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STOCK PURCHASE AGREEMENT
dated as of June 7, 1999
by and between
AVNET, INC.
a New York corporation
and
ELECTROCOMPONENTS PLC
a public limited company formed under the laws of England
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INDEX
Article I - Definitions ......................................................1
1.1 Capitalized Terms ....................................................1
1.2 Accounting Terms .....................................................1
Article II - Purchase and Sale ...............................................1
2.1 Basic Transaction ....................................................1
2.2 Purchase Price .......................................................1
2.3 The Closing ..........................................................2
2.4 Deliveries at the Closing ............................................2
Article III - Representations and Warranties of Seller .......................2
3.1 Organization and Good Standing .......................................2
3.2 Enforceability; Authority; No Conflict ...............................3
3.3 Capitalization .......................................................3
3.4 Financial Statement ..................................................4
3.5 Books and Records ....................................................4
3.6 No Undisclosed Liabilities ...........................................5
3.7 Ordinary Course ......................................................5
3.8 Permits ..............................................................5
3.9 Regulatory Filings ...................................................6
3.10 Consents .............................................................6
3.11 Contracts ............................................................6
3.12 Litigation ...........................................................8
3.13 Inventory ............................................................9
3.14 Real Property ........................................................9
3.15 Environmental Matters ...............................................10
3.16 Compliance With Legal Requirements ..................................11
3.17 Software; Year 2000 Compliance ......................................12
3.18 Intellectual Property ...............................................14
3.19 Tax Matters .........................................................15
3.20 Employee Benefits ...................................................16
3.21 Accounts Receivable .................................................17
3.22 Title to Assets; Sufficiency of Assets ..............................17
3.23 Insurance ...........................................................18
3.24 Contracts with Affiliates ...........................................18
3.25 Principal Customers and Suppliers ...................................19
3.26 Employees and Labor Matters .........................................19
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3.27 Product Returns ......................................................20
3.28 Product Liability and Product Warranty ...............................20
3.29 Customer and Mailing Lists ...........................................21
3.30 Bank Accounts and Safe Deposit Boxes; Powers of Attorney .............21
3.31 Brokers' Fees ........................................................21
3.32 Disclosure ...........................................................21
3.33 No Material Adverse Change ...........................................21
3.34 Not Investment Company ...............................................21
3.35 No Other Warranties ..................................................21
Article IV - Representations and Warranties of Buyer .........................22
4.1 Organization and Good Standing .......................................22
4.2 Authorization and Approval of Agreement ..............................22
4.3 No Conflict ..........................................................22
4.4 Investment Representation ............................................22
4.5 Adequate Financing ...................................................22
Article V - Pre-Closing Covenants ............................................23
5.1 Affirmative Covenants of Seller ......................................23
5.2 Negative Covenants of Seller .........................................24
5.3 Additional Covenants .................................................26
5.4 Antitrust Filing .....................................................27
5.5 Cash Free/Debt Free at Closing .......................................27
Article VI - Post Closing Covenants ..........................................28
6.1 General ..............................................................28
6.2 Litigation Support ...................................................28
6.3 Use of Seller's Name .................................................29
6.4 Web Site Address .....................................................29
6.5 Post-Closing Tax Matters .............................................29
6.6 Misdirected Payments .................................................32
6.7 Preparation of Closing Date Financial Statements .....................32
6.8 Employee Benefit Transition Plan .....................................33
6.9 Employees ............................................................33
6.10 Continuation of Pre-Closing Covenants ................................33
Article VII - Conditions Precedent to Obligation Of Buyer ....................33
7.1 Conditions Precedent .................................................34
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7.2 Waiver ...............................................................38
Article VIII - Conditions Precedent to Obligation of Seller ..................38
8.1 Conditions Precedent .................................................38
8.2 Waiver ...............................................................39
Article IX - Indemnification .................................................39
9.1 Survival; Remedies ...................................................39
9.2 Indemnification By Seller ............................................40
9.3 Indemnification By Buyer .............................................41
9.4 Notice and Defense ...................................................41
9.5 Limitations on Indemnification by Seller .............................42
9.6 Escrow; Right of Set-Off .............................................43
9.7 Tax Status of Indemnification Payment ................................43
Article X - Termination ......................................................43
10.1 Termination Events ...................................................43
10.2 Effect of Termination ................................................43
Article XI - Miscellaneous ...................................................44
11.1 Expenses .............................................................44
11.2 Assignment; Benefits and Burdens .....................................44
11.3 Amendment ............................................................44
11.4 Notices ..............................................................45
11.5 Entire Understanding .................................................46
11.6 Governing Law; Jurisdiction ..........................................46
11.7 Severability .........................................................46
11.8 Waiver; Remedies Not Exclusive .......................................46
11.9 Schedules ............................................................47
11.10 Terminology and Construction; Counterparts ...........................47
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS:
A. [Intentionally Omitted]
B. Form of the Announcement
C. Form of the opinion of Xxxxxx, Xxxxxxx & Xxxxxxx
X. Form of the opinion of Xxxxx Xxxx, Esq.
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E. Form of the Nonsolicitation Agreement
F. Form of the Escrow Agreement
G. Form of the Employment Agreements/Key Employees
H. Form of the Noncompetition Agreements/Key Employees
I. Form of the Supply Agreement
J. Form of the Shared Space License Agreement
K. Form of the opinion of Schoolman, Rogers, Gandal, Pordy & Xxxxx, P.A.
SCHEDULES:
Schedule 1.1 Certain Definitions
Schedule 3.1(c) Organization and Good Standing
Schedule 3.1(d) Ownership Interests in Other Entities
Schedule 3.2(b) Conflicts
Schedule 3.3 Capitalization
Schedule 3.4 Financial Statements.
Schedule 3.6 Undisclosed Liabilities.
Schedule 3.7(b) Ordinary Course
Schedule 3.8 Permits
Schedule 3.10 Consents.
Schedule 3.11(a) Outstanding Sales Orders and Sales Contracts in Excess of
$500,000
Schedule 3.11(b) Purchase Orders, Bids and Purchase Commitments in Excess
of $500,000
Schedule 3.11(c) Supply Contracts
Schedule 3.11(d) Non-Competition Agreements
Schedule 3.11(e) Contracts with Employees/Affiliates
Schedule 3.11(f) Communications Contracts
Schedule 3.11(g) Debts, Liabilities or Obligations Guaranteed by the
Company
Schedule 3.11(h) Other Material Contracts
Schedule 3.11(i) Problems with Contracts
Schedule 3.12 Litigation
Schedule 3.13 Inventory issues
Schedule 3.14(b) Leases
Schedule 3.14(d) Leased Real Property
Schedule 3.15 Environmental Matters
Schedule 3.15(a) Environmental Permits
Schedule 3.16 Compliance with Legal Requirements
Schedule 3.17(a) Software
Schedule 3.17(b) Year 2000 Compliance
Schedule 3.17(c) Form of Year 2000 Notice to Suppliers
Schedule 3.17(d) Limited Warranty and Limited Liability Provision
Schedule 3.18(a) Intellectual Property
Schedule 3.18(c) Ownership of Intellectual Property
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Schedule 3.19 Tax Matters
Schedule 3.19(d) Tax Returns
Schedule 3.20 Employee Benefit Plans
Schedule 3.22(a) Title to Assets
Schedule 3.23 Insurance
Schedule 3.24(a) Contracts with Affiliates
Schedule 3.24(b) Contracts with the Company's Directors, Officers or
Employees or their respective Affiliates
Schedule 3.25(a) Top Customers
Schedule 3.25(b) Suppliers or Vendors
Schedule 3.26(a) Employment Related Contracts
Schedule 3.26(b) Employee Census
Schedule 3.26(d) Obligations to Employees
Schedule 3.27 Product Returns
Schedule 3.28 Product Warranties & Liability
Schedule 3.29 Customer List
Schedule 3.30 Bank Accounts & Safe Deposit Boxes
Schedule 5.2(a)(viii) Employee Salary Adjustments
Schedule 6.5 Taxes
Schedule 6.8 Employee Benefits Transition Plan
Schedule 7.1(c) Consents
Schedule 7.1(k)(i) Canadian Employees
Schedule 7.1(k)(ii) Canadian Assets
Schedule 7.1(1)(i) Puerto Rico Employees
Schedule 7.1(1)(ii) Puerto Rico Assets
Schedule 7.1(m) List of Company Office Locations
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made and entered into as of the 7th day of
June, 1999, by and between Avnet, Inc., a New York corporation ("Seller"), and
Electrocomponentsplc, a public limited company formed under the laws of England
("Buyer").
RECITALS
A. Seller owns all of the issued and outstanding shares (the "Shares") of the
capital stock of Allied Electronics, Inc., a Delaware corporation (the
"Company").
B . Buyer desires to purchase (or to cause a direct or indirect wholly-owned
subsidiary of Buyer to purchase) the Shares from Seller, and Seller desires to
sell the Shares to Buyer (or to a direct or indirect wholly-owned subsidiary of
Buyer), all upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I -- DEFINITIONS
1.1 Capitalized Terms. For purposes of this Agreement, the capitalized terms
(and all derivations thereof) set forth on Schedule 1.1 shall have the
respective meanings specified or referred to thereon.
1.2 Accounting Terms. All accounting terms used in this Agreement, and not
otherwise defined on Schedule 1.1, shall be construed in accordance with United
States generally accepted accounting principles.
ARTICLE II -- PURCHASE AND SALE
2.1 Basic Transaction. Upon the terms and subject to the conditions of this
Agreement, at the Closing, Buyer shall purchase the Shares from Seller, and
Seller shall sell the Shares to Buyer.
2.2 Purchase Price. Buyer agrees to pay to Seller at the Closing a cash purchase
price of US $380,000,000 (the "Purchase Price"), as follows:
(a) US$377,000,000 by wire transfer in immediately available funds to an
account designated by Seller; and
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(b) US$3,000,000 (the "Escrow Amount") by wire transfer in immediately
available funds to an account designated by the Escrow Agent pursuant to the
Escrow Agreement, to be held by the Escrow Agent in accordance with the terms
and conditions of the Escrow Agreement.
2.3 The Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Xxxxxx Xxxxxxxx, 000
Xxxxxxxx Xxxxxx, Xxxxx 0000, Xx. Xxxxx, Xxxxx 00000, commencing at 9:00 a.m.
local time, on July 2, 1999 (the "Closing Date"). Closing shall be deemed
effective as of the close of business on the Closing Date.
2.4 Deliveries at the Closing. At the Closing:
(a) Seller shall deliver or cause to be delivered to Buyer (i) a stock
certificate or certificates representing the Shares, duly endorsed in blank or
accompanied by stock powers duly executed in blank, with all necessary stock
transfer stamps affixed thereto, free and clear of all Liens (the "Stock
Certificate"), and (ii) all of the Contracts, documents, certificates and
instruments set forth in Section 7.1; and
(b) Buyer shall deliver or cause to be delivered to Seller (i) the Purchase
Price, in accordance with Section 2.2, and (ii) all of the Contracts, documents,
certificates and instruments set forth in Section 8.1.
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer that the statements contained in
this Article III are true and complete as of the date of this Agreement and will
be true and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Article III).
3.1 Organization and Good Standing.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York.
(b) The Company and Seller each has the power and authority to conduct its
respective business as it is now being conducted, and to own or use the assets
that it purports to own or use.
(c) The Company is duly qualified to do business and is in good standing in
every jurisdiction in which its business or the character of its assets requires
such qualification, except where the failure to be so qualified would not have a
Material Adverse Effect; all of which jurisdictions where the Company is
currently qualified to do business are disclosed on Schedule 3.1(c).
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(d) Except as set forth on Schedule 3.1(d), the Company does not, directly
or indirectly, own any capital stock, securities, or other equity, profits, or
ownership interest of any kind or nature (whether controlling or not) in any
corporation, limited liability company, partnership, joint venture, or other
Person.
3.2 Enforceability Authority; No Conflict.
(a) This Agreement constitutes the legal, valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms. Upon the
execution and delivery by Seller of the Related Agreements, such agreements will
constitute the legal, valid and binding obligations of Seller, enforceable
against Seller in accordance with their respective terms. Seller has the
absolute and unrestricted right, power, authority and capacity to execute and
deliver this Agreement and the Related Agreements, and to perform its
obligations hereunder and thereunder.
(b) Except as set forth on Schedule 3.2(b), neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby shall (with notice, lapse of time, or both): (i) violate or conflict with
or result in a breach of or constitute a default under any provision of the
Company's or Seller's respective Charter, Bylaws or other governing documents;
(ii) violate or conflict with or result in a breach of or constitute a default
under any Order applicable to the Company or Seller, or their respective
property or assets; (iii) violate or conflict with or result in a breach of or
constitute a default under any Legal Requirement; (iv) violate or conflict with
or result in a breach of or constitute a default under, or result in the
termination of or accelerate the performance required by any provision of, any
material Contract, Lien, or Permit to which the Company or Seller is a party or
by which any of their respective assets are bound; (v) result in the creation or
imposition of any Lien upon any asset of the Company; or (vi) give any Person
(including any Governmental Entity) the right to challenge the Agreement or any
of the transactions contemplated hereby or to exercise any remedy or obtain any
relief under, any Legal Requirement.
(c) The execution, delivery and performance of this Agreement and the
Related Agreements by Seller, and the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action.
3.3 Capitalization. The authorized capital stock of the Company consists solely
of one hundred thousand (100,000) shares of Common Stock, of which one thousand
(1,000) such shares are issued and outstanding and constitute the Shares, and of
which no shares constitute treasury shares. Seller is the record and beneficial
owner and holder of the Shares, free and clear of all Liens. All of the Shares
have been duly authorized and validly issued and are fully paid, nonassessable
and outstanding. Other than as set forth on Schedule 3.3, (i) there are no
options, warrants, rights, calls, subscriptions, or other commitments of any
kind or nature relating to shares of Common Stock or any other capital stock or
securities of the Company, and there are no Contracts to issue, distribute or
sell any of the foregoing; (ii) there are no outstanding securities or other
instruments convertible into or exchangeable for shares of Common Stock or any
other capital stock or securities of the
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Company and no Contracts to issue, distribute or sell such securities or
instruments; (iii) no Person has any right of first refusal, preemptive right,
subscription right, or similar right with respect to any shares of Common Stock
or any other capital stock or securities of the Company; (iv) there are no
proxies, voting trusts, voting agreements, or similar Contracts relating to any
shares of Common Stock or any other capital stock or securities of the Company;
and (v) there is no shareholders agreement, buy-sell agreement, registration
rights agreement, or similar Contract relating to any shares of Common Stock or
any other capital stock or securities of the Company. Upon consummation of
Closing, there will be no dividends or distributions that have been declared
that have not been paid or distributed in full (except as may be contemplated by
Section 5.5). The offer, issuance and sale of the Shares to Seller were (i)
exempt from the registration and prospectus delivery requirements of the
Securities Act, (ii) registered or qualified (or exempt from registration or
qualification) under the registration or qualification requirements of all
applicable state securities laws, and (iii) accomplished in conformity with all
other Legal Requirements.
3.4 Financial Statements.
(a) Schedule 3.4(a) contains true and complete copies of (i) the unaudited
balance sheet (the "Interim Balance Sheet") of the Company at April 2, 1999 (the
"Interim Balance Sheet Date"), and the related unaudited statement of income for
the nine months then ended (the "Interim Financial Statements"); and (ii) the
unaudited balance sheet of the Company at June 26, 1998 (which included an audit
of the inventory and receivables by Xxxxxx Xxxxxxxx, which did not issue a
written report thereon), and the related unaudited statement of income for the
fiscal year then ended (the "FY98 Financial Statements"; the Interim Financial
Statements and the FY98 Financial Statements are collectively referred to herein
as the "Financial Statements").
(b) The Financial Statements (i) present fairly the financial condition of
the Company as at the respective dates specified therein and the results of
operations of the Company for the respective periods specified therein, (ii)
have been prepared in conformity with GAAP (except that inventory has been
priced at the lower of cost or net realizable value, with cost determined on a
last invoiced value basis, and the Company's inventory has been overstated and
its accounts receivable understated by an equal amount due to the Company's
methodology for accruing for sales returns), and (iii) have been derived from
the accounting records of the Company and represent only actual, bona fide
transactions. The Interim Financial Statements have been prepared in a manner
consistent with the preparation of the FY98 Financial Statements, including
without any change in accounting practices, methods, policies or procedures used
in the preparation of the FY98 Financial Statements.
3.5 Books and Records. During the Seller Ownership Period (as defined below),
the books of account, minute books, stock record books, and other records of the
Company, all of which have been provided to Buyer have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls consistent with other companies in Buyer's
consolidated group. The minute books of the Company contain true and complete
(i) copies of the Company's Charter and Bylaws, and (ii) records of all meetings
held of, all consents signed
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by, and any other corporate action taken by, the stockholders, the Boards of
Directors, and committees of the Boards of Directors, of the Company during the
period of Seller's ownership of the Company commencing on July 2, 1993 (the
"Seller Ownership Period"); and no meeting of any such stockholders, Board of
Directors or committee has been held during the Seller Ownership Period for
which minutes have not been prepared and are not contained in such minute books.
3.6 No Undisclosed Liabilities. Except as set forth on Schedule 3.6, the Company
has no liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent or otherwise) which are required to be
reflected, reserved, accrued or noted in GAAP financial statements except for
liabilities or obligations reflected or reserved against, or accrued or noted
in, the Interim Balance Sheet and liabilities or obligations incurred in the
Ordinary Course since the Interim Balance Sheet Date.
3.7 Ordinary Course.
(a) Since the Interim Balance Sheet Date the Company has not taken any
action, or omitted to take any action, other than in the Ordinary Course.
(b) Except as set forth on Schedule 3.7(b), since the Interim Balance Sheet
Date there has not been: (i) any damage, destruction, casualty or other similar
occurrence or event (whether or not insured against), that either singly or in
the aggregate has caused a Material Adverse Effect; (ii) any Liens attached to
any of the assets of the Company not in the Ordinary Course; (iii) any
incurrence or creation of any liability, obligation or other Contract in excess
of US$250,000 by the Company, except unsecured trade payables incurred in the
Ordinary Course; (iv) any purchase, sale, transfer, assignment or other
disposition by the Company of any of its assets or properties in excess of
US$250,000, except for Inventory purchased or sold, and cash transferred to
Seller or its Affiliates, in the Ordinary Course; (v) any increase in the
compensation payable or to become payable by the Company to any officer or
employee, other than routine increases made in the Ordinary Course or pursuant
to any existing bonus, profit sharing or similar plan or arrangement; (vi) any
change in the Company's employment policies or procedures, or the entry by the
Company into any Contract, or the adoption or amendment of any plan or Contract,
with respect to current or future compensation, severance, stay pay or employee
benefits; (vii) any entry into, termination of or receipt of notice of
termination of any material Contract with any supplier, vendor, dealer,
distributor or sales representative; (viii) waiver or release of any right or
claim in excess of US$250,000 against any Person; (ix) any direct or indirect
purchase, retirement, redemption or other acquisition of any shares of the
Company's capital stock or other securities; (x) any change by the Company of
its accounting methods, practices, policies and/or procedures; or (xi) any
Contract entered into by the Company otherwise obligating it to do any of the
foregoing.
3.8 Permits. The Company possesses, and is operating in compliance in all
material respects with, all franchises, licenses, permits, certificates,
authorizations, rights and other approvals of Governmental Entities necessary to
(i) occupy, maintain, operate and use the Real Property as it is
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currently used and proposed to be used, (ii) conduct its business as currently
conducted and as proposed to be conducted, and (iii) maintain and operate its
Plans (collectively, the "Permits"). Schedule 3.8 contains a true and complete
list of all Permits that are material to the conduct of the Company's business.
Each Permit has been lawfully and validly issued, and no proceeding is pending
or, to Seller's Knowledge, threatened with respect to the revocation, suspension
or limitation of any Permit. The consummation of the transactions contemplated
hereby will not result in the revocation, suspension or limitation of any
Permit, and, except as set forth on Schedule 3.8, no Permit will require the
consent of its issuing authority for the parties to enter into this Agreement or
to consummate the transactions contemplated hereby.
3.9 Regulatory Filings. The Company has made all required registrations and
filings with and submissions to all applicable Governmental Entities which are
material to the operations of the Company as currently conducted and as proposed
to be conducted, including all such applicable Governmental Entities having
jurisdiction over any matters pertaining to conservation or protection of the
environment, and the treatment, discharge, use, handling, storage or production,
or disposal of Hazardous Materials. All such registrations, filings and
submissions were in compliance in all material respects with all Legal
Requirements (including all Environmental Laws) and other requirements when
filed, no material deficiencies have been asserted by any such applicable
Governmental Entities with respect to such registrations, filings or submissions
and, to Seller's Knowledge, no facts or circumstances exist which would indicate
that a material deficiency may be asserted by any such authority with respect to
any such registration, filing or submission.
3.10 Consents. Except as set forth on Schedule 3.10, no material approvals,
consents, or authorizations by or from any Person (including any Governmental
Entity), and no material filings or notices with or to any Person (including any
Governmental Entity), are required or necessary in order for Seller to enter
into this Agreement and/or to consummate the transactions contemplated hereby
(collectively, the "Consents"). Seller has delivered to Buyer true and complete
copies of all Consents obtained, made or given by Seller.
3.11 Contracts.
(a) Schedule 3.11(a) contains a true and complete list and description of
each individual outstanding sales order and sales contract of the Company having
an indicated gross value in excess of US$500,000. Except as set forth on
Schedule 3.11(a), all such outstanding sales orders and sales contracts of the
Company have been entered into in the Ordinary Course.
(b) Schedule 3.11(b) contains a true and complete list and description of
all outstanding purchase orders, bids, and purchase commitments of the Company
having a gross indicated value in excess of US$500,000 in the aggregate from any
single supplier or vendor. Except as set forth on Schedule 3.11(b), all such
outstanding purchase orders and purchase commitments of the Company have been
incurred in the Ordinary Course, and no purchase order or purchase
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commitment of the Company is in excess of the normal, ordinary and usual
requirements of the business of the Company.
(c) Schedule 3.11(c) contains a true and complete list of all sales
agency, sales representative, distributor, wholesaler, dealer, export, import,
and similar Contracts of the Company, and true and complete copies of the same
have been delivered to Buyer heretofore.
(d) Schedule 3.11(d) contains a true and complete list and description of
all noncompetition, nonsolicitation, and/or confidentiality Contracts and/or
covenants under which the Company is obligated (other than nondisclosure
agreements entered into in the Ordinary Course with customers and suppliers that
do not have a Material Adverse Effect) or under which, to Seller's Knowledge,
any of its officers or key employees is obligated, and true and complete copies
of the same have been delivered to Buyer. Except for the Contracts listed on
Schedule 3.11(d), the Company is not restricted by any Contract from carrying
on its business or engaging in any other business or activity anywhere in the
world (including relocating, closing or terminating any of its operations or
facilities), and, to Seller's Knowledge, no such officer or key employee is a
party to or otherwise bound or affected by any Contract, covenant or other
arrangement or understanding that would restrict or impair his or her ability to
perform diligently his or her duties to the Company.
(e) Schedule 3.11(e) and Schedule 3.24(a) contain a true and complete list
and description of all Contracts of the Company with any officer, director,
consultant, employee or Affiliate of the Company, or with any associate,
Affiliate or employee of any Affiliate of the Company (other than
employment-related Contracts, which are covered by Section 3.26 hereto); in each
case, a true and complete copy of such written Contract or a true and complete
summary of such oral Contract has been delivered to Buyer.
(f) Schedule 3.11(f) contains a true and complete list and description of
all Contracts of the Company relating to WAT's and other communication lines and
numbers (toll free (800) telephone numbers and fax lines), including special
tariff or service agreements, and all delivery, courier or other transportation
companies which deliver products to customers (including UPS). True and complete
copies of such written Contracts, and true and complete summaries of such oral
Contracts, have been delivered to Buyer.
(g) Schedule 3.11(g) contains a true and complete list and description of
all Contracts pursuant to which any debts, liabilities or obligations are
guaranteed by the Company, or pursuant to which the Company is a surety or
accommodation party. True and complete copies of such written Contracts and true
and complete summaries of such oral Contracts have been delivered to Buyer.
(h) Schedule 3.11(h) contains a true and complete list and description of
all other material Contracts of the Company by which the Company or its rights
or assets are bound that are not otherwise disclosed in this Agreement. True and
complete copies of such written Contracts and true
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and complete summaries of such oral Contracts have been delivered to Buyer. For
the purposes of this subsection (h), "material" means any Contract that (i)
involves performance by any party more than one (1) year after the date hereof,
(ii) involves payments or receipts by the Company in excess of US$500,000, or
(iii) involves capital expenditures in excess of US$500,000.
(i) Except as set forth on Schedule 3.11(i):
(i) each Contract described above in this Section 3.11 is in full force
and effect, and (to Seller's Knowledge with respect to the enforceability
against third parties) is legal, valid, binding and enforceable in accordance
with its terms;
(ii) no event or condition has occurred or is alleged to have occurred
regarding the actions of the Company, or to Seller's Knowledge any other Person,
that constitutes or (with notice, the passage of time, or both) would constitute
a default or a basis of force majeure or other claim of excusable delay,
termination, nonperformance or accelerated or increased rights by the Company or
any other Person under any Contract described above in this Section 3.11;
(iii) with respect to each Contract described above in this Section
3.11, the Company is not, and to Seller's Knowledge no other Person is, in
default thereunder, and the Company has not, and to Seller's Knowledge no other
Person has, failed to perform fully thereunder by reason of force majeure or
other claim of excusable delay, termination or nonperformance thereunder;
(iv) the Company has not given to or received from any other Person, at
any time since December 31, 1997, any notice or other communication (whether
oral or written) regarding any actual, alleged, possible, or potential violation
or breach of, or default under, any Contract described above in this Section
3.11;
(v) other than in the Ordinary Course, there are no renegotiations of,
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, and no such Person has made demand for such renegotiation; and
(vi) Contracts relating to the sale, design, manufacture or provision
of products or services by the Company have been entered into in the Ordinary
Course and have been entered into without the commission of any act alone or in
concert with any other Person, or any consideration having been paid or
promised, that is or would be in violation in any material respect of any Legal
Requirement.
3.12 Litigation. Except as set forth on Schedule 3.12:
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(a) There is no (i) Order against or materially affecting the Company
or its assets or business, or (ii) Action pending against or materially
affecting the Company or its assets or business.
(b) To Seller's Knowledge, there is no (i) basis for the institution of any
Action against the Company or any of its respective officers, directors,
employees, or assets, (ii) Order against or affecting any officer, director or
employee of the Company relating to the Company or its business, (iii) Action
threatened against or affecting the Company or its respective assets or
business, or (iv) Action pending or threatened against the Company's officers,
directors or employees relating to the Company or its business.
3.13 Inventory. All Inventory was purchased in the Ordinary Course. Except as
set forth on Schedule 3.13, the Inventory is owned free and clear of all Liens
other than Liens incurred in the Ordinary Course. The Inventory is maintained on
the financial records of the Company using valuation methods and practices
consistent with those used in preparing the Financial Statements. Except as set
forth on Schedule 3.13, all Inventories not written off have been priced at the
lower of cost or net realizable value, with cost determined on a last invoiced
value basis. The Company's inventory has been overstated and its accounts
receivable understated by an equal amount due to the Company's methodology for
accruing for sales returns. Inventory levels, including total Inventory and
quantities of each item of Inventory, have been maintained in a manner
consistent with the Company's past practices during the Company's fiscal year
ended June 26, 1998, and are reasonable in the present circumstances of the
Company. Except as set forth on Schedule 3.13, all Inventory (not shipped to
customers) is located at the Company's Principal Office/Warehouse. The Company
does not hold any item included in Inventory on consignment.
3.14 Real Property.
(a) The Company does not own any real property or any interest in any real
property, and thus has no Owned Real Property.
(b) Schedule 3.14(b) contains a true and complete list of the Leased Real
Property, setting forth the location address, the term, the tenant (Seller or
Company), monthly payments, and 1999 rent expense. The Leases of the Leased Real
Property are in full force and effect. True and complete copies of such Leases
of the Leased Real Property with respect to the Company is a party or otherwise
has any liability or obligation (other than the Company's liability and
obligation to Seller for the Company's allocable share of the rent and related
costs in the Ordinary Course) have been provided to Buyer. The Company or
Seller, as the case may be, is entitled, pursuant to the Leases of the Leased
Real Property, to use the leased premises for the purposes and in the manner in
which they are currently used by the Company, and such uses comply in all
material respects with all applicable zoning ordinances, building and fire
codes, safety and health regulations and other applicable Legal Requirements
(including the Americans With Disabilities Act). No premises subject to such
Leases has suffered any damage or destruction which renders the premises
inoperable or unusable, and all such premises have public utilities, including
water, sewer, gas, electricity and
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telephone, which are adequate for current use of the premises. The premises
subject to the Principal Lease, including its fixtures, equipment, and operating
systems, are in good operating condition and repair, normal wear and tear
excluded. Except as set forth on Schedule 3.14(b), no material construction,
alteration or other leasehold improvement work with respect to any of the
premises subject to such Leases remains to be paid for or performed. The Company
has neither sent nor received notice of any default under the Leases of the
Leased Real Property. The Company has not breached any covenant, agreement or
condition contained in the Principal Lease, and the Company has not breached any
material covenant, agreement or condition contained in any Lease of the Leased
Real Property (other than the Principal Lease), nor has there occurred any event
which (with the passage of time, the giving of notice, or both) would constitute
such a breach by the Company (including the failure to pay when due any rent,
additional rent or other charges or payments due thereunder). The Company is not
obligated to pay any brokerage commission with respect to the Principal Lease
(including on the renewal or extension of the Lease).
(c) Except as set forth on Schedule 3.12, there is not pending or, to
Seller's Knowledge, threatened, any Action claiming that any portion of the
Leased Real Property, or any of the Structures located thereon, violates any
applicable Legal Requirement. No pending or, to Seller's Knowledge, threatened
condemnation or similar proceeding exists with respect to the Leased Real
Property.
(d) Except as set forth on Schedule 3.14(d), none of the Leases of the
Leased Real Property will require the consent of the lessor or licensor to or as
a result of the consummation of the transactions contemplated by this Agreement.
3.15 Environmental Matters. Except as set forth on Schedule 3.15, during the
Seller Ownership Period:
(a) The Company has obtained all Permits which are material to, or
necessary for, the operation of its business, or its occupancy of any Lease Real
Property, under any Environmental Law (the "Environmental Permits"). Schedule
3.15(a) lists all current Environmental Permits.
(b) Except for activities in the Ordinary Course consistent with the
Environmental Permits (and, to Seller's Knowledge, with respect to actions of
third parties), no Hazardous Material (i) has been released, placed, stored,
generated, used, manufactured, treated, deposited, spilled, discharged, released
or disposed of on or under any real property currently or previously owned or
Leased by the Company or is presently located on or under any Real Property (or,
to Seller's Knowledge, any property adjoining any Real Property), (ii) is
presently maintained, used, generated or permitted to remain in place by the
Company in violation of any Environmental Law, (iii) is required by any
Environmental Law to be eliminated, removed, treated or mitigated by the
Company, given the nature of its present condition, location, nature, material
or maintenance, or (iv) is of a type, location, material, nature or condition
which requires special notification to third parties by the Company under
Environmental Law or common law.
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(c) No notice, citation, summons or order has been received by the Company
or Seller, no notice has been given by the Company and no complaint has been
filed, no penalty has been assessed and no investigation or review is pending or
(to Seller's Knowledge) threatened by any Person (including any Governmental
Entity) with respect to any Lease Real Property as to (i) any alleged violation
by the Company of any Environmental Law, (ii) any alleged failure by the Company
to comply with or obtain, maintain or report, or maintain in records under any
environmental Permit required in connection with its business or assets, or
(iii) any use, possession, generation, treatment, storage, recycling,
transportation, release or disposal by or on behalf of the Company of any
Hazardous Material.
(d) The Company has not received any request for information, notice of
claim, demand or notification that it is or that indicates that it may be a
"potentially responsible party" with respect to any investigation or remediation
of any threatened or actual release of any Hazardous Material. To Seller's
Knowledge, there are no events, conditions, circumstances, activities,
practices, incidents, actions or plans that give rise to any material liability
under any Environmental Law or which may materially interfere or prevent
material compliance with any Environmental Permit.
(e) To Seller's Knowledge, no above-ground or underground storage tanks,
whether or not in use, are or have ever been located at, nor is there any soil,
surface or groundwater contamination of, or threatened migration of
contamination upon, any property currently owned or Leased by the Company.
(f) No notice has been received by the Company with respect to the listing
or proposed listing of any property currently or previously owned, operated or
Leased by the Company on the National Priorities List promulgated pursuant to
CERCLA, CERCLIS or any similar state list of sites requiring investigation or
cleanup.
(g) During the Seller Ownership Period, there have been no environmental
inspections, investigations, studies, tests, reviews or other analyses conducted
by or for Seller in relation to any Real Property.
(h) The Company has not released, transported or arranged for the
transportation of any Hazardous Material from any property currently or
previously owned, operated or Leased by the Company in violation of any
Environmental Law. All Hazardous Material containers have been properly
manifested and disposed of by properly authorized Hazardous Material handlers,
and no such handler, treatment, storage or disposal facility used by the Company
is, to Seller's Knowledge, subject to any Action with regard to actual or
potential environmental compliance.
(i) To Seller's Knowledge, no Real Property has been the subject of any
removal or remediation action under any Environmental Law.
3.16 Compliance With Legal Requirements. Except as set forth on Schedule 3.16:
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(a) The Company is, and at all times since January 1, 1996, has been, in
compliance in all material respects with each Legal Requirement (excluding
Environmental Laws, which are the subject of Section 3.15) that is or was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets;
(b) No event has occurred or circumstance exists that (with notice, the
lapse of time or both) (i) may constitute or result in a material violation by
the Company of, or a failure on the part of the Company to comply in all
material respects with, any Legal Requirement (excluding Environmental Laws,
which are the subject of Section 3.15), or (ii) may give rise to any obligation
on the part of the Company to undertake, or to bear all or any portion of the
cost of, any material remedial action of any nature (excluding under or pursuant
to any Environmental Laws, which are the subject of Section 3.15); and
(c) The Company has not received, at any time since January 1, 1996, any
notice from any Governmental Entity or any other Person regarding (i) any
actual, alleged, possible or potential material violation of, or failure to
materially comply with, any Legal Requirement (excluding Environmental Laws,
which are the subject of Section 3.15), or (ii) any actual, alleged, possible or
potential obligation on the part of the Company to undertake, or to bear all or
any portion of the cost of, any material remedial action of any nature
(excluding under or pursuant to any Environmental Laws, which are the subject of
Section 3.15).
3.17 Software; Year 2000 Compliant.
(a) (i) Schedule 3.17(a) is a true and complete list and description of
each material item of software owned, leased or licensed by the Company or
otherwise used in connection with the Company's business (the "Software"). (For
purposes of this Section 3.17, commonly available software programs acquired or
licensed for less than US$5,000 with respect to any individual or site license,
or $1,000 per user with respect to any license that is paid per user, shall not
be deemed "material.") For purposes of this Agreement, the Software listed and
described in Item 1 of Schedule 3.17(a) is referred to as the "Third Party
Software", and the Software listed and described in Item 2 of Schedule 3.17(a)
is referred to as the "Allied Software."
(ii) Except as set forth in Item 1 of Schedule 3.17(a), the Company
owns, or has Contracts granting it the right to use, all of the Third Party
Software, and true and complete copies of any such Contracts have been provided
to Buyer. Except as set forth in Item 1 of Schedule 3.17(a), all such Contracts
are in full force and effect, all royalties and other payments due from the
Company to third parties under such Contracts have been paid and the Company has
no future royalty or payment obligations for the continuing use of the Third
Party Software. There exists no default by the Company or, to Seller's
Knowledge, by the other party to any such Contracts. No event has occurred (with
notice, the passage of time or both) which would result in any event of default
under any such Contracts, or prevent the Company currently, or after Closing,
from exercising or obtaining the benefits under any such Contracts or give rise
to any right of termination
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or cancellation thereof. Neither Seller nor the Company has received any notice
that any Third Party Software infringes upon or otherwise violates the rights of
any third party, and, to Seller's Knowledge, no such infringement or violation
exists. The items comprising the Third Party Software (except for such Third
Party Software in the process of development) are currently jointly performing
adequately all data processing functions and applications necessary for the
operation of the Company's business that they are intended by the Company to
perform.
(iii) All Allied Software was prepared, authored and developed by
employees of the Company, and no Persons other than employees of the Company
prepared, authored or developed, in whole or in part, any Allied Software. To
Seller's Knowledge, no Person other than the Company has any right, title or
interest in, or any other ownership right in or to, any Allied Software. The
Company has not granted to any Person any license, lease, or other right of any
kind or nature to use any Allied Software. Neither Seller nor the Company has
received any notice that any Allied Software infringes upon or otherwise
violates the rights of any third party, and, to Seller's Knowledge, no such
infringement or violation exists. The items comprising the Allied Software
(except for such Allied Software in the process of development) are currently
jointly performing adequately all data processing functions and applications
necessary for the operation of the Company's business that they are intended by
the Company to perform.
(b) Seller has reviewed the areas within the Company's business and
operations that could suffer a Material Adverse Effect as a result of the
Company failing to be Year 2000 Compliant (as defined in this Section 3.17(b)),
and has developed a written program (the "Y2K Program") to ensure that any and
all computer systems, computer-aided equipment and/or equipment with imbedded
computer technology which are used in its operation will be or are Year 2000
Compliant prior to December 31, 1999. Seller has provided true and complete
copies of the Y2K Program, and of the reports and/or results of its
implementation, to Buyer. A description of the current status of the
implementation of the Y2K Program, and of the steps remaining to complete
implementation of the Y2K Program, are set forth on Schedule 3.17(b). Upon
completion of implementation by the Company of the Y2K Program as described in
Schedule 3.17(b), all Software, firmware, hardware, electronic components,
computer systems, computer-aided equipment, equipment with imbedded computer
technology, and similar or related items of automated or computerized systems,
owned or used by the Company (when used in accordance with the respective
product documentation provided by the Company's vendor, supplier, contractor or
subcontractor), will be (if and to the extent they are not currently) able to
accurately handle and process data in, from, into and between the twentieth and
twenty-first centuries, including leap year calculations (including accepting,
accommodating, comparing, sequencing and responding to four-digit or two-digit
date input, storing data, providing date output, and performing calculations on
dates or portions of dates), in ways that are unambiguous and correct as to
century (twentieth verses twenty-first), and to function effectively without
interruption before, during and after January 1, 2000, without any material
change in operations associated with the advent of the new century ("Year 2000
Compliant").
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(c) Attached to Schedule 3.17(c) is a copy of the form cover letter, and
request for Year 2000 Project Notice, used by the Seller on behalf of the
Company, as part of the Y2K Program, to contact the Company's suppliers and
vendors to request a statement from such suppliers and vendors to the effect
that they will utilize all reasonable efforts to ensure that their business will
not experience any significant disruption or adverse impact due to year 2000
problems.
(d) Each catalog published by the Company on or after January 1, 1996, has
included as part of the sales terms and conditions a provision containing a
limited warranty and limitation of liabilities substantially as contained in
Section 5 (page XV) of the Company's catalog in effect on the date of this
Agreement, copies of each such provision being attached as Schedule 3.17(d). To
Seller's Knowledge, such provisions, and/or the Company's current insurance
coverage, provide the Company with reasonable protection against liability to
its customers with respect to year 2000 problems associated with the Company's
Inventory.
3.18 Intellectual Property
(a) Schedule 3.18(a) is a true and complete list and description of all
trademarks, service marks, trade names, logos, copyrights and patents,
registered or unregistered and applications therefor, owned or used by, or
leased or licensed to, the Company ("Intellectual Property").
(b) The Company has taken reasonable precautions to protect the secrecy,
confidentiality and value of its customer list, catalog list, mailing list, all
as compiled by the Company (collectively, the "Trade Secrets"). To Seller's
Knowledge, the Company has no other information that would be deemed a trade
secret under the Uniform Trade Secret Act. Seller does not have copies of the
Company's Trade Secrets. The documentation relating to each Trade Secret is
current, accurate and sufficient in detail and content to identify and explain
it and to allow its full and proper use without reliance on the knowledge or
memory of any individual. To Seller's Knowledge, no material portion of the
Trade Secrets are part of the public knowledge or literature, and no material
portion of the Trade Secrets has been used, divulged or appropriated either for
the benefit of any Person (other than the Company) or to the detriment of the
Company.
(c) Except as set forth on Schedule 3.18(c), the Company owns all right,
title and interest in and to the Intellectual Property and Trade Secrets, free
and clear of all Liens, and has the sole and exclusive right to use the same.
The Intellectual Property licensed to the Company are subject to license
agreements that are in full force and effect. All royalties and other payments
due from the Company to third parties under such license agreements have been
paid, and there exists no material default by the Company or, to Seller's
Knowledge, other party to such agreement and no event has occurred (with notice,
the passage of time, or both) which would result in any event of default or
prevent the Company from exercising or obtaining the benefits thereunder or give
rise to any right of termination or cancellation thereof. There are no Actions
pending against the Company, or to Seller's Knowledge, threatened against the
Company alleging any adverse claim or encumbrance on the Company's title to, or
right to use, any item of Intellectual Property or Trade Secrets, nor, to
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21
Seller's Knowledge, is there any reasonable basis for bringing any such suit or
action. Except as set forth on Schedule 3.18(c), the Company has not granted
any outstanding licenses, sublicenses or other rights under or to any of the
Intellectual Property or Trade Secrets. The Company has not received any notice
that the Company has infringed upon, or is infringing upon or otherwise
violating, any patent, trademark, service xxxx, trade name, copyright or other
intellectual property right of any third party. To Seller's Knowledge, no third
party has violated or is violating, or has infringed or is infringing upon, any
of the Company's rights in and to the Intellectual Property or the Trade
Secrets.
(d) After commencement of the Seller Ownership Period, substantially all
newly hired employees of the Company have executed Seller's form Confidentiality
and Development Agreement.
(e) To Seller's Knowledge, the Company has used reasonable commercial
efforts to assure that, with respect to each catalog published by the Company on
or after January 1, 1996, each page referencing a supplier, vendor or
manufacturer, or offering its products or components for sale, has been
reviewed and approved by the applicable supplier, vendor or manufacturer.
3.19 Tax Matters. Except as set forth on Schedule 3.19:
(a) All Tax Returns required to have been filed by the Company and any
affiliated, consolidated, combined, unitary or other groups of which the Company
is, will be (at any time on or prior to the Closing Date) or was a member, have
been or will be filed timely and are or will be accurate and correct in all
material respects insofar as they relate to the Company, and all Taxes due and
payable on such Returns have been or will be timely paid by Seller.
(b) The Company currently is not the beneficiary of any extension of time
within which to file any Tax Return. To the Seller's knowledge, no claim has
ever been made by a Tax Authority in a jurisdiction where the Company does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
There are no Liens on any of the assets of the Company that arose in connection
with any failure (or alleged failure) to pay any Tax.
(c) There is no dispute or claim concerning any material income Tax
liability of the Seller Affiliated Group for any taxable period during which the
Company was a member of such group claimed or raised by any Tax Authority in
writing. The Company has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency; and the Seller Affiliated Group has not waived any statute of
limitations in respect of any income Taxes or agreed to any extension of time
with respect to an income Tax assessment or deficiency for any taxable period
during which the Company was a member of such group.
(d) There is no dispute or claim concerning any material Tax liability of
the Company claimed or raised by any Tax Authority in writing. Seller has
delivered to Buyer true and complete
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copies of all income Tax Returns filed by the Company on a stand-alone basis and
with respect to all Consolidated income Tax Returns, Seller has delivered pro
forma income Tax Returns of the Company for each taxable period since December
31, 1996. Schedule 3.19(d) lists all state and local income Tax Returns filed by
the Company or by any Affiliated Group of which the Company is or was a member
for taxable periods ended on or after December 31, 1996, and indicates those Tax
Returns that, to the Knowledge of the Seller, currently are the subject of
audit.
(e) The Company has withheld and paid, and through the Closing Date will
continue to withhold and pay, all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any Person.
(f) The Company has no liability for the Taxes of any Person other than the
Company, Seller or any other member of the Seller Affiliated Group (i) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local,
or foreign law), (ii) as a transferee or successor, or (iii) by Contract.
(g) The Company has not filed a consent under Code Section 341(f)
concerning collapsible corporations. The Company has not executed or entered
into a closing agreement pursuant to Section 7121 of the Code or any predecessor
provision thereof or any similar provision of state, local or foreign law. The
Company has not made any payments, is not obligated to make any payments, and is
not a party to any agreement that under certain circumstances could obligate it
to make any payments that will not be deductible under Code Section 280G. The
Company has not been and is not 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). The Company is not a party to
any currently effective Tax allocation, sharing or indemnification agreement.
The Company is a member of the Seller Affiliated Group and is eligible to make
the Section 338(h)(10) Election for federal income Tax purposes. The Company is
not, and prior to the Closing will not become, required to include in income any
adjustment in Tax periods ending after the Closing Date pursuant to Section 481
of the Code. The statutory period of limitations for assessing Tax against the
Company with respect to all Affiliated Groups (other than the Seller Affiliated
Group) has expired. No member of the Seller Affiliated Group is a participant in
a tax shelter, as defined in Code Section 6111, or in any other tax shelter.
3.20 Employee Benefits.
(a) Schedule 3.20 contains a correct and complete list of all Plans and all
ERISA Affiliates. With respect to each Plan, true and complete copies of each of
the following documents (and any amendments thereto), where applicable, have
been delivered previously to Buyer: (i) the Plan documents; (ii) a written
description of any Plan which is not in writing; and (iii) the most recent
summary plan description and each summary of material modifications required by
ERISA.
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(b) The fair market value of assets under each Pension Plan, as
determined as of the last day of the Plan year of such Pension Plan which
coincides with, or first precedes, the date of this Agreement, equals or exceeds
the present value of all vested and nonvested liabilities thereunder determined
in accordance with PBGC methods, factors, and assumptions set forth in the most
recent actuarial report for the Plan.
(c) There are no pending or, to Seller's Knowledge, threatened Actions
(other than routine claims for benefits) asserted or instituted against any Plan
or the assets of any Plan, or against the Company, or any ERISA Affiliate,
trustee, administrator, or fiduciary of such Plan. There is no pending or, to
Seller's Knowledge, threatened or contemplated Action by any Governmental Entity
with respect to any Plan.
(d) No Pension Plan has been completely or partially terminated or been the
subject of a Reportable Event (within the meaning if ERISA Section 4043) as to
which notices would be required to be filed with the PBGC. No proceeding has
been instituted by the PBGC to terminate any such Pension Plan.
(e) Neither the Company, nor any ERISA Affiliate, has announced any
intention, made any amendment or binding commitment, or given any written or
oral notice providing that on or after the Closing Date, the Company (1) will
create additional Plans covering employees of the Company, (2) will increase
benefits promised or provided pursuant to any Plan, (3) will not exercise any
right or power it may have to terminate, suspend, or amend any Plan, or (4) will
incur an obligation that will have a Material Adverse Effect.
(f) Neither the Company nor any ERISA Affiliate maintains or has maintained
at any time, or contributes to within the three year period ending on the date
of this Agreement, or has contributed to or is or was required to contribute to,
any (1) multi-employer plan (as defined in ERISA Section 3(37)), (2) Plan
subject to a collective bargaining agreement, or (3) funded or unfunded medical,
health, accident, or life insurance plan or arrangement for current or future
retirees or their spouses or dependents (except continuation rights under a Plan
subject to Code Section 4980B).
(g) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will constitute an event
entitling any Person to any additional or other benefits, or that would
otherwise modify benefits or the vesting of benefits, provided under any Plan.
3.21 Accounts Receivable. All accounts receivable of the Company reflected on
the Interim Balance Sheet or on the accounting records of the Company as of the
Closing Date (collectively, the "Accounts Receivable") represent or will
represent valid obligations in the full amount thereof arising from sales
actually made or services actually performed in the Ordinary Course. The
reserves with respect to Accounts Receivable included in the Interim Balance
Sheet have been
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established in accordance with GAAP. Since the Interim Balance Sheet Date, the
Company has not collected Accounts Receivable except in the Ordinary Course.
3.22 Title to Assets; Sufficiency of Assets;
(a) Except as set forth on Schedule 3.22(a):
(i) The Company owns with good and marketable title all the assets
(whether real, personal or mixed and whether tangible or intangible) that it
purports to own, or that are reflected as owned in the books and records of the
Company, including (A) all of the assets reflected in the Interim Balance Sheet
(except for assets held under capitalized leases and personal property sold
since the date of the Interim Balance Sheet in the Ordinary Course), and (B) all
of the assets purchased or otherwise acquired by the Company since the Interim
Balance Sheet Date (except for personal property acquired and sold since the
Interim Balance Sheet Date in the Ordinary Course).
(ii) All material assets reflected in the Interim Balance Sheet are
free and clear of all Liens, except (A) for sales and other dispositions of
Inventory in the Ordinary Course since the Interim Balance Sheet Date, and (B)
Permitted Liens.
(b) The assets presently owned or Leased by the Company (or, with respect
to the Leased Real Property, Leased by the Seller), taken as a whole, have been
and are sufficient for the operation and continued operation of the Company's
business as currently conducted, except for assets associated with the corporate
services provided by Seller to the Company described on Schedule 3.24(a).
(c) At Closing, all Company assets will be free and clear of all security
interests, liens, pledges, and similar encumbrances relating to loans or other
financing provided to the Company or Seller, except for Permitted Liens,
purchase money security interests incurred in the Ordinary Course, and the
leases applicable to Company assets that are leased.
3.23 Insurance. Schedule 3.23 (i) contains a true and complete list of all
insurance coverages currently in force that cover or purport to cover risks or
losses to or associated with the Company's business, operations, premises,
assets, employees, agents, officers and directors (collectively, the
"Policies"), and (ii) sets forth, with respect to each Policy other than the
Policy with respect to Seller's executive life insurance/retirement program, the
insured, all additional insureds, a description of the insured loss coverage,
the expiration date and time of coverage, the dollar limitations of coverage,
and a general description of each deductible feature and principal exclusion.
The Policies are and through the Closing Date will remain in full force and
effect. All premiums due have been paid (without regard to grace periods). The
Company has not been refused any insurance for which it has applied, has not
received notice from any issuer of any Policy of such issuer's intention to
cancel or refuse to renew such Policy.
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25
3.24 Contracts with Affiliates.
(a) Schedule 3.24(a) sets forth a true and complete list and brief
description of all Contracts and other arrangements between or among Seller
and/or its Affiliates, on one hand, and the Company, on the other hand.
(b) Schedule 3.24(b) sets forth a true and complete list and brief
description of all Contracts pursuant to which any of the Company's directors,
officers, or employees, or their respective Affiliates, (i) have, to Seller's
Knowledge without investigation, a pecuniary interest in any supplier, vendor or
customer of the Company, or any Person with which the Company is in competition
(excluding shares of publicly traded stock or securities aggregating less than
3% of the outstanding shares thereof), (ii) is indebted to the Company (other
than for advances of business expenses or compensation made in the Ordinary
Course), (iii) is a party to any material non-employment related transaction
with the Company, or (iv) have any debts, liabilities or obligations guaranteed
by the Company, or the Company is a surety or accommodation party with respect
thereto.
3.25 Principal Customers and Suppliers.
(a) Schedule 3.25(a) sets forth a true and complete list of the names of
each of the Company's customers who made purchases aggregating in excess of
US$100,000 during the 12-month period ended on the Interim Balance Sheet Date,
and since such date no such customer has terminated its relationship with, or
materially adversely curtailed its purchases from, the Company or indicated (for
any reason) its intention so to terminate its relationship or materially curtail
its purchases. To Seller's Knowledge, this Agreement and the consummation of the
transactions contemplated hereby will not cause any customer listed on Schedule
3.25(a) to terminate its relationship with, or materially adversely curtail its
purchases from the Company.
(b) Schedule 3.25(b) sets forth a true and complete list of the names of
each of the Company's suppliers or vendors who made sales to the Company
aggregating in excess of US$500,000 during the 12-month period ended on the
Interim Balance Sheet Date, and since such date no such supplier or vendor has
terminated its relationship with, or materially adversely curtailed its
accommodations, sales or services, to the Company or indicated (for any reason)
its intention to terminate such relationship or materially curtail its
accommodations, sales or services. To Seller's Knowledge, this Agreement and the
consummation of the transactions contemplated hereby will not cause any supplier
or vendor listed on Schedule 3.25(b) to terminate its relationship with, or
materially adversely curtail its accommodations, sales or services, to the
Company.
3.26 Employees and Labor Matters.
(a) Schedule 3.26(a) sets forth a true and complete list of all of the
Company's currently effective Contracts, plans, arrangements, commitments and
understandings pertaining to terms of
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employment, compensation, bonuses, profit sharing, stock purchases, stock
repurchases, stock options, phantom stock, stock appreciation rights,
commissions, incentives, loans or loan guarantees, severance pay or benefits,
use of the Company's property and related matters of the Company with any
current or former officer, director, employee or consultant, and true and
complete copies of all such Contracts, plans, arrangements and understandings
have been provided to Buyer.
(b) Schedule 3.26(b) sets forth a copy of a list delivered by Seller to
Buyer on May 21, 1999, which includes the then-current identity (by employee
number), birth date, hire date, annual base salary, employee benefit elections
and other information of each of the Company's employees. None of the Company's
key management employees has given written notice of resignation and, to
Seller's Knowledge, none of such employees intends to terminate his or her
respective employment with the Company.
(c) There is no union representing or purporting to represent any of the
Company's employees, and the Company is not a party to or otherwise bound by any
collective bargaining, union or similar Contract with any union representing or
purporting to represent any of the Company's employees.
(d) Except as set forth on Schedule 3.26(d) and as contemplated by Section
6.9 hereof, neither Buyer nor the Company will have any responsibility for
continuing any person in the employ of (or retaining any Person as a consultant
to) the Company from and after the Closing Date, or have any liability for any
severance payments to or similar arrangements with any such person who shall
cease to be an employee of the Company at or prior to the Closing. Except as set
forth on Schedule 3.26(d), the Company is not obligated to provide any employee
with any post-employment benefits, including retiree medical benefits, retiree
life insurance benefits, or retiree accidental death or disability benefits.
(e) There is not occurring or, to Seller's Knowledge, threatened, any
strike, slow down, picketing, lockout, work stoppage, or other concerted action
by any union or other group of employees or other Persons against either the
Company or its premises or assets. To Seller's Knowledge, no union, other labor
organization, group of employees or other Person has attempted, or is
attempting, to organize any of the employees of the Company.
(f) The Company has complied in all material respects with all Legal
Requirements relating to employment and labor, and to Seller's Knowledge no
facts or circumstances exist that could provide a reasonable basis for a claim
of wrongful termination, or discrimination based on gender, age, race, marital
status or other protected classification, by any current or former employee of
the Company against the Company.
(g) The Company is not liable for the payment of any material compensation,
damages, taxes, fines, penalties or other amounts, however designated, for
failure to comply with any of the
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foregoing Legal Requirements. For purposes of this Section 3.26(g), US$100,000
in any instance, or related group of instances, shall be deemed "material."
3.27 Product Returns. Schedule 3.27 sets forth a true and complete description
of the product return experience of the Company for returns in excess of
US$50,000 per occurrence since January 1, 1996. Since such date, the Company has
not experienced any returns of its products which have had or may have a
Material Adverse Effect.
3.28 Product Liability and Product Warranty. Schedule 3.28 sets forth a true and
complete description of (i) all warranties issued by the Company since January
1, 1996, or for which the Company has otherwise become obligated (other than
warranties imposed by the Uniform Commercial Code) since January 1, 1996, with
respect to products sold, or services rendered, by the Company, and (ii) the
Company's product liability and product warranty experience for product
liability or product warranty claims in excess of US$50,000 per occurrence since
January 1, 1996. Since such date, the Company has not suffered any product
liability or product warranty claims which have had or may have a Material
Adverse Effect.
3.29 Customer and Mailing Lists. Except as set forth on Schedule 3.29, the
Company has the sole and exclusive ownership of and right to use the Company's
Trade Secrets without any liability for any contingent or future payment to any
third party. The Company has not sold, Leased, rented, assigned, disposed of or
granted any rights to any of the Company's Trade Secrets in whole or in part.
Except for incidental disclosures made in the Ordinary Course to employees of
the Company and/or third parties, the Company has not disclosed any Trade
Secrets in whole or in part to any Person.
3.30 Bank Accounts and Safe Deposit Boxes; Powers of Attorney. Set forth on
Schedule 3.30 is a true and complete list of all accounts at banks and other
financial institutions maintained by or for the use of the Company, together
with the names of authorized signatories of the Company on each such account and
the location of all safe deposit boxes (and all keys thereto) maintained by or
for the Company, together with the names of the persons with authorized access
thereto. Schedule 3.30 also sets forth a list and brief description of all
Persons to whom the Company has granted currently effective powers of attorney.
3.31 Brokers' Fees. No broker, finder or similar agent has been employed by or
on behalf of the Company in connection with this Agreement or the transactions
contemplated hereby, and the Company has not entered into any Contract with any
Person for the payment of any brokerage commission, finder's fee or any similar
compensation in connection with this Agreement or the transactions contemplated
hereby.
3.32 Disclosure. No representation or warranty of Seller in this Agreement, no
Schedule to this Agreement, and no certificate, document, instrument or other
writing delivered by Seller pursuant to this Agreement at or for Closing,
contains or will contain an untrue statement of material fact or
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omits to state a material fact necessary in order to make the statements herein
or therein, in the light of the circumstances under which they are made, not
misleading.
3.33 No Material Adverse Change. Since the Interim Balance Sheet Date, no event
has occurred or circumstance exists that has caused a Material Adverse Effect.
3.34. Not Investment Company. The Company is not an investment company required
to be registered under the Investment Company Act of 1940.
3.35 No Other Warranties. Buyer is purchasing the Shares based solely on the
results of its inspections and investigations and the representations and
warranties contained in this Agreement, and not on any representation or
warranty of Seller not expressly set forth in this Agreement. Any claims Buyer
may have for breach of representations or warranties shall be based solely on
the representations and warranties of Seller set forth in this Agreement. EXCEPT
AS OTHERWISE PROVIDED IN THIS AGREEMENT, ALL WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR ANY PARTICULAR PURPOSE AND ALL OTHER WARRANTIES ARISING UNDER THE
UNIFORM COMMERCIAL CODE, ARE HEREBY WAIVED BY BUYER. In particular, Buyer
disclaims reliance on any budgets or projections of the Company provided to
Buyer by Seller.
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that the statements contained in
this Article IV are true and complete as of the date of this Agreement and will
be true and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Article IV):
4.1 Organization and Good Standing. Buyer is a public limited company validly
existing and in good standing under the laws of England.
4.2 Authorization and Approval of Agreement. Buyer has all requisite power and
authority to enter into this Agreement and the Related Agreements, and to
perform the obligations required to be performed by it hereunder and thereunder.
All proceedings required by Buyer's Charter, Bylaws or other governing
documents, or otherwise required by Legal Requirements, for Buyer's execution,
delivery and performance of this Agreement and the Related Agreements have been
taken. This Agreement has been duly and validly executed and delivered by Buyer
and is enforceable against Buyer in accordance with its terms, and the Related
Agreements, when executed and delivered by Buyer, will be enforceable against
Buyer in accordance with their respective terms.
4.3 No Conflict. The execution and delivery of this Agreement and the Related
Agreements by Buyer and the performance by Buyer of its obligations hereunder
and thereunder will not conflict with, violate or result in any breach of or
constitute a default under any provisions of Buyer's
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Charter, Bylaws or other governing documents, or of any of the provisions of any
Contract, Order, Permit or any other restriction of any kind or character to
which Buyer is a party or by which it is bound; and other than the HSR Act
filing, no consent of any Governmental Entity or other third party is required
to be obtained on the part of Buyer in connection with Buyer's execution,
delivery or performance of this Agreement and the Related Agreements.
4.4 Investment Representation. Buyer is acquiring the Shares for investment
purposes only, for its own account, and not with a view to or for the resale of
the Shares in connection with any distribution thereof within the meaning of the
Securities Act.
4.5 Adequate Financing. Buyer has adequate financing available to pay the
Purchase Price hereunder, subject to normal banking terms and conditions.
ARTICLE V -- PRE-CLOSING COVENANTS
5.1 Affirmative Covenants of Seller. Seller covenants and agrees that
commencing on the date hereof and continuing through the Closing Date, except as
contemplated by this Agreement, it shall cause the Company to:
(a) carry on its business only in the Ordinary Course;
(b) use all reasonable commercial efforts to preserve its business
organization intact and preserve the goodwill and relationships of its
customers, suppliers, vendors, landlords, tenants, creditors, employees,
consultants, and others having business relations with it;
(c) maintain its corporate existence and good standing in its
jurisdiction of organization and in each other jurisdiction in which it is
currently qualified to do business;
(d) duly and timely file or cause to be filed all material reports,
returns, certifications and other statements required to be filed with any
Governmental Entity and promptly pay or cause to be paid when due all Taxes,
assessments and governmental charges, including interest and penalties levied or
assessed, unless diligently contested in good faith by appropriate proceedings;
(e) maintain in good condition and repair, consistent with past
practice (with normal wear and tear excepted), all Structures located on the
Leased Real Property, and all of the Company's equipment, fixtures and other
tangible personal property located on the Leased Real Property;
(f) give Buyer and Buyer's employees, counsel, accountants and advisors
full access (including the right to take photocopies) upon reasonable notice
during normal business hours to all of the properties, personnel, financial, Tax
and operating data and information, books, Tax Returns, Contracts, commitments,
and records of the Company, and such other documents, data, and other
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information they may reasonably request, in connection with reviewing the
Company and its business, properties and operations;
(g) maintain in full force and effect and comply with all Permits and
all existing policies of insurance, except for replacements or renewals made in
the Ordinary Course;
(h) use all reasonable commercial efforts to permit the Company to
retain the material benefits provided by all Contracts to which the Company is a
party under arrangements similar to those in effect on the date hereof;
(i) maintain the Company's books, records and accounts in the Ordinary
Course;
(j) use all reasonable commercial efforts to obtain as promptly as
possible all Consents in order to complete the transactions contemplated by this
Agreement;
(k) use all reasonable commercial efforts to retain its current
employees;
(1) continue to maintain all of its employee benefit plans in their
current form in accordance with applicable Legal Requirements, and to amend or
modify such employee benefit plans only to the extent necessary to comply with
applicable Legal Requirements;
(m) confer with Buyer concerning operational matters of a material
nature;
(n) report periodically to Buyer concerning the status of the business,
operations, assets and finances of the Company, including providing Buyer with
monthly internal unaudited financial statements and reports consistent with
prior practice; and
(o) promptly advise Buyer orally and, within three Business Days
thereafter, in writing, of any change in the Company's business or condition
that has had or is reasonably likely to have a Material Adverse Effect.
5.2 Negative Covenants of Seller.
(a) Seller covenants and agrees that commencing on the date hereof and
continuing through the Closing Date, it (without the written consent of Buyer,
which consent shall not be unreasonably withheld) shall cause the Company not to
do any of the following:
(i) take any action other than in the Ordinary Course;
(ii) amend its Charter, Bylaws or other governing documents;
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(iii) authorize for issuance, issue or deliver any additional
shares of its capital stock or securities (including securities convertible into
or exchangeable for shares of its capital stock), or issue or grant any right,
option, subscription, warrant or other commitment for the issuance of shares of
its capital stock or of such securities, or authorize, declare or approve any
stock split or any combination, recapitalization or reclassification any shares
of its capital stock or securities;
(iv) incur any material liability, commitment or obligation
(including any guarantee or indemnity) other than in the Ordinary Course or as
contemplated by this Agreement;
(v) sell, transfer or otherwise dispose of assets, except for
the sale or disposition of obsolete or damaged tangible personal property and
except for the sale of Inventory and other assets in the Ordinary Course;
(vi) except for amounts committed for emergency repairs, make
any capital commitments which, singly, exceed US$500,000;
(vii) mortgage, pledge or encumber any or its assets or
guaranty the obligations of any party, other than Permitted Liens;
(viii) except as contemplated by Schedule 5.2(a)(viii) hereto,
make any adjustments in the salary rate or fringe benefits of, or authorize any
bonus payments to or consulting arrangements with, or otherwise increase, adopt,
amend, modify or terminate the compensation or fringe benefits payable or to
become payable by the Company under any agreement, arrangement, policy or other
Contract to, any director, officer, employee or consultant other than in the
Ordinary Course;
(ix) adopt, or increase, adjust, amend, modify or terminate
any payments to or benefits under, any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or other Plan for or with
any directors, officers, employees or consultants of the Company;
(x) enter into, terminate, amend or modify any material
Contract, or cancel or waive any claims or rights, other than in the Ordinary
Course;
(xi) adopt or make any change in the accounting practices,
methods, policies or procedures used the Company in the preparation of its
Financial Statements;
(xii) declare or pay any dividends or distributions, except as
permitted by Section 5.5;
(xiii) make any public statement, issue any press release or
disclose any information relating to this Agreement, except (A) Seller and/or
the Company may make such disclosures to
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those personnel, counsel, accountants and advisors having a need to know by
virtue of this Agreement, (B) Seller and/or the Company may issue press releases
or other information which in the opinion of the Seller's and/or the Company's
counsel are required by applicable securities laws or rules of the New York
Stock Exchange, in which event, Seller shall provide prior notice thereof to
Buyer and shall consult with Buyer as to the contents of any such release, and
(C) Seller and/or the Company, in consultation with Buyer, may disclose such
information relating to this Agreement and the transaction contemplated by this
Agreement to customers, vendors, suppliers, and other Persons doing business
with the Company as may be necessary to assist in the transition from Seller to
Buyer and in maintaining their relationships with the Company after Closing;
(xiv) take any action with the intention of causing any of the
representations and warranties of Seller made herein to be inaccurate on the
Closing Date;
(xv) merge or consolidate with or into any other entity, cause
any entity to be merged with or into the Company, liquidate or dissolve, or
liquidate or dissolve any Person into the Company;
(xvi) enter into any Lease of real property, or enter into any
Contract or option to purchase real property or interest in real property, or
consummate any existing Contract to purchase real property or interest in real
property except as contemplated by this Agreement;
(xvii) acquire or agree to acquire any equity interest in any
Person; or
(xviii) enter into or consummate any Contract to do any of the
foregoing.
5.3 Additional Covenants.
(a) Until such time, if any, as this Agreement is terminated pursuant
to Article X, Seller will not, and will cause the Company and its
representatives not to, directly or indirectly solicit, initiate or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
nonpublic information to, or consider the merits of any unsolicited inquiries or
proposals from, any Person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary Course)
of the Company, or any of the capital stock or securities of the Company, or any
merger, consolidation, business combination, or similar transaction involving
the Company.
(b) Between the date hereof and the Closing Date, Seller and Buyer
agree to each use reasonable efforts to cause all of the conditions set forth in
Articles VII and VIII to be satisfied.
(c) At all times from the date hereof to the Closing Date, Seller and
Buyer shall promptly notify the other in writing of the occurrence of any event
that will or may result in the failure to satisfy any of the conditions set
forth in Articles VII and VIII.
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(d) Subject to the terms and conditions of this Agreement, Seller and
Buyer agree to each use reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper, incident
or advisable under applicable Legal Requirements, to consummate and make
effective the transactions contemplated by this Agreement.
(e) Announcements. Seller and Buyer shall make their respective
announcements attached hereto as Exhibit B (the "Announcements") in accordance
with the time table set forth thereon.
(f) Non-Disturbance Agreement. Seller shall use commercially reasonable
efforts to obtain a non-disturbance agreement relating to the Principal Lease in
the form of Exhibit "F" to the Principal Lease which is referred to in Section
21 of the Principal Lease (or in such other form as is reasonably acceptable to
Buyer), executed by the appropriate lender, which shall include a representation
by such lender that the following documents currently filed in the land records
relating to the Real Property on which the Principal Office/Warehouse is located
are no longer in force or effect:
(i) That certain Memorandum of Lease Agreement dated March 29,
1994 between Riverbend Realty Partners, Ltd., and Purina Xxxxx, Inc.; and
(ii) That certain Deed of Trust, Mortgage, Assignment,
Security Agreement and Financing Statement effective as of September 27, 1993
granted by Purina Xxxxx, Inc. to The CIT Group/Business Credit, Inc.
(g) Estoppel Certificate. Seller shall use commercially reasonable
efforts to obtain an estoppel certificate regarding the Principal Lease executed
by the landlord, in form and substance reasonably acceptable to Buyer.
(h) Intellectual Property Assignments. Seller shall use commercially
reasonable efforts to obtain assignments to the Company by Xxxxxx Xxxxxx Design
and Production, Xxxxx Corporation, Millstar Electronic Publishing Group in
partnership with Banda Corporation, and Xxxxxxx Graphic Services, respectively,
of all copyright, trademark, and other intellectual property and moral rights
associated with or included in the services and products provided by them to the
Company, in form and substance reasonably acceptable to Buyer.
(i) Y2K. Seller agrees to cause the Company to use commercially
reasonable efforts to carry out and otherwise implement the recommendations set
forth in, and to otherwise remedy the deficiencies relating to the Company
described in, Seller's Year 2000 Program Management Office Project Memorandum
(Audit Number A990309-1) dated March 9, 1999 from X.X. Xxxxxxxxx, PMO QA
Manager, a copy of which is attached to Schedule 3.17(b)(1), prior to Closing.
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5.4 Antitrust Filing. Buyer and Seller agree to each use reasonable efforts to
cause the expiration or termination of the waiting period under the HSR Act with
regard to their notification and report filed thereunder; provided, however,
that nothing in this Agreement shall be construed as to require Buyer or any
Affiliate of Buyer to dispose of or make any change in any portion of its
respective business to comply with the HSR Act.
5.5 Cash Free/Debt Free at Closing.
(a) Seller shall be entitled to dividend, distribute or otherwise
withdraw all cash from the Company on or prior to Closing.
(b) Seller shall cause:
(i) all intercompany accounts to have been paid, satisfied or
otherwise eliminated as of Closing so that the category "Intercompany Accounts"
(including all line items thereunder) on a balance sheet of the Company as at
Closing (prepared in a manner consistent with the preparation of the Financial
Statements, and after taking into account such action) would be equal to zero
dollars ($0);
(ii) the Company to have no debts or liabilities to Seller or
any Affiliate of Seller as of Closing (including, except as otherwise provided
in Section 6.5, those arising out of or relating to Taxes);
(iii) all Federal and state income Taxes payable to have been
paid or otherwise satisfied, and/or transferred to Seller, as of Closing so that
the line item "Fed & State Income Taxes Payable" on a balance sheet of the
Company as at Closing (prepared in a manner consistent with the preparation of
the Financial Statements, and after taking into account such action) would be
equal to zero dollars ($0); and
(iv) the Company to have no debts or liabilities (including
long-term liabilities) which would be required to be reflected on a balance
sheet of the Company as at Closing (prepared in a manner consistent with the
preparation of the Financial Statements), other than on line items under the
category "Current Liabilities" (excluding those debts and liabilities governed
by Section 5.5(b)(iii) above).
(c) For purposes of this Agreement, the debts and liabilities of the
Company which would be required to be reflected on a balance sheet of the
Company as at Closing (prepared in a manner consistent with the preparation of
the Financial Statements) on line items under the category ("Current
Liabilities" (excluding those debts and liabilities governed by Section
5.5(b)(iii) above) are referred to herein as the "Inherited Debt."
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ARTICLE VI -- POST-CLOSING COVENANTS
6.1 General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement and the
transactions contemplated hereby, each of the parties hereto shall take such
further action (including the execution and delivery of such further instruments
and documents) as the other party reasonably may request, at the expense of the
requesting party unless such requesting party is entitled to indemnification
therefor under Article IX. Seller acknowledges and agrees that from and after
the Closing Date, Buyer shall be entitled to possession (or copies in the case
of financial or Tax records) of all documents, books, records (including Tax
records), Contracts and financial data of any sort relating to the Company.
6.2 Litigation Support. In the event and for so long as any party hereto or the
Company actively is contesting or defending against any Action (other than an
Action in which the other party hereto or its Affiliates is the opposing party)
in connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company, the other party hereto shall
cooperate with it and its counsel, make available their personnel and provide
such testimony and access to their books and records as shall be necessary or
appropriate in connection with the contest or defense thereof.
6.3 Use of Seller's Name. Seller consents to the Company continuing to use
stationary, business cards, catalogs, CD-ROMs, promotional and public relations
materials, and other printed material or electronic media which uses or includes
Seller's name until the earlier to occur of (i) 12 months after the Closing Date
(or 18 months after the Closing Date with respect to the Company's catalog), or
(ii) the date when existing stocks of such items are used up in the Ordinary
Course. With respect to the Company's current catalog, Seller acknowledges that
in the Ordinary Course it is anticipated that such catalog will not to be
replaced until the end of its approximately 13 month life cycle. Except as
permitted by this Section 6.3 or as otherwise contemplated by this Agreement,
the Company shall not use or include Seller's name in any of the foregoing items
after the Closing Date without the written consent of Seller.
6.4 Web Site Address. Seller consents to the Company continuing to use the web
site address "xxx.xxxxxx.xxxxx.xxx" until the Company's current catalog is
replaced as contemplated by Section 6.3. Thereafter, Seller agrees to use
reasonable efforts to redirect inquiries from said web site address to a new
Company web site address not using the Seller's name.
6.5 Post-Closing Tax Matters.
(a) Section 338(h)(10) Election. Seller and Buyer covenant and agree to
join in the filing of an election under Section 338(h)(10) of the Code, and they
further covenant and agree to join in the filing of or (in the case of Seller)
cause or permit the Company or any other applicable member of the Seller
Affiliated Group to join in the filing of any equivalent election or elections
that may be
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required or permitted under any state or local Tax Laws with respect to the
purchase and sale of the Shares hereunder (the elections under the Code and
state and local Tax Laws referenced herein shall be collectively referred to as
the "Section 338(h)(10) Election"), pursuant to which Section 338(h)(10)
Election the Company will be deemed (for income Tax purposes) to have sold all
of its assets in a single transaction at the close of the Closing Date. Seller
will pay any Tax imposed on Seller, any other member of the Seller Affiliated
Group, or the Company attributable to, or resulting from, any gain on the deemed
asset sale (including increases in capital or surplus) resulting from the making
of the Section,338(h)(10) Election, and will indemnify Buyer and the Company
against any Damages arising out of any failure of Seller to pay such Tax or to
make a valid and timely Section 338(h)(10) Election under the Code or under any
state or local Tax Law where a Section 338(h)(10) Election is required or
permitted. Seller will also pay any state or local Tax (and indemnify the Buyer
and the Company against any Damages arising out of any failure to pay such Tax)
imposed on the Company attributable to, or resulting from, any gain on the
deemed asset sale (including increases in capital or surplus) resulting from an
election under any state or local Tax Law similar to the election 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
hereunder (with any such election under Section 338(g) of the Code or any
similar state or local Tax Laws being included, where applicable, as a "Section
338(h)(10) Election"). Seller shall also file any other documents relating to
such Section 338(h)(10) Election as may be reasonably requested by Buyer.
(b) Termination of Tax Sharing Agreements. Any and all tax sharing,
allocation or indemnification agreements between Seller (or any Affiliate of
Seller) and the Company are terminated as of the end of the Closing Date and
will have no further effect for any period after the Closing Date.
(c) Taxes of Other Persons. Seller agrees to indemnify and hold
harmless Buyer from and against any and all Damages Buyer or the Company may
suffer resulting from, arising out of, relating to, in the nature of or caused
by any liability of the Company arising before the Closing Date for Taxes of any
Person other than the Company (i) under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local or foreign law), (ii) as a transferee or
successor, or (iii) by Contract. Subparagraph (iii) shall be applicable to Taxes
arising after the Closing Date if such Contract or other arrangement was entered
into on or before the Closing Date and not disclosed to Buyer on Schedule 6.5.
(d) Tax Returns. Audits, Contests, Etc., Tax Cooperation:
(i) Taxable Periods Ending on or Before the Closing Date.
Seller shall prepare or cause to be prepared and timely file or cause to be
timely filed all Tax Returns for the Company (including any Consolidated Tax
Returns) for all periods ending on or prior to the Closing Date. Seller will
include the income or loss of the Company (including any income or loss
resulting from the Section 338(h)(10) Election) on the Seller's Consolidated
income Tax Returns (and, if applicable, on the Company's separate income Tax
Returns) for all periods through the Closing Date
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and pay any income Taxes attributable to such income. The Company will furnish
Tax information to Seller for inclusion in all such Tax Returns for such periods
in accordance with the Company's past custom and practice. Seller shall promptly
reimburse Buyer for Taxes of the Company with respect to any period ending on or
before the Closing Date after payment by Buyer or the Company of such Taxes
(excluding any Taxes included within Inherited Debt).
(ii) Tax Periods Beginning Before and Ending After the Closing
Date. Buyer shall prepare or cause to be prepared and file or cause to be filed
any Tax Returns of the Company for Tax periods which begin before the Closing
Date and end after the Closing Date. Seller shall promptly pay to Buyer after
the date on which Taxes are paid with respect to such periods an amount equal to
the portion of such Taxes which relates to the portion of such Taxable period
ending on the Closing Date (excluding any Taxes included within Inherited Debt).
For purposes of this Section 6.5(d)(ii), in the case of any Tax based upon or
related to income, receipts, capital or surplus, the Seller's portion shall be
equal to the amount which would be payable if the relevant Taxable period ended
on the Closing Date, and shall include any Taxes on income, receipts, capital or
surplus, deemed recognized pursuant to the Section 338(h)(10) Election. All
determinations necessary to effect the foregoing allocation shall be made in a
manner consistent with prior practice of the Company (subject to applicable
law).
(iii) Any Tax Refunds that are received by Buyer or the
Company, and any amounts credited against Tax to which Buyer or the Company
become entitled, that relate to Tax periods or portions thereof ending on or
before the Closing Date shall be for the account of Seller, and Buyer shall
promptly pay over to Seller any such refund or the amount of any such credit
after receipt or entitlement thereto.
(iv) Prior to Closing, the Company shall not enter into any
agreement with any Tax Authority that will bind Buyer or the Company for any
taxable period ending after the Closing Date without the consent of the Buyer.
(v) Buyer, the Company and Seller shall cooperate fully, as
and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to this Section 6.5 and any audit, litigation
or other proceeding with respect to the Company's Taxes. Such cooperation shall
include (upon the other party's request) the provision of records and
information which are reasonably relevant to such filing or to such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanations reasonably
needed in connection with such Tax filing or Tax dispute. The Company, the Buyer
and Seller agree (A) to retain all books and records in such party's possession
with respect to Tax matters pertinent to the Company relating to any taxable
period beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Buyer or Seller, any extensions
thereof) of the respective taxable periods, and (B) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the
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other party so requests, the Company, the Buyer or the Seller, as the case may
be, shall allow the other party to take possession of such books and records.
(vi) All Tax Returns and computations referred to in this
Section 6.5 shall be prepared in a manner consistent with prior Tax Returns and
financial statements.
(vii) Seller will not settle any audit of Seller's
Consolidated income Tax Returns in a manner which would adversely affect the
Company after the Closing Date without the prior written consent of the Buyer,
which consent shall not unreasonably be withheld.
(e) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by Seller
when due, and Seller will, at its own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other such Taxes and fees, and, if required by
applicable law, Buyer will, and will cause its Affiliates to, join in the
execution of any such Tax Returns and other documentation.
(f) Allocation of Purchase Price. The parties hereto 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 all Tax reporting purposes in
such manner as Buyer shall provide (after reasonable consultation with Seller),
provided that such allocation is reasonably in conformity with Regulations
Section 1.338(b)-2T promulgated under the Code. Buyer and Seller will file IRS
Form 8023 and all Tax Returns (including amended returns and claims for refund)
and information reports in a manner consistent with such allocation.
(g) Notwithstanding anything in this Agreement to the contrary, prior
to making a permitted (as opposed to a required) Section 338(h)(10) Election in
any individual state(s), Buyer will give notice to Seller of Buyer's good faith
estimate of the value to Buyer of such Section 338(h)(l0) Election in such
state(s) (the "Value"). For each such state, Seller will have a reasonable
opportunity (subject to any deadline to make the Section 338(h)(10) Election in
said state) to elect to pay Buyer said Value, in which event Buyer would not
make the Section 338(h)(10) Election in said state.
6.6 Misdirected Payments. If after Closing either the Company or Seller shall
receive any payment or other funds belonging to the other, then they shall
promptly (and in no event later than 14 days after receipt thereof) deliver or
transmit the same to the appropriate recipient.
6.7 Preparation of Closing Date Financial Statements.
(a) Within fifteen (15) calendar days after the Closing Date, Buyer
shall cause the Company to prepare and deliver to Buyer and Seller a draft
balance sheet of the Company at the Closing Date, and related draft statements
of income for the fiscal year then ended (the "Draft
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Closing Date Financial Statements"), together with such additional year-end
financial information as is customarily prepared by consolidated subsidiaries of
Seller. The Draft Closing Date Financial Statements shall be prepared in
accordance with GAAP (except that inventory will be priced at the lower of cost
or net realizable value, with cost determined on a last invoiced value basis,
and the Company's inventory will be overstated and its accounts receivable
understated by an equal amount due to the Company's methodology for accruing for
sales returns).
(b) Buyer shall use all reasonable commercial efforts to cause KPMG,
within forty-five (45) days of the Closing Date, (i) to review the Draft Closing
Date Financial Statements, and to issue a reviewed balance sheet of the Company
at the Closing Date, and related reviewed statements of income for the fiscal
year then ended, together with a review report thereon by KPMG (the "Closing
Date Financial Statements"), and (ii) to deliver the Closing Date Financial
Statements to Buyer, Seller and the Company. The Closing Date Financial
Statements shall be prepared in accordance with GAAP (except that inventory will
be priced at the lower of cost or net realizable value, with cost determined on
a last invoiced value basis, and the Company's inventory will be overstated and
its accounts receivable understated by an equal amount due to the Company's
methodology for accruing for sales returns).
(c) Upon reasonable prior written notice from Seller, KPMG will make
the work papers and back-up materials used in preparing the Closing Date
Financial Statements, and the books and records of the Company relating thereto,
available to Seller and its attorneys, accountants, agents and other
representatives (including the right to make photocopies) at any reasonable
times that they may so request; provided, however, that Seller shall schedule
such access through an authorized representative of Buyer and in such a way as
to avoid material disruption of the normal business operations of the Company.
(d) Upon reasonable prior written notice from Buyer, Xxxxxx Xxxxxxxx
(and/or any other accountants of Seller having custody or control thereof) will
make the work papers and back-up materials, if any, used in preparing the
Interim Financial Statements, FY98 Financial Statements, and any other
pre-Closing financial statements of the Company, and any books and records (or
copies thereof) of the Company relating thereto in their custody or control,
available to Buyer and its attorneys, accountants (including KPMG), agents and
other representatives (including the right to make photocopies) at any
reasonable times that they may so request; provided, however, that Buyer shall
schedule such access through an authorized representative of Seller.
6.8 Employee Benefit Transition Plan. Schedule 6.8 sets forth the post-closing
covenants and agreements of Buyer and Seller with regard to certain Plans,
Welfare Plans, and other employee benefits.
6.9 Employees. Subject to (a) changes made in the Ordinary Course, (b) all "at
will" employees remaining "at will" employees, and (c) Seller fulfilling its
obligations under Section 6.8 and Schedule 6.8 thereto, Buyer agrees to
continue, for at least 90 days after the Closing Date, the
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employment of all employees of the Company (including those employees who are on
leaves of absence for short-term disability on the Closing Date), such
continuation of employment to provide for each such employee to receive
compensation at substantially the same rate as such employee received
immediately prior to the Closing Date (except as otherwise provided in Section
6.8 and Schedule 6.8 thereto). Those employees of the Company who continue
employment with the Company after the Closing Date are herein referred to as the
"Transferred Employees." Buyer shall cause the Company to fulfill all
liabilities for accrued or unused vacation, holiday and sick pay entitlements
under the Company's applicable policies as of the Closing Date to the
Transferred Employees in respect of the period prior to Closing. This Section
6.9 shall not apply to the Key Employees (whose employment shall be governed by
their respective Employment Agreements/Key Employees and Noncompetition
Agreements/Key Employees), and the Company's employees shall not be deemed
third-party beneficiaries of this Section 6.9.
6.10 Continuation of Pre-Closing Covenants. To the extent not fulfilled prior
to Closing, Seller agrees to use commercially reasonable efforts to fulfill its
obligations pursuant to the covenants set forth in Sections 5.3(d), 5.3(f),
5.3(g), 5.3(h), and 5.5(b).
ARTICLE VII--CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
7.1 Conditions Precedent. Buyer's obligation to purchase the Shares hereunder,
and to otherwise Close the transactions contemplated hereby, is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
(a) Representations. Warranties and Covenants.
(i) Each of Seller's representations and warranties in this
Agreement must have been accurate in all material respects as of the date hereof
and must be accurate in all material respects on and as of the Closing Date as
if made on and as of such date; provided, however, that each of Seller's
representations and warranties in Sections 3.3, 3.7(a) (provided, however, that
Seller shall be entitled to reasonable notice and an opportunity to cure, at
Seller's expense, any inaccuracy in its representations and warranties in
Section 3.7(a)), and 3.33 must have been accurate in all respects as of the date
hereof, and must be accurate in all respects as of the Closing Date as if made
on such date.
(ii) Each of the covenants and obligations that Seller is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been duly performed and complied with in all material
respects at or prior to Closing; provided, however, that each of Seller's
covenants and obligations in Sections 5.1 (a), 5.2(a)(i) and 5.5 (provided,
however, that Seller shall be entitled to reasonable notice and an opportunity
to cure, at Seller's expense, any inaccuracy in its representations and
warranties in Sections 5.1 (a), 5.2(a)(i) and 5.5) must have been duly
performed and complied with at or prior to Closing.
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(b) No Actions. No Action shall be pending or threatened before any
Governmental Entity: (i) seeking to restrain or prohibit, or to obtain damages
or other relief in connection with, this Agreement and/or the consummation of
the transactions contemplated hereby; or (ii) asserting that any Person other
than the parties hereto (A) is the legal or beneficial owner of, or has any
right to acquire or to obtain legal or beneficial ownership of, any stock of or
any other ownership interest in the Company, or (B) is entitled to all or any
portion of the Purchase Price. Further, there must not be in effect any Legal
Requirement or any injunction or other Order that (1) prohibits the purchase of
the Shares by the Buyer from Seller, and (2) has been adopted or issued, or has
otherwise become effective, since the date of this Agreement.
(c) Consents. The Consents listed in Schedule 7.1 (c) must have been
obtained and must be in full force and effect.
(d) Deliveries. Seller shall have delivered or caused to be delivered
to Buyer:
(i) the Stock Certificate;
(ii) a certificate executed by an officer of Seller certifying
to the accuracy in all material respects on the Closing Date of Seller's
representations and warranties set forth in Article III and that all agreements,
covenants, obligations and conditions of Seller to be performed or complied with
prior to the Closing Date have been so performed or complied with in all
material respects;
(iii) a certificate by the Secretary of Seller certifying that
the Board of Directors of Seller has taken all action necessary to authorize the
execution, delivery and performance of this Agreement by Seller and the
consummation of the transactions contemplated thereby;
(iv) the books of account, minute books, original stock
transfer books (containing canceled stock certificates representing all
transfers of its capital stock prior to the Closing Date and all related stock
powers, deeds of gift, stock powers, and other assignments separate from
certificate) and the corporate seal of the Company;
(v) the resignations of each officer and each member of the
Board of Directors of the Company, effective as of the Closing Date, except for
such officers and directors as Buyer shall designate in writing;
(vi) an opinion of Xxxxxx, Xxxxxxx & Xxxxxxx, addressed to
Buyer, in the form annexed hereto as Exhibit C, and an opinion of Xxxxx Xxxx,
Esq., addressed to Buyer, in the form annexed hereto as Exhibit D;
(vii) a license by Seller to the Company for use of the web
site address "xxx.xxxxxx.xxxxx.xxx" in form and substance reasonably acceptable
to Buyer;
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(viii) with respect to the Transferred Employees, an
assignment(s) by Seller to the Company of the acknowledgments, agreements, and
similar employment-related documents executed by the Transferred Employees in
favor of Seller, if any;
(ix) copy of Seller's Board of Director's resolutions
regarding this Agreement and the transactions contemplated hereby, certified by
the Secretary or an Assistant Secretary of Seller;
(x) copy of the Company's Board of Director's resolutions
regarding this Agreement and the transactions contemplated hereby, including the
transactions contemplated by Section 5.5, certified by the Secretary or an
Assistant Secretary of the Company;
(xi) incumbency certificate for Seller issued by the Secretary
or an Assistant Secretary of the Seller;
(xii) incumbency certificate for, and certified copy of the
Bylaws of, the Company issued by the Secretary or Assistant Secretary of the
Company;
(xiii) certified copies of the Charter of the Company issued
by the Secretary of State of Delaware within 30 days of the Closing Date;
(xiv) short form good standing certificate for the Seller
issued by the Secretary of State of New York within 30 days of the Closing Date;
(xv) long form good standing certificate for the Company
issued by the Secretary of State of Delaware within 30 days of the Closing Date;
(xvi) good standing and tax clearance certificates for the
Company from the Secretary of State (or equivalent state authority) of the
states listed on Schedule 3.1(c) issued within 30 days of the Closing Date;
(xvii) an assignment of the Principal Lease from Seller to the
Company, consented to by the landlord, in form and substance reasonably
acceptable to Buyer;
(xviii) an assignment of Seller's pending U.S. trademark
application for the xxxx "Allied Electronics" (a copy of which is attached to
Schedule 3.18(a) hereof), in form and substance reasonably acceptable to Buyer;
and
(xix) such other items as Buyer may reasonably request.
(e) HSR Act. Seller shall have made all pre-merger notification filings
required to made by Seller under the HSR Act, all applicable waiting periods
thereunder shall have expired or been terminated without any request from any
appropriate Governmental Entity for additional information
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or, if additional information has been requested, all applicable extended
waiting periods shall have expired.
(f) Nonsolicitation Agreement. Seller shall have executed and delivered a
Nonsolicitation Agreement in substantially the form annexed hereto as Exhibit E
(the "Nonsolicitation Agreement").
(g) Escrow Agreement. Seller shall have executed and delivered an Escrow
Agreement in substantially the form annexed hereto as Exhibit F (the "Escrow
Agreement").
(h) Employment Agreements/Key Employees; Noncompetition Agreements/Key
Employees. Each of the Key Employees shall have executed and delivered (i) an
employment agreement in substantially the form annexed hereto as Exhibit G
(collectively, the "Employment Agreements/Key Employees"), and (ii) a
noncompetition agreement substantially in the form annexed hereto as Exhibit H
(collectively, the "Noncompetition Agreements/Key Employees").
(i) Supply Agreement. Seller and the Company shall have executed and
delivered a Supply Agreement in substantially the form annexed hereto as Exhibit
I (the "Supply Agreement").
(j) Wire Transfer Instructions. At least three (3) Business Days prior to
the Closing Date, the Seller shall provide Buyer with applicable wire transfer
instructions to the account designated by Seller pursuant to Section 2.2(a).
(k) Canadian Business.
(i) Prior to Closing, Buyer shall cause an Affiliate of Buyer ("Buyer
Canada") to offer to employ the employees of Seller Canada listed on Schedule
7.1(k)(i) in a manner generally consistent with the terms of Section 6.9 above,
effective upon the consummation of Closing. Seller shall have used commercially
reasonable efforts to cause such employees of Seller Canada to accept said offer
of employment.
(ii) Prior to Closing, Seller shall have caused Seller Canada to have
sold the assets of Seller Canada listed on Schedule 7.1(k)(ii) to Buyer Canada
for their net book value, effective immediately prior to the consummation of
Closing, which payment of said net book value shall be included in (and not in
addition to) the Purchase Price.
(iii) Prior to Closing, Seller Canada and the Company to have entered
into a Shared Space License Agreement substantially in the form of Exhibit J
with respect to the use of the premises leased by Seller Canada in Missisauga,
Ontario, Nepean, Ontario, and Burnaby, British Columbia, Canada.
(l) Puerto Rican Business.
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(i) Prior to Closing, Buyer shall cause an Affiliate of Buyer ("Buyer
Puerto Rico") to offer to employ the employees of Seller Puerto Rico listed on
Schedule 7.1(l)(i) in a manner generally consistent with the terms of Section
6.9 above, effective upon the consummation of Closing. Seller shall have used
commercially reasonable efforts to cause such employees of Seller Puerto Rico to
accept said offer of employment.
(ii) Prior to Closing, Seller shall have caused Seller Puerto Rico to
have sold the assets of Seller Puerto Rico listed on Schedule 7.1(l)(ii) to
Buyer Puerto Rico for their net book value, effective immediately prior to the
consummation of Closing, which payment of said net book value shall be included
in (and not in addition to) the Purchase Price.
(iii) Prior to Closing, Seller Puerto Rico and the Company to have
entered into a Shared Space License Agreement substantially in the form of
Exhibit J with respect to the use of the premises leased by Seller Puerto Rico
in Xxxxx Xxxxxx, Puerto Rico.
(m) Seller's Premises. Seller and the Company shall have entered into a
Shared Space License Agreement in the form attached hereto as Exhibit J (the
"Shared Space License Agreement") with respect to each of the Leases of Leased
Real Property with respect to which the Seller (as opposed to the Company) is
the tenant or subtenant based on the information set forth on Schedule 7.1(m)
regarding Company's allocable share of the use of each of said premises.
7.2 Waiver. Buyer shall have the right to waive the foregoing conditions, or any
of them, wholly or in part; provided, however, that no such waiver shall be
deemed to have occurred unless it is in writing and executed by Buyer. No such
waiver shall affect the existence or amount of Damages for which Buyer may be
entitled to indemnification hereunder.
ARTICLE VIII -- CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
-------------------------------------------------------------
8.1 Conditions Precedent. Seller's obligation to sell the Shares hereunder, and
to otherwise Close the transactions contemplated hereby, is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants.
(i) Each of Buyer's representations and warranties in this Agreement
must have been accurate in all material respects as of the date hereof and must
be accurate in all material respects on and as of the Closing Date as if made on
and as of such date.
(ii) Each of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
must have been duly performed and complied with in all material respects.
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(b) No Injunction. There must not be in effect any Legal Requirement or any
injunction or other Order that (i) prohibits the sale of the Shares by Seller to
Buyer, and (ii) has been adopted or issued, or has otherwise become effective,
since the date of this Agreement.
(c) Deliveries. Buyer shall have delivered to Seller:
(i) The Purchase Price in accordance with Section 2.2;
(ii) A certificate executed by an officer of the Buyer certifying to
the accuracy in all material respects on the Closing Date of Buyer's
representations and warranties set forth in Article IV and that all agreements,
covenants and conditions of Buyer to be performed or complied with prior to the
Closing Date has been so performed or complied with in all material respects;
(iii) a copy of resolutions adopted by a duly authorized committee of
Buyer's Board of Directors regarding this Agreement and the transactions
contemplated hereby, certified by the Secretary or any one Director of Buyer;
(iv) incumbency certificate for Buyer issued by the Secretary or any
one Director of Buyer;
(v) copies of the Memorandum and Articles of Association of Buyer
certified by the Secretary or any one Director of Buyer;
(vi) an opinion of Shulman, Rogers, Gandal, Pordy & Xxxxx, P.A.,
addressed to Seller, in the form annexed hereto as Exhibit K, and
(vii) such other items as Seller may reasonably request.
Further, Buyer shall use commercially reasonable efforts to obtain the opinion
of Xxxxxx Xxxx, addressed to Seller, with regard to the equivalent opinions, on
behalf of the Buyer, as are to be provided by Xxxxxx, Xxxxxxx & Xxxxxxx pursuant
to Section 7.1(d)(vi).
(d) HSR Act. Buyer shall have made all pre-merger notification filings
required to made by Buyer under the HSR Act, all applicable waiting periods
thereunder shall have expired or been terminated without any request from any
appropriate Governmental Entity for additional information or, if additional
information has been requested, all applicable extended waiting periods shall
have expired.
(e) Related Agreements. Buyer shall have executed and delivered the
Escrow Agreement, the Nonsolicitation Agreement and the Supply Agreement.
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8.2 Waiver. Seller shall have the right to waive the foregoing conditions, or
any of them, wholly or in part; provided, however, that no such waiver shall be
deemed to have occurred unless it is in writing and executed by Seller. No such
waiver shall effect the existence or amount of Damages for which Seller may be
entitled to indemnification hereunder.
ARTICLE IX -- INDEMNIFICATION
-----------------------------
9.1 Survival; Remedies.
(a) All representations and warranties contained in this Agreement shall
survive the Closing, and shall remain in full force and effect, for a period of
two (2) years following the Closing, except as follows: (i) Section 3.3 shall
survive without limitation; and (ii) Sections 3.15, 3.19, 3.20 and 6.5 shall
survive until 30 days after the expiration of the applicable statute of
limitations (determined without regard to any waivers or extensions of such
statutory periods). If and to the extent Seller or Buyer waives or extends any
applicable statute of limitations relating to Section 3.15, 3.19, 3.20, or 6.5
with the written consent of the other party (which consent shall not to be
unreasonably withheld, delayed or conditioned), then such representations and
warranties shall survive until 30 days after the expiration of the applicable
statute of limitations after application of such waiver or extension period. The
right of the Buyer Indemnified Parties to indemnification under Section 9.2(c)
(with respect to environmental Actions) shall survive until 30 days after the
expiration of the applicable statute of limitations.
(b) The post-Closing covenants and agreements of the parties contained
herein shall survive the Closing until the expiration of the applicable statutes
of limitations relating to a contract claim brought hereunder (determined
without regard to any waivers or extensions of such statutory periods). If and
to the extent Seller and Buyer mutually agree in writing to waive or extend any
such applicable statute of limitations, then such covenants and agreements shall
survive until 30 days after the expiration of the applicable statute of
limitations after application of such waiver or extension period.
(c) The remedies provided in this Article IX shall remain in force and
effect as to representations, warranties, covenants and agreements, for such
period of time as is specified in this Section 9.1; provided, however, that a
party shall be deemed to have made a timely claim with respect to any
representation, warranty, covenant or agreement if notice of such claim
containing reasonable details of the basis for and amount of the claim has been
properly delivered by the claimant(s) to the other parties prior to the
expiration of the applicable time period.
9.2 Indemnification By Seller. From and after Closing, Seller shall indemnify,
defend and hold harmless Buyer, the Company and their respective directors,
officers, stockholders, employees, agents, representatives, successors and
assigns (each, a "Buyer Indemnified Party" or, collectively, "Buyer Indemnified
Parties") from and against any and all Damages suffered or incurred by a Buyer
Indemnified Party that result, directly or indirectly, from or in connection
with:
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(a) any breach of any representation or warranty made by Seller in this
Agreement, the Schedules, or any other agreement, certificate, document or
writing delivered by Seller at or for Closing pursuant to this Agreement;
(b) any breach by Seller of any covenant or obligation hereunder;
(c) any Actions involving the Company arising out of any matter, event or
omission occurring or accruing prior to the consummation of Closing (including
Actions set forth on Schedule 3.12 and environmental Actions), other than (i)
Inherited Debt, and (ii) any matters disclosed to Buyer as a debt or liability
on any Schedule to this Agreement (excluding Schedule 3.12, Schedule 3.15,
Schedule 3.19, and Schedule 6.5; provided, however, that solely for purposes of
this Section 9.2(c), obligations (including Contracts) which are executory with
respect to post-Closing performance shall not, as a result of their executory
nature, be deemed Actions; or
(d) any liability relating to any Plan, Pension Plan or Welfare Plan
arising out of any matter occurring or accruing prior to Closing, including
under ERISA or the Code (other than any such liability included within the
definition of Inherited Debt).
Notwithstanding any other provision of this Agreement, Seller shall not be
entitled to any contribution from the Company with respect to any claims made by
Buyer Indemnified Parties against Seller under this Section 9.2.
9.3 Indemnification by Buyer. From and after Closing, Buyer and the Company,
jointly and severally, shall indemnify, defend and hold harmless Seller and its
directors, officers, stockholders, employees, agents, representatives and
permitted successors and assigns (a "Seller Indemnified Party" or, collectively,
"Seller Indemnified Parties") from and against all Damages suffered by a Seller
Indemnified Party that result, directly or indirectly, from or in connection
with:
(a) any breach of any representation or warranty made by Buyer in this
Agreement;
(b) any breach by Buyer of any covenant or obligation hereunder; or
(c) except as otherwise specifically provided herein, any Action involving
the Company arising out of any matter occurring or accruing after the
consummation of Closing; or
(d) any Inherited Debt.
9.4 Notice and Defense. If a Buyer Indemnified Party or Seller Indemnified Party
seeking indemnification ("Indemnified Party") desires to make a claim against a
party for indemnification ("Indemnifying Party") under this Article IX (or, in
the case of a Buyer Indemnified Party, to have Damages in respect of a matter
included for purposes of determining whether the Threshold Amount has been met
or exceeded), the Indemnified Party will, within 15 days after the Indemnified
Party
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receives notice of a claim, notify the Indemnifying Party in writing of any
claim or demand as to which the Indemnified Party is entitled to claim
indemnification (or, in the case of a Buyer Indemnified Party, of any claim or
demand which the Buyer Indemnified Party intends to credit against the Threshold
Amount), and, to the extent known, the amount and circumstances surrounding such
claim. The Indemnified Party's failure to provide such timely notice shall not
preclude the Indemnified Party from seeking indemnification under this Article
IX unless and to the extent the Indemnifying Party has been materially
prejudiced by such delay. In the event the claim is a third party Action against
an Indemnified Party or involves a claim by or liability involving a
Governmental Entity, the Indemnifying Party shall have the right to employ
counsel of its choice to defend any such claim or demand; provided, however,
that (i) the indemnified Party is kept fully informed of all developments and is
promptly furnished copies of all relevant papers; (ii) the Indemnifying Party
promptly commences and diligently prosecutes the defense; and (iii) the
Indemnified Party shall have the right to participate, at its own expense and
through counsel selected by it, in the defense of any such claim. If the
conditions of the foregoing proviso are not met, if the positions of the
Indemnified Party and the Indemnifying Party under the Action are in conflict,
or if the Indemnifying Party chooses not to control the defense, the Indemnified
Party shall assume and control the defense of such third party Action at the
expense of the Indemnifying Party. The Indemnifying Party, or, if the conditions
to the foregoing proviso are not met, the Indemnified Party, shall have the
right to pay, compromise or settle any such third party claim with the written
consent of the other party, which consent will not be unreasonably withheld,
conditioned or delayed.
9.5 Limitations on Indemnification by Seller.
(a) (i) Notwithstanding anything contained herein to the contrary (except
as otherwise provided in Section 9.5(a)(ii) below), a Buyer Indemnified Party
will not be entitled to indemnification hereunder until the aggregate of all
Damages incurred by the Buyer Indemnified Parties exceeds in the aggregate the
amount of US$ 1,000,000 (the "Threshold Amount"), and then such Buyer
Indemnified Party(ies) shall only be entitled to indemnification hereunder to
the extent of the excess of such Damages over the Threshold Amount. In no event,
however, shall such Threshold Amount limitation on the Buyer Indemnified
Parties' rights to indemnification apply to indemnification sought by Buyer
Indemnified Parties for Damages resulting from a breach of the representations,
warranties, covenants or agreements in Sections 3.31 or 5.5. Notwithstanding the
forgoing provisions of this Section 9.5(a)(i), breaches of the representations,
warranties, covenants or agreements in Sections 3.15, 3.19, 6.5, and/or 9.2(c)
(as Section 9.2(c) relates to environmental Actions) shall be governed by
Section 9.5(a)(ii) rather than this Section 9.5(a)(i).
(ii) Notwithstanding anything contained herein to the contrary, a Buyer
Indemnified Party will not be entitled to indemnification hereunder with respect
to a breach of the representations, warranties, covenants or agreements in
Sections 3.15, 3.19, 6.5, and/or 9.2(c) (as Section 9.2(c) relates to
environmental Actions), until the aggregate of all Damages incurred by the Buyer
Indemnified Parties with respect thereto exceeds in the aggregate the amount of
US$250,000 (the "Tax/Environmental Threshold Amount"), and then such Buyer
Indemnified Party(ies) shall
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only be entitled to indemnification hereunder with respect thereto to the extent
of the excess of such Damages over the Tax/Environmental Threshold Amount. For
purposes of this Section 9.5(a)(ii), Seller shall not be deemed to have breached
the representations, warranties, covenants or agreements in Sections 3.19 or 6.5
as a result of Buyer's and/or the Company's liability for, or payment of, any
Taxes included within the definition of Inherited Debt.
(b) Seller's maximum liability to Buyer Indemnified Parties for Damages
under this Article IX shall be limited to 10% of the Purchase Price; provided
however, that there shall be no limitation on Seller's maximum liability to
Buyer Indemnified Parties for Damages arising out of or relating to (i) any
breaches of any representation or warranty contained in Sections 3.15, 3.19
and/or 3.20, (ii) any indemnification to which Buyer Indemnified Parties are
entitled under Section 9.2(c) (as Section 9.2(c) relates to environmental
Actions), and/or (iii) any breaches of any representation, warranty, covenant or
agreement contained in Section 6.5 and/or any indemnification to which Buyer
Indemnified Parties are entitled under Section 6.5.
9.6 Escrow; Right of Set-Off. Upon notice to Seller specifying in reasonable
detail the basis for such set-off, Buyer may set off against the Escrow Amount
any amount to which it may be entitled under this Article IX (taking into
account, if applicable, the Threshold Amount) by giving a notice of claim and
prevailing in any dispute with respect thereto in accordance with the Escrow
Agreement. Neither the exercise of nor the failure to exercise such right of
set-off or to give a notice of a claim under the Escrow Agreement will
constitute an election of remedies or limit Buyer in any manner in the
enforcement of any other remedies that may be available to it.
9.7 Tax Status of Indemnification Payment. Any indemnification made pursuant to
this Article IX shall constitute an adjustment of the Purchase Price (which
shall be allocated in accordance with Exhibit A, subject to Treasury Regulation
Sections 1.338(b)-2T and -3T) and the parties hereto shall, within a
reasonable time of payment and receipt of such payment, as applicable, and in
any event within two months of such payment, file all amendments to their
respective current and past income tax returns as may be necessary to reflect
the foregoing.
ARTICLE X - TERMINATION
-----------------------
10.1 Termination Events. This Agreement may, by notice given prior to or at the
Closing, be terminated:
(a) by either Buyer or Seller if a material breach of any provision of this
Agreement has been committed by the other party and such breach has not been
waived in writing or cured within the earlier to occur of (i) 10 business days
after written notice of such breach has been delivered to the breaching party,
or (ii) the Closing Date;
(b) (i) by Buyer if any of the conditions in Article VII has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the
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failure of Buyer to comply with its obligations under this Agreement) and Buyer
has not waived in writing such condition on or before the Closing Date; or (ii)
by Seller, if any of the conditions in Article VIII has not been satisfied of
the Closing Date or if satisfaction of such a condition is or becomes impossible
(other than through the failure of Seller to comply with its obligations under
this Agreement) and Seller has not waived in writing such condition on or before
the Closing Date;
(c) by mutual written consent of Buyer and Seller; or
(d) by either Buyer or Seller if the Closing has not occurred (other than
through the failure of any party seeking to terminate this Agreement to comply
fully with its obligations under this Agreement) on or before September 30,
1999, or such later date as the parties may agree upon in writing.
10.2 Effect of Termination. Each party's right of termination under Section 10.
1 is in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 10.1, all further
obligations of the parties under this Agreement will terminate, except (i) the
obligations in Section 11.1 will survive, and (ii) Buyer will return or destroy
as much of the written confidential information of Seller in Buyer's possession
as Seller may reasonably request; provided, however, that if this Agreement is
terminated by a party because of the breach of the Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
ARTICLE XI -- MISCELLANEOUS
---------------------------
11.1 Expenses. Except as otherwise expressly provided in this Agreement, Seller
(on behalf of itself and the Company) and Buyer will bear their respective
expenses incurred in connection with the preparation, execution and performance
of this Agreement and the transactions contemplated hereby, including all fees
and expenses of agents, representatives, counsel and accountants. In the event
of termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a breach of
this Agreement by the other party.
11.2 Assignment; Benefits and Burdens. Neither party may assign any of its
rights under this Agreement without the prior consent of the other party, except
that Buyer may assign in writing any of its rights under this Agreement to any
of its direct or indirect wholly-owned Affiliates (in which event Buyer hereby
guarantees the payment and performance by such Affiliate assignee of all
agreements, covenants and obligations hereunder, and such Affiliate assignee
shall make such written representations and warranties to Seller which parallel
those of Buyer in Article IV as the Seller may reasonably request); provided,
further, however, that Seller may transfer the Shares to, and may assign in
writing any of its rights under this Agreement to, any of its direct or indirect
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wholly-owned Affiliates (in which event Seller hereby guarantees the payment and
performance by such Affiliate assignee of all agreements, covenants and
obligations hereunder, and such Affiliate assignee shall make such written
representations and warranties to Buyer which parallel those of Seller in
Article III as the Buyer may reasonably request). Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement any legal or equitable right,
remedy or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
11.3 Amendment. This Agreement may be amended, modified or supplemented only by
an instrument in writing executed by the party to be charged with the amendment,
modification or supplement.
11.4 Notices. All notices, requests, consents, demands and other communications
which are required or may be given under this Agreement shall be in writing
(including telecommunications) and shall be deemed to have been duly given if
(i) personally delivered, (ii) sent by telecopy or other wire transmission with
successful transmission acknowledged; (iii) sent by Federal Express or other
overnight air express; or (iv) sent by registered or certified mail, return
receipt requested and postage prepaid. All notices delivered to a party to this
Agreement or to legal counsel for such party shall be sent to the following
respective addresses:
If to Buyer or after the Closing, the Company:
-----------------------------------------------
Electrocomponents plc
4240 Xxxx Court
Xxxxxx Xxxxxxxx Xxxx
Xxxxxx 0X0 0XX
Xxxxxx Xxxxxxx
Attention: Xxxxxx X. Xxxxxx, Group Chief Executive
Telecopy: 000-000-000000
With a copy to:
Shulman, Rogers, Gandal, Pordy & Xxxxx, P.A.
00000 Xxxxxxxxx Xxxx, Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
If to Seller or prior to Closing, the Company:
----------------------------------------------
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Avnet, Inc.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxx, Xx. V.P. & General Counsel
Telecopy: (000) 000-0000
With a copy to:
Xxxxxx, Xxxxxxx & Xxxxxxx
0 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
or to such other address or to such other person or persons designated in
writing by such party or counsel, as the case may be. Notices pursuant to
subsections (i) or subsection (ii) shall be deemed to have been received on the
day delivered or transmitted, respectively. Notices delivered pursuant to
subsection (iii) or subsection (iv) shall be deemed to have been received on the
second Business Day following the day sent, whether or not such notice was
actually received on such day.
11.5 Entire Understanding. This Agreement supersedes all prior agreements
between the parties hereto with respect to its subject matter (including the
Letter of Intent between Buyer and Seller, dated March 23, 1999) and constitutes
a complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter.
11.6 Governing Law; Jurisdiction.
(a) This Agreement shall be governed by and interpreted under the laws of
the State of Delaware applicable to contracts made and to be performed entirely
within such State, without giving effect to the conflict of laws principles of
such State. Buyer and Seller hereby irrevocably submit to the jurisdiction of
any Delaware state or Federal court sitting in the City of Wilmington over any
Action arising out of or relating to this Agreement. Buyer and Seller hereby
irrevocably waive, to the fullest extent permitted by applicable law, any
objection which it or they may now have or hereafter have to the laying of venue
of any such Action brought in such court and any claim that any such Action
brought in such a court has been brought in an inconvenient forum. Buyer and
Seller agree that, to the fullest extent permitted by applicable law, a final
judgment in any such Action brought in such a court shall be conclusive and
binding on Buyer or Seller, as the case may be, and may be enforced in any court
of the jurisdiction in which the Buyer or Seller, as the case may be, are or may
be subject by suit upon such judgment, provided that service or process is
effected upon Buyer or Seller, as the case may be, in one of the manners
specified in subparagraph (b) of this Section 11.6 or as otherwise permitted by
applicable law.
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(b) Each of Seller and Buyer hereby consents to process being served in any
Action referred to in subparagraph (a) of this Section 11.6 by the mailing of a
copy thereof by registered or certified mail, first-class postage prepaid,
return receipt requested, to such Person at its address in Section 11.4, or as
otherwise permitted by applicable law.
11.7 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable, and shall
not affect the validity or enforceability of the offending provision in any
other situation or in any other jurisdiction.
11.8 Waiver; Remedies Not Exclusive. The rights and remedies of the parties to
this Agreement are cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right, power or privilege under this
Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power or privilege, and no single or partial exercise of
any such right, power or privilege will preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
11.9 Schedules. The Schedules are a part of this Agreement as if fully set forth
herein and all references to this Agreement shall be deemed to include the
Schedules. Any fact or item in any Schedule hereto referenced by a particular
Section in this Agreement shall be deemed disclosed with respect to any other
Section or Schedule, whether or not an explicit cross-reference appears
indicating the other Sections or Schedules to which such fact or item also
relates, if by description the disclosure of such fact or item is readily
discernable to be applicable to another specific Section or Schedule, provided
that Seller shall have the burden of demonstrating that disclosure of such fact
or item is readily discernable.
11.10 Terminology and Constructions Counterparts. All terms and words in this
Agreement, regardless of the number and gender in which they are used, shall be
deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context of this Agreement
may require. Unless otherwise indicated, any reference in this Agreement to a
Section, Article, Exhibit or Schedule shall mean the applicable section,
article, exhibit or schedule of or to this Agreement. The use herein of the word
"including," when following any general statement, term or matter, shall not be
construed to limit such statement, term or matter, to the specific items or
matters set forth immediately following such word or to similar items or
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matters, whether or not non-limiting language (such as "without limitation," or
"but not limited to," or words of similar import) is used with reference
thereto, but rather shall be deemed to refer to all other items and matters that
could reasonably fall within the broadest possible scope of such general
statement, term or matter. The section headings in this Agreement are intended
solely for convenience and shall be given no effect in the construction and
interpretation hereof. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and both of which
together shall constitute one and the same agreement. Facsimile signatures shall
be sufficient to bind the parties.
[SIGNATURES APPEAR ON FOLLOWING PAGES]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement of the date
first written above.
SELLER:
Avnet, Inc., a New York corporation
By: /s/ Xxxxx X. Xxxx
---------------------------------
Name: Xxxxx X. Xxxx
-------------------------------
Title: Senior Vice President
------------------------------
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BUYER:
Electrocomponents plc, a public limited
company formed under the laws of England
By:/s/Xxxxxx X. Xxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxx, Group Chief Executive