company's past
practices, including allocations of overhead and overhead variances.
(q) "Subsidiary" shall mean, when used with reference to an entity, any
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corporation, a majority of the outstanding securities entitled routinely to vote
in the election of directors are owned directly or indirectly by such entity, or
any partnership, joint venture or other enterprise in which such entity
currently has, directly or indirectly, any controlling equity interest.
(r) "Taxes" shall mean all taxes, charges, imposts, tariffs, fees, levies
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or other similar assessments or charges of any kind whatsoever, including income
taxes, ad valorem taxes, excise taxes, withholding taxes or other taxes of or
with respect to gross receipts, premiums, real property, personal property,
windfall profits, sales, use, transfers, licensing, employment, payroll and
franchises imposed by or under any law, and such terms shall include any
interest, fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any such tax or any contest or
dispute thereof.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
KENT ELECTRONICS CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
▇▇▇▇▇▇-▇▇▇▇ FUNDING II, L.L.C.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
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JOINDER
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Effective immediately after the Closing, the Company hereby joins in this
Agreement and shall be fully bound by the covenants of the Purchaser and the
Company set forth herein, including, without limitation, the covenants set forth
in Article VI of this Agreement.
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K*TEC ELECTRONICS CORPORATION
By: /s/ R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
President and General Manager
EXHIBIT F
ENVIRONMENTAL LAWS
1. Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. (S)(S) 9601 et seq.
2. Resource Conservation and Recovery Act, 42 U.S.C. (S)(S) 6901 et seq.
("RCRA")
3. Clean Water Act, 33 U.S.C. (S)(S) 1251 et seq.
4. Clean Air Act, 42 U.S.C. (S)(S) 7401 et seq.
5. Toxic Substances Control Act, 15 U.S.C. (S)(S) 2601 et seq.
6. Hazardous Materials Transportation Act, 49 U.S.C. (S)(S) 1801 et seq.
7. Occupational Safety and Health Act, 29 U.S.C. (S)(S) 651 et seq.
8. Oil Pollution Act, 33 U.S.C. (S)(S) 2701 et seq.
9. Emergency Planning and Community Right-to-Know Act, 42 U.S.C. (S)(S) 11001
et seq.
10. Safe Drinking Water Act, 42 U.S.C. (S)(S) 300f et seq.
11. Federal Insecticide, Fungicide and ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇ ▇.▇.▇. (▇)(▇)▇▇▇ et.
seq.
12. Atomic Energy Act, 42 U.S.C. (S)(S) 2014 et. seq.
13. Endangered Species Act, 15 U.S.C. (S)(S)1531 et. seq.
14. Natural Environmental Policy Act, 42 U.S.C. (S)4321 et seq.