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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
May 24, 1996
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Date of Report (Date of earliest event reported)
VANSTAR CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Delaware 1-14192 94-2376431
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
5964 W. Las Positas Blvd.
Pleasanton, California 94566
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(Address of Principal Executive Offices) (Zip Code)
510/734-4000
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
Effective May 24, 1996, Vanstar Corporation (the "Registrant"), through its
wholly owned subsidiary, VST West, Inc., a Delaware corporation ("VST"),
acquired certain of the assets and assumed certain of the liabilities of
Dataflex Corporation, a New Jersey corporation ("Dataflex") and of Dataflex'
wholly owned subsidiary, Dataflex Southwest Corporation, an Arizona corporation
("DSC"). The assets acquired and liabilities assumed by the Registrant and VST
comprised substantially all of the assets and liabilities associated with the
business operations of Dataflex and DSC known as the Dataflex Western Region and
the Dataflex Southwest Region. Through the Dataflex Western Region and the
Dataflex Southwest Region, Dataflex and DSC provided personal computers and
related goods and services, including goods and services relating to the design,
integration and management of large PC desktop and network infrastructures to
customers in the states of Arizona, California, Colorado, New Mexico, Nevada and
Utah.
The acquisition was consummated pursuant to the terms of an Asset
Purchase Agreement, dated May 24, 1996, by and among the Registrant and VST,
on the one hand, and Dataflex and DSC, on the other (the "Asset Purchase
Agreement"). Pursuant to the Asset Purchase Agreement, Vanstar and VST agreed
to pay an amount equal to $10,000,000 plus the net tangible value, as of
May 31, 1996, of the assets acquired over the liabilities assumed. On May 24,
1996 Vanstar and VST paid approximately $37,000,000 in cash against the
estimated purchase price of approximately $42,000,000. The Asset Purchase
Agreement provides that the remaining unpaid portion of the purchase price
will be paid in cash as soon as practicable following the completion of an
audit of the assets acquired and liabilities assumed as of May 31, 1996. The
purchase price and other provisions of the Asset Purchase Agreement were
determined by arms length negotiation between the parties.
Prior to the execution and delivery of the Asset Purchase Agreement, no
material relationship existed between the Registrant, VST, any officer, director
or affiliate of the Registrant or VST or any associate of any such officer or
director, on the one hand, and Dataflex or DSC on the other. Contemporaneous
with the consummation of the transactions contemplated in the Asset Purchase
Agreement on May 24, 1996, Mr. Peter Jackson resigned his position as Co-
President of Dataflex and accepted a position as a Vice President of the
Registrant.
The Registrant and VST currently expect to utilize the assets acquired from
Dataflex and DSC in the conduct of the Registrant's existing business and to
continue a business substantially similar to the business previously conducted
by Dataflex and DSC as the Dataflex Western Region and the Dataflex Southwest
Region. In making the cash payments called for in the Asset Purchase Agreement,
the Registrant utilized existing working capital resources, including lines of
credit between the Registrant and IBM Credit Corporation.
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On May 24, 1996, the Registrant issued a news release relating to the
transactions contemplated in the Asset Purchase Agreement, the form of which is
attached hereto as Exhibit 99.1.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit No. Document Description
2.1 Asset Purchase Agreement by and among Vanstar
Corporation, VST West, Inc. and Dataflex Corporation
and Dataflex Southwest Corporation, dated as of May 24,
1996 (Schedules and Exhibits to the Asset Purchase
Agreement have been omitted pursuant to Item 601(b)(2)
of Regulation S-K) (filed herewith)
99.1 May 24, 1996 Vanstar Corporation News Release (filed
herewith)
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
VANSTAR CORPORATION
Date: June 7, 1996 By: /s/ H. Christopher Covington
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Name: H. Christopher Covington
Title: Sr. Vice President
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EXHIBIT INDEX
Doc. No. Document Description
2.1 Asset Purchase Agreement by and among Vanstar Corporation, VST
West, Inc. and Dataflex Corporation and Dataflex Southwest
Corporation, dated as of May 24, 1996 (Schedules and Exhibits to
the Asset Purchase Agreement have been omitted pursuant to Item
601(b)(2) of Regulation S-K) (filed herewith)
99.1 May 24, 1996 Vanstar Corporation News Release (filed herewith)
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
VANSTAR CORPORATION,
VST WEST, INC.
AND
DATAFLEX CORPORATION,
DATAFLEX SOUTHWEST CORPORATION
DATED
MAY 24, 1996
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TABLE OF CONTENTS
PAGE
ARTICLE I SALE AND PURCHASE OF THE ASSETS; DEFINITIONS.................. 1
1.1 Assets........................................................... 1
1.2 Excluded Assets.................................................. 3
1.3 Definition of Certain Terms...................................... 3
ARTICLE II THE CLOSING................................................... 13
2.1 Place and Date................................................... 13
2.2 Purchase Price................................................... 13
2.2.1 Closing Date Payment..................................... 13
2.2.2 Certain Additional Potential Payments.................... 13
2.2.3 Payment to IBM Credit.................................... 13
2.3 Designation of Inventory Components.............................. 13
2.4 Valuation of Asset Components.................................... 14
2.5 Effect of Valuations, Return of Certain Assets................... 14
2.6 Escrow Agreement................................................. 18
2.7 Arrangements Related to the Indemnity Basket..................... 19
2.8 Allocation of Purchase Price..................................... 19
2.9 Assumption of Liabilities........................................ 19
2.10 Excluded Liabilities............................................. 20
2.11 Consent of Third Parties......................................... 20
2.12 Intellectual Property Licenses................................... 21
ARTICLE III REPRESENTATIONS AND WARRANTIES........................... 22
3.1 Representations and Warranties of Sellers........................ 22
3.1.1 Authorization, etc....................................... 22
3.1.2 Corporate Status......................................... 22
3.1.3 No Conflicts, etc........................................ 23
3.1.4 Financial Statements..................................... 23
3.1.5 Absence of Undisclosed Liabilities....................... 23
3.1.6 Taxes.................................................... 24
3.1.7 Absence of Changes....................................... 25
3.1.8 Litigation............................................... 27
3.1.9 Compliance with Laws; Governmental Approvals and
Consents; Governmental Contracts......................... 28
3.1.10 Operation of the Business................................ 28
3.1.11 Assets................................................... 28
3.1.12 Contracts................................................ 29
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3.1.13 Territorial Restrictions................................. 31
3.1.14 Inventories.............................................. 31
3.1.15 Customers................................................ 32
3.1.16 Suppliers. .............................................. 32
3.1.17 Product Warranties....................................... 32
3.1.18 Absence of Certain Business Practices.................... 33
3.1.19 Intellectual Property.................................... 33
3.1.20 Insurance................................................ 35
3.1.21 Real Property............................................ 35
3.1.22 Environmental Matters.................................... 35
3.1.23 Employees, Labor Matters, etc............................ 36
3.1.24 Employee Benefit Plans................................... 37
3.1.25 Confidentiality.......................................... 37
3.1.26 No Guarantees............................................ 37
3.1.27 Records.................................................. 37
3.1.28 Brokers, Finders, etc.................................... 37
3.1.29 Disclosure............................................... 38
3.1.30 Receivables.............................................. 38
3.1.31 Backlog.................................................. 38
3.1.32 Liabilities to Affiliates................................ 38
3.1.33 Excluded Businesses...................................... 39
3.2 Representations and Warranties of Vanstar and Buyer.............. 39
3.2.1 Corporate Status; Authorization, etc..................... 39
3.2.2 No Conflicts, etc........................................ 39
3.2.3 Litigation............................................... 39
3.2.4 Brokers, Finders, etc.................................... 40
ARTICLE IV COVENANTS........................................................ 40
4.1 Covenants of Sellers............................................. 40
4.1.1 Conduct of Business...................................... 40
4.1.2 No Solicitation.......................................... 41
4.1.3 Access and Information................................... 41
4.1.4 Public Announcements..................................... 42
4.1.5 Further Actions.......................................... 42
4.1.6 Further Assurances....................................... 42
4.1.7 Liability for Transfer Taxes............................. 43
4.1.8 Certificates of Tax Authorities.......................... 43
4.2 Covenants of Vanstar and Buyer................................... 43
4.2.1 Public Announcements..................................... 43
4.2.2 Further Actions.......................................... 44
4.2.3 Conduct of the Business.................................. 45
4.2.4 Further Assurances....................................... 45
4.2.5 Sellers' Records......................................... 45
4.2.6 Performance by Buyer..................................... 46
4.3 Use of Business Names by Buyer................................... 46
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ARTICLE V CONDITIONS PRECEDENT............................................. 46
5.1 Conditions to Obligations of Each Party.......................... 46
5.1.1 HSR Act Notification..................................... 46
5.1.2 No Injunction, etc....................................... 46
5.2 Conditions to Obligations of Buyer............................... 47
5.2.1 Representations, Performance............................. 47
5.2.2 Financing................................................ 47
5.2.3 Consents................................................. 47
5.2.4 No Material Adverse Effect............................... 47
5.2.5 Opinion of Counsel....................................... 48
5.2.6 Corporate, Other Proceedings............................. 48
5.2.7 Transfer Documents....................................... 48
5.2.8 Vendor Arrangements...................................... 48
5.2.9 COBRA Obligations........................................ 49
5.2.10 Certain Employment Arrangements........................... 49
5.2.11 Accounting Matters........................................ 49
5.3 Conditions to Obligations of Seller.............................. 49
5.3.1 Representations, Performance, etc........................ 49
5.3.2 Assumption Agreement..................................... 50
5.3.3 Opinion of Counsel....................................... 50
5.3.4 Corporate Proceedings.................................... 50
5.3.5 Consents and Approvals................................... 50
5.3.6 Collateral Agreements.................................... 50
ARTICLE VI EMPLOYEES AND EMPLOYEE BENEFIT PLANS............................. 50
6.1 Employment of Sellers' Employees................................. 50
6.2 Welfare and Benefit Plans........................................ 52
6.3 Workers Compensation............................................. 53
6.4 Employment Taxes................................................. 53
ARTICLE VII TERMINATION................................................... 53
7.1 Termination...................................................... 53
7.2 Effect of Termination............................................ 54
ARTICLE VIII NON-COMPETITION AND DELIVERY OF FINANCIAL STATEMENTS.......... 54
8.1 Non-Competition.................................................. 54
8.2 Delivery of Audited Financial Statements......................... 55
ARTICLE IX INDEMNIFICATION.................................................. 55
9.1 Indemnification By Sellers. ..................................... 55
9.2 Treatment of Sellers............................................. 56
9.3 Indemnification By Vanstar and Buyer............................. 57
9.4 Adjustments to Indemnification Payments.......................... 57
9.5 Indemnification Procedures....................................... 57
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9.6 Time Limitation.................................................. 58
9.7 Survival of Representations and Warranties, etc.................. 58
ARTICLE X MISCELLANEOUS.................................................... 59
10.1 Expenses......................................................... 59
10.2 Severability..................................................... 59
10.3 Notices.......................................................... 59
10.4 Headings......................................................... 60
10.5 Entire Agreement................................................. 60
10.6 Counterparts..................................................... 60
10.7 Governing Law, etc............................................... 60
10.8 Binding Effect................................................... 60
10.9 Assignment....................................................... 60
10.10 No Third Party Beneficiaries..................................... 61
10.11 Amendment; Waivers, etc.......................................... 61
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SCHEDULES
Schedule No.
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Excluded Assets.........................................................1.2
Additional Assumed Liabilities...................................2.9(a)(ii)
Jurisdictions of Dataflex and DSC..................................3.1.2(b)
Consents..............................................................3.1.3
Extraordinary Costs and Adjustments to
Annual Financial Statements ........................................3.1.4
Liabilities, including, Employee Vacation
Time, Vacation Pay, Severance, Etc..................................3.1.5
Contested Taxes....................................................3.1.6(a)
Extension for Period of Assessments on Taxes.......................3.1.6(b)
Assertion of Taxes Owed............................................3.1.6(c)
Litigation, Administrative Appeal of Taxes.........................3.1.6(e)
Changes Outside Ordinary Course of Business...........................3.1.7
Actions, Claim, Etc...................................................3.1.8
Compliance with Applicable Law Exception...........................3.1.9(a)
Governmental Approvals.............................................3.1.9(b)
Governmental Contracts.............................................3.1.9(c)
Business Operations Through Direct or Indirect Subsidiary............3.1.10
Permitted Liens......................................................3.1.11
Agreements, Contracts, Commitments................................3.1.12(a)
Events of Default on Contracts, Etc...............................3.1.12(c)
Territorial Restrictions.............................................3.1.13
Location of Inventories..............................................3.1.14
Customer Lists.......................................................3.1.15
Suppliers............................................................3.1.16
Warranties...........................................................3.1.17
Intellectual Property.............................................3.1.19(a)
Intellectual Property Exceptions..................................3.1.19(b)
Leased or Licensed Intellectual Property..........................3.1.19(d)
Intellectual Property Litigation..................................3.1.19(e)
Restrictions on Use of Name and Mark..............................3.1.19(g)
Insurance Policies...................................................3.1.20
Leases............................................................3.1.21(b)
Collective Bargaining Agreements.....................................3.1.23
Pension, Bonuses & Other Compensation................................3.1.24
Confidentiality Exceptions...........................................3.1.25
Guarantee Exceptions.................................................3.1.26
Receivables..........................................................3.1.30
Backlog..............................................................3.1.31
Governmental Approval and Other Consents
Required by Vanstar and/or Buyer....................................3.2.2
Operating and Applications Software................................5.2.5(b)
Material Differences in Financials ..................................5.2.11
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EXHIBITS
Exhibit A Transferred Affiliate Receivables
Exhibit B Assumption Agreement
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") dated as of May 24, 1996,
by and among VANSTAR CORPORATION, a Delaware corporation ("Vanstar"), VST WEST,
INC., a Delaware corporation and a wholly-owned subsidiary of Vanstar ("Buyer"),
DATAFLEX CORPORATION, a New Jersey corporation ("Dataflex"), and DATAFLEX
SOUTHWEST CORPORATION, an Arizona corporation and a wholly-owned subsidiary of
Dataflex ("DSC"). (Dataflex and DSC are sometimes herein referred to singularly
as a "Seller" and collectively as the "Sellers").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Sellers, Vanstar and Buyer
have determined that it would be in their respective best interests for Buyer to
acquire the Business (as hereinafter defined) from Sellers in consideration of
the payment by Buyer of the consideration provided for herein including the
assumption and discharge by Buyer of the Assumed Liabilities (as hereinafter
defined); and
WHEREAS, the respective Boards of Directors of Sellers, Vanstar and Buyer
have determined that the above described ends can be effectively accomplished by
the execution, delivery and performance of this Agreement and have authorized
the same;
NOW, THEREFORE, in consideration of the mutual promises, representations
and warranties herein contained, and on the terms and subject to the conditions
herein set forth, the parties hereto agree as follows:
ARTICLE I SALE AND PURCHASE OF THE ASSETS; DEFINITIONS
1.1 ASSETS. Subject to and upon the terms and conditions set forth in
this Agreement, at the Closing, Sellers will sell, transfer, convey, assign and
deliver to Buyer, and Buyer will purchase or acquire from Sellers all right,
title and interest of each Seller in and to all the properties, assets and
rights of every nature, kind and description, tangible and intangible (including
goodwill), whether real, personal or mixed, whether accrued, contingent or
otherwise, owned or leased by each Seller or otherwise used or useable by either
Seller in or with respect to the Business as of the Cut-off Date, or acquired by
either Seller or any of their Affiliates between the Cut-off Date and the
Closing, whether or not described or referred to herein and which are used in or
with respect to the Business (all of which, other than the Excluded Assets, are
hereinafter collectively referred to as the "Assets"), including, without
limitation, all those items in the following categories that conform to the
definition of the term "Assets":
(a) all fixed assets, equipment, furniture, furnishings, vehicles,
tools, and similar property (including, but not limited to, any residual
values under leases or similar arrangements relating to any of the
foregoing);
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(b) all inventories of raw materials, work in process, finished
products, goods, Spare Parts, office and other supplies, including any of
such of inventories held at any location controlled by either Seller or at
any other location (pursuant to conditional sales agreements, consignment
arrangements or in any bailment or otherwise) and any such items previously
purchased and in transit to either Seller at any such locations (the
"Inventories");
(c) all replacements, components, devices, equipment and other
similar items owned or held by either Seller for use in connection with the
repair, replacement, modification, customization or installation of goods
and products applicable to the Business ("Spare Parts");
(d) all rights in and to products sold or leased by either Seller
(including, but not limited to, products hereafter returned or repossessed
and unpaid Sellers' rights of rescission, replevin, reclamation and rights
to stoppage in transit);
(e) all of the rights of each Seller under all contracts,
arrangements, licenses, leases and other agreements, including, without
limitation, any right to receive payment for products sold or services
rendered, and to receive goods and services, pursuant to such agreements
and to assert claims and take other rightful actions in respect of
breaches, defaults and other violations of such contracts, arrangements,
licenses, leases and other agreements and otherwise;
(f) all cash, deposits in transit, credits, prepaid expenses,
deferred charges, advance payments, security deposits and prepaid items;
(g) all notes and accounts receivable held by either Seller or of
which either Seller is the beneficial holder and all notes, bonds and other
evidences of indebtedness of and rights to receive payments from any Person
held by either Seller ("Accounts Receivable"), including, also, any amounts
owing to either of the Sellers from vendors of goods and products used in
the Business resulting from discounts for prompt payment, volume discounts,
promotional programs or similar vendor special pricing and term
arrangements ("Vendor Receivables");
(h) all Intellectual Property and all rights thereunder or in respect
thereof primarily relating to or used or held for use in connection with
the Business (other than the name "Dataflex" and related service marks,
trademarks and trade names specifically set forth in the Excluded Assets),
including, but not limited to, rights to enforce and remedies against past,
present and future infringements thereof, and rights of priority and
protection of interests therein under the laws of any jurisdiction
worldwide and all tangible embodiments thereof, together with all
Intellectual Property rights included in the other clauses of this Section
1.1 (the "Intellectual Property Assets");
(i) all books, records, manuals and other materials (in any form or
medium) other than the originals of Sellers' corporate minute books and
similar records (copies
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of which will be provided to Vanstar and Buyer), including, without
limitation, all records and materials maintained at the headquarters of
either Seller, advertising matter, catalogues, price lists, correspondence,
mailing lists, lists of customers, customer files and customer credit
histories, distribution lists, photographs, production data, sales and
promotional materials and records, purchasing materials and records,
contract forms, technical data, graphic materials, drawings, designs,
personnel records, salary records, manufacturing and quality control
records and procedures, blueprints, research and development files,
records, data and laboratory books, Intellectual Property disclosures,
media materials and plates, accounting records, sales order files and
litigation files, but not including the books, records, names and other
materials which relate solely to the "Dataflex" name and other related
service marks, trademarks and trade names expressly set forth in the
Excluded Assets);
(j) to the extent their transfer is permitted by law, all
Governmental Approvals, including all applications therefor, if any;
(k) all rights to causes of action, lawsuits, judgments, claims and
demands of any nature available to or being pursued by either Seller with
respect or relating to the Business or the ownership, use, function or
value of any Asset (other than the Excluded Assets and Excluded
Liabilities), whether arising by way of counterclaim or otherwise; and
(l) all guarantees, warranties, indemnities and similar rights in
favor of either Seller with respect to any Asset.
Subject to the terms and conditions hereof, at the Closing, the Assets
shall be transferred or otherwise conveyed to Buyer free and clear of all
liabilities, obligations, liens and encumbrances, excepting only Assumed
Liabilities, Liens listed on Schedule 3.1.11, and Permitted Liens.
1.2 EXCLUDED ASSETS. Sellers will retain and not transfer, and Buyer will
not purchase or acquire (i) the assets and liabilities specifically described on
Schedule 1.2 identified as relating to Sellers' Valtron Business and Onyx
Business (ii) any and all Affiliate Receivables (other than those set forth on
Exhibit A hereto, which shall be transferred to Buyer as part of the Assets),
and (iii) the other assets specifically described on Schedule 1.2 (collectively,
the "Excluded Assets").
1.3 DEFINITION OF CERTAIN TERMS. The terms defined in this Section 1.3,
whenever used in this Agreement (including in the Schedules), shall have the
respective meanings indicated below for all purposes of this Agreement. All
references herein to a Section, Article or Schedule are to a Section, Article or
Schedule of or to this Agreement, unless otherwise indicated.
ACCEPTED SPARE PARTS: shall mean the Spare Parts which Vanstar and
Buyer, after consultation with Sellers, reasonably believe will be utilized
in connection with Vanstar's and Buyer's conduct of the Business prior to
the 270th day following the
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Closing Date, as determined by Vanstar and Buyer promptly following the
Closing, as provided in Section 2.3. In making the determination called
for with regard to Accepted Spare Parts, to the extent that Sellers shall
be unable to provide records regarding "run rates" or historical
utilization of Spare Parts in connection with the Business, the parties
agree to utilize Vanstar's records with regard thereto or Vanstar's good
faith estimates thereof, in any event in consultation with Sellers.
ACCOUNTS RECEIVABLE: as defined in Section 1.1.
AFFILIATE: of a Person means a Person that directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first Person. "Control" (including the terms
"controlled by" and "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management policies of a Person, whether through the ownership of
voting securities, by contract or credit arrangement, as trustee or
executor, or otherwise.
AFFILIATE RECEIVABLES: any account or note receivable owing by
Dataflex to DSC or by DSC to Dataflex or otherwise relating to any
intercompany obligations among Dataflex and its Affiliates, and any account
or note receivable or other payment obligation of any officer, director,
employee or Affiliate of either of the Sellers.
AGREEMENT: this Asset Purchase Agreement, including the Schedules
hereto.
ANNUAL FINANCIAL STATEMENTS: as defined in Section 3.1.4.
APPLICABLE LAW: all applicable provisions of all (i) constitutions,
treaties, statutes, laws (including the common law), rules, regulations,
ordinances, codes or orders of any Governmental Authority, (ii)
Governmental Approvals and (iii) orders, decisions, injunctions, judgments,
awards and decrees of or agreements with any Governmental Authority.
AR ADJUSTMENT AMOUNT: as defined in Section 2.5.
ASSETS: as defined in Section 1.1.
ASSUMED LIABILITIES: as defined in Section 2.9.
ASSUMPTION AGREEMENT: as defined in Section 2.9.
AVAILABLE FOR SALE: shall mean Inventory (other than Spare Parts)
held in the ordinary course for sale to the public with the expectation,
determined by Vanstar and Buyer, after consultation with Sellers, promptly
following the Closing as provided in Section 2.3, that such Inventory will
be sold, subject to existing economic and market conditions in the normal
course of business and that no part of such inventory consists of obsolete
items, items no longer being produced by the manufacturer thereof or items
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representing an earlier version of a product which has been the subject of
modifications, material fixes, a subsequent version release or intervening
model.
BUSINESS: the business acquired or to be acquired by Buyer pursuant
to this Agreement, consisting of the Assets, and the Assumed Liabilities
(but not including the Excluded Assets and Excluded Liabilities), and which
may be more particularly described as certain of the business operations of
Dataflex and all of the business operations of DSC, commonly referred to as
the Dataflex Western Region and Dataflex Southwest Region businesses,
including all of the business operations which have been conducted by DSC
since its formation and the similar type of business operations conducted
directly by Dataflex in the Business Territory involving generally the sale
of goods, or the provision of services (including repair and maintenance
services), relating to, personal computers, client servers, computer
networks, communication equipment, other equipment relating thereto, such
as computer monitors and peripherals and other individual components,
operating systems and applications software and other software (including
software created for use on the internet) created for use in tie-in
arrangements, customer service and internal management systems for sales,
delivery and support.
BUSINESS DAY: shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required
to close.
BUSINESS FINANCIAL STATEMENTS: as defined in Section 3.1.4.
BUSINESS TERRITORY: shall mean the states of Arizona, California,
Colorado, New Mexico, Nevada and Utah.
BUYER: as defined in the preamble of this Agreement.
BUYER INDEMNITEES: as defined in Section 9.1.
BUYER'S ACCOUNTANTS: Ernst & Young.
CERCLA: the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. 9601 ET SEQ.
CLOSING: the Closing as defined in Section 2.1.
CLOSING DATE: as defined in Section 2.1.
CLOSING DATE PAYMENT: as defined in Section 2.2.1
CODE: the Internal Revenue Code of 1986, as amended.
COLLATERAL AGREEMENTS: the agreements and other documents and
instruments described in Sections 5.2.8 and the Escrow Agreement.
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CONSENT: any consent, approval, authorization, waiver, permit, grant,
franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice
to, any Person, including but not limited to any Governmental Authority.
CONTRACT: as defined in Section 3.1.12(a).
COVERED RETURNS: as defined in Section 3.1.6.
COVERED TAXES: as defined in Section 3.1.6.
CUT-OFF DATE BALANCE SHEET: as defined in Section 3.1.4.
CUT-OFF DATE: March 31, 1996.
DATAFLEX: as defined in the Preamble of this Agreement.
DETERMINATION DATE: May 31, 1996.
DISCONTINUED WITH CURRENT ORDERS: shall mean Inventory (other than
Spare Parts) not meeting the definition of Available for Sale but for which
either of the Sellers has firm purchase orders or binding contracts for
sale thereof with unaffiliated third parties, as determined by Vanstar and
Buyer at the Closing.
DISCONTINUED WITH NO DEMAND shall mean Inventory (other than Spare
Parts) which does not constitute Available for Sale and with regard to
which none of Vanstar, Buyer or either of the Sellers has firm purchase
orders or contractual commitments, as determined by Vanstar and Buyer
promptly following the Closing, as provided in Section 2.3.
DSC: as defined in the Preamble of this Agreement.
EMPLOYEE BENEFIT PLAN: as defined in Section 3.1.24.
ENVIRONMENTAL LAWS: all Applicable Laws relating to the protection of
the environment, to human health and safety, or to any emission, discharge,
generation, processing, storage, holding, abatement, existence, Release,
threatened Release or transportation of any Hazardous Substances,
including, without limitation, (1) CERCLA, the Resource Conservation and
Recovery Act, and the Occupational Safety and Health Act, (ii) all other
requirements pertaining to reporting, licensing, permitting, investigation
or remediation of emissions, discharges, releases or threatened releases of
Hazardous Materials into the air, surface water, ground water or land, or
relating to the manufacture, processing, distribution, use, sale,
treatment, receipt, storage, disposal, transport or handling of Hazardous
Substances, and (iii) all other requirements pertaining to the protection
of the health and safety of employees or the public.
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ENVIRONMENTAL LIABILITIES AND COSTS: all Losses, whether direct or
indirect, known or unknown, current or potential, past, present or future,
imposed by, under or pursuant to Environmental Laws, including, without
limitation, all Losses related to Remedial Actions, and all fees,
disbursements and expenses of counsel, experts, personnel and consultants
based on, arising out of or otherwise in respect of: (i) the ownership or
operation of the Business, the Leased Real Property or any other real
properties, assets, equipment or facilities, by either Seller, or any of
their predecessors or Affiliates; (ii) the environmental conditions
existing on the Closing Date on, under, above, or about any Leased Real
Property or any other real properties, assets, equipment or facilities
currently or previously owned, leased or operated by either Seller, or any
of their predecessors or Affiliates; and (iii) expenditures necessary to
cause any Leased Real Property or any aspect of the Business to be in
compliance with any and all requirements of Environmental Laws as of the
Closing Date, including, without limitation, all Environmental Permits
issued under or pursuant to such Environmental Laws, and reasonably
necessary to make full economic use of any Leased Real Property.
ENVIRONMENTAL PERMITS: any federal, state and local permit, license,
registration, consent, order, administrative consent order, certificate,
approval or other authorization with respect to either Seller necessary for
the conduct of the Business as currently conducted or previously conducted
under any Environmental Law.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
ESCROW AGENT: as defined in Section 2.6.
ESCROW AGREEMENT: as defined in Section 2.6.
EXCLUDED ASSETS: as defined in Section 1.2.
EXCLUDED LIABILITIES: as defined in Section 2.10.
EXPECTED CLOSING DATE: May 24, 1996.
FINANCIAL STATEMENTS: as defined in Section 3.1.4.
GAAP: generally accepted accounting principles as in effect in the
United States as of the date of any application thereof.
GOVERNMENTAL APPROVAL: any Consent of, with or from any Governmental
Authority.
GOVERNMENTAL AUTHORITY: any nation or government, any state or other
political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, without limitation, any government
authority, agency, department, board, commission or instrumentality of
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the United States, any State of the United States or any political
subdivision thereof, and any tribunal or arbitrator(s) of competent
jurisdiction, and any self-regulatory organization.
HAZARDOUS SUBSTANCES: any substance that: (i) is or contains
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum or petroleum-derived substances or wastes, radon gas or related
materials (ii) requires investigation, removal or remediation under any
Environmental Law, or is defined, listed or identified as a "hazardous
waste" or "hazardous substance" thereunder, or (iii) is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or
otherwise hazardous and is regulated by any Governmental Authority or
Environmental Law.
HSR ACT: the Hart-Scott-Rodino Anti-trust Improvements Act of 1976,
as amended.
IBM CREDIT: IBM Credit Corp.
IBM LIABILITIES: any debts or liabilities owed by Sellers, or either
of them, under the Inventory and Working Capital Financing Agreement
between Dataflex and IBM Credit or the Inventory and Working Capital
Financing Agreement between IBM Credit and DSC, in each case dated as of
December 28, 1994, as amended.
INDEMNITY BASKET: as defined in Section 2.7.
INDEMNIFIED PARTY: as defined in Section 9.5.
INDEMNIFYING PARTY: as defined in Section 9.5.
INTELLECTUAL PROPERTY: except to the extent specifically included in
Schedule 1.2 as part of the Excluded Assets, any and all United States and
foreign: (a) patents (including reexaminations, design patents, industrial
designs and utility models) and patent applications (including docketed
patent disclosures awaiting filing, provisional applications, reissues,
divisions, continuations, continuations-in-part and extensions), patent
disclosures awaiting filing determination, inventions and improvements
thereto; (b) trademarks, service marks, trade names, trade dress, logos,
business and product names, slogans, and registrations and applications for
registration thereof; (c) copyrights (including software) and registrations
thereof but excluding the Sellers' names, and also excluding all of
Sellers' rights, title and interests in and otherwise with respect to
Sellers' "Flex Direct Catalogue"; (d) inventions, processes, designs,
formulae, trade secrets, know-how, industrial models, confidential and
technical information, manufacturing, engineering and technical drawings,
product specifications and confidential business information; (e) mask work
and other semiconductor chip rights and registrations thereof; (f)
intellectual property rights similar to any of the foregoing; (g) copies
and tangible embodiments thereof (in whatever form or medium, including
electronic media).
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INTELLECTUAL PROPERTY ASSETS: as defined in Section 1.1.
INVENTORIES: as defined in Section 1.1.
INVENTORY DIFFERENCE: as defined in Section 2.5(a).
IRS: the Internal Revenue Service.
LEASED REAL PROPERTY: means all interests leased pursuant to the
Leases.
LEASES: means the real property leases, subleases, licenses and
occupancy agreements pursuant to which the respective Seller is the lessee,
sublessee, licensee or occupant which relate to or are being used in the
Business and which are described on Schedule 3.1.21(b).
LIEN: any mortgage, pledge, hypothecation, right of others, claim,
security interest, encumbrance, lease, sublease, license, occupancy
agreement, adverse claim or interest, easement, covenant, encroachment,
burden, title defect, title retention agreement, voting trust agreement,
interest, equity, option, lien, right of first refusal, charge or other
restrictions or limitations of any nature whatsoever, including but not
limited to such as may arise under any Contracts.
LOSSES: as defined in Section 9.1.
MARKED MATERIALS: as defined in Section 4.3.
MATERIAL ADVERSE EFFECT: with regard to any Person, any event,
occurrence, fact, condition, change or effect that individually or in the
aggregate with similar events, occurrences, facts, conditions, changes or
effects will or can reasonably be expected to result in a cost, expense,
charge, liability, loss of revenue or diminution in value equal to or
greater than $100,000.
MAXIMUM LIABILITY: shall mean an amount equal to the stated
liabilities of the Business incurred in the ordinary course, other than the
IBM Liabilities, as properly reflected in the balance sheet constituting a
part of the Net Worth Report.
NATIONAL ACCOUNT: as defined in Section 8.1(b).
NET VALUE: shall mean, with regard to any asset or asset class, the
value assigned thereto on the books and records of the Business, giving
effect to any asset or asset class specific reserves for discounts applied,
bad debts, shrinkage, obsolescence or the like, as applicable.
NET WORTH REPORT: as defined in Section 2.5(d) hereof.
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ONYX AGREEMENT: the agreement between Tony Goolsby and Dataflex dated
as of June __ [date unspecified], 1994 pursuant to which such parties
conduct the Onyx Business.
ONYX BUSINESS: the business being conducted by Sellers in conjunction
with Tony Goolsby pursuant to the Onyx Agreement.
ONYX RECEIVABLES: the accounts receivable and other payments owing to
either Seller by Tony Goolsby (or any of his Affiliates) and/or the Onyx
Business, aggregating approximately $1,350,000 as of the Cut-off Date, and
constituting part of the assets to be retained by Sellers as part of the
Excluded Assets.
OPEN BOX ITEMS: shall mean all items of Inventory (other than Spare
Parts) which are incomplete, damaged, the packing material of which has
been damaged, scratched or opened, or any product which has been returned
to either Seller by a purchaser, as determined by Vanstar and Buyer
promptly following the Closing, as provided in Section 2.3.
OWNED INTELLECTUAL PROPERTY: as defined in Section 3.1.19(a).
PERMITTED LIENS: Liens reserved against in the Cut-off Date Balance
Sheet, to the extent so reserved and to the extent relating exclusively to
the Assumed Liabilities, or as otherwise set forth on Schedule 3.1.11.
PERSON: any natural person, firm, partnership, association,
corporation, company, limited liability company, limited partnership,
trust, business trust, Governmental Authority or other entity.
REJECTED INVENTORY: shall mean items of Inventory (other than Spare
Parts) classified as Discontinued With No Demand and Open Box Items.
REJECTED SPARE PARTS: shall mean any Spare Parts other than Accepted
Spare Parts.
RELEASE: any releasing, disposing, discharging, injecting, spilling,
leaking, leaching, pumping, dumping, emitting, escaping, emptying, seeping,
dispersal, migration, transporting, placing and the like, including without
limitation, the moving of any materials through, into or upon, any land,
soil, surface water, ground water or air, or otherwise entering into the
environment.
REMEDIAL ACTION: all actions required to (i) clean up, remove, treat
or in any other way remediate any Hazardous Substances; (ii) prevent the
release of Hazardous Substances so that they do not migrate or endanger or
threaten to endanger public health or welfare or the environment; or (iii)
perform studies, investigations and care related to any such Hazardous
Substances.
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SECURITY: as defined in Section 3.1.30.
SECURITIES ACTS: as defined in Section 8.2.
SELLERS: as defined in the preamble of this Agreement.
SELLERS' ACCOUNTANTS: Price Waterhouse LLP
SELLER INDEMNITEES: as defined in Section 9.3.
SPARE PARTS: as defined in Section 1.1.
STATEMENT OF NET ASSETS SOLD: as defined in Section 3.1.4.
STAY BONUS: as defined in Section 6.1(e).
SUBSIDIARIES: each corporation or other Person in which a Person owns
or controls, directly or indirectly, capital stock or other equity
interests representing at least 50% of the outstanding voting stock or
other equity interests or conferring the power to name a majority of the
members of the Board of Directors or other governing body or otherwise
direct the management or policies thereof.
TANGIBLE NET WORTH: means, with regard to any determination thereof,
total assets (excluding intangible assets) less total liabilities of the
Business, other than the IBM Liabilities, determined in accordance with
GAAP.
TAX: any federal, state, provincial, local, foreign or other income,
alternative, minimum, accumulated earnings, personal holding company,
franchise, capital stock, net worth, capital, profits, windfall profits,
gross receipts, value added, sales, use, goods and services, excise,
customs duties, transfer, conveyance, mortgage, registration, stamp,
documentary, recording, premium, severance, environmental (including taxes
under Section 59A of the Code), real property, personal property, ad
valorem, intangibles, rent, occupancy, license, occupational, employment,
unemployment insurance, social security, disability, workers' compensation,
payroll, health care, withholding, estimated or other similar tax, duty or
other governmental charge or assessment or deficiencies thereof (including
all interest and penalties thereon and additions thereto whether disputed
or not).
TAX RETURN: any return, report, declaration, form, claim for refund
or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
TRANSACTION EXPENSES: as defined in Section 10.1.
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TRANSFERRED EMPLOYEES: as defined in Section 6.1(b).
TRANSFER TAXES: as defined in Section 4.1.7.
TRANSITION EMPLOYEES: as defined in Section 6.1(c).
TRANSITION PERIOD: as defined in Section 6.1(c).
UNCOLLECTED ACCOUNTS RECEIVABLE: shall mean all Accounts Receivable
(other than Vendor Receivables) remaining uncollected which Vanstar and
Buyer, after consultation with Sellers, designate as uncollectible and
subject to Section 2.5(b).
UNCOLLECTED VENDOR RECEIVABLES: shall mean all Vendor Receivables
remaining uncollected which Vanstar and Buyer, after consultation with
Sellers, designate as uncollectible and subject to Section 2.5(c).
VALTRON BUSINESS: the assets and liabilities relating solely to the
business of Sellers commonly known as the "Valtron" business and being more
specifically described in Schedule 1.2 hereof.
VALTRON RECEIVABLES: the accounts receivable and other amounts owing
to either of the Sellers with respect to the Valtron Business, aggregating
approximately $1,900,000 on the Cut-off Date and constituting part of the
Valtron Business to be retained by Sellers as part of the Excluded Assets.
VANSTAR: as defined in the Preamble of this Agreement.
VANSTAR CLAIMS: as defined in Section 2.6.
VALUATION: as defined in Section 2.4.
VENDOR RECEIVABLES: as defined in Section 1.1.
VR ADJUSTMENT AMOUNT: as defined in Section 2.5(c).
WITHHOLDING TAXES: as defined in Section 3.1.6(a).
ARTICLE II THE CLOSING
2.1 PLACE AND DATE. The closing of the sale and purchase of the Assets
(the "Closing") shall take place at 10:00 A.M. local time on the 24th day of
May, 1996 at the offices of Arter & Hadden in Dallas, Texas, or at such other
time and place as the parties may agree. The Closing shall be deemed effective
as of 11:59 p.m., Friday, May 24, 1996. The day on which the Closing actually
occurs is herein sometimes referred to as the "Closing Date."
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2.2 PURCHASE PRICE. On the terms and subject to the conditions set forth
in this Agreement, Buyer agrees to assume and timely discharge the Assumed
Liabilities as provided in Section 2.9 and to pay to or on behalf of Sellers the
amounts set forth in this Section 2.2.
2.2.1 CLOSING DATE PAYMENT. On the Closing Date, Vanstar and
Buyer shall pay to or on behalf of Sellers an amount (the "Closing Date
Payment") equal to $5,000,000 plus the Tangible Net Worth of the Business
as of the Cut-off Date, for a total Closing Date Payment of $36,901,750.
2.2.2 CERTAIN ADDITIONAL POTENTIAL PAYMENTS. Following the
Closing Date, Vanstar and Buyer shall make the payments to Sellers, if any,
that may be required by the provisions contained in Section 2.5 and 2.6.
2.2.3 PAYMENT TO IBM CREDIT. Sellers hereby irrevocably authorize
and instruct Vanstar and Buyer to pay the entire Closing Date Payment and
any payments due Sellers pursuant to the Escrow Agreement or Section 2.5 or
2.6 directly to IBM Credit (and Sellers acknowledge and agree that such
payment to IBM Credit shall be deemed to constitute full performance by
Vanstar and Buyer of their obligations to make the Closing Date Payment and
any payments due Sellers pursuant to the Escrow Agreement or Section 2.5 or
2.6 to Sellers hereunder or pursuant hereto for all purposes), with
instructions to apply same to Sellers' account with IBM Credit. Although
the parties have agreed as to the payment of certain cash to IBM Credit, it
is not the intent of the parties to make IBM Credit a third party
beneficiary of this Agreement or to confer any benefit under this Agreement
to IBM Credit. Without limiting the generality of the foregoing, neither
Vanstar nor Buyer assumes any obligations to IBM Credit arising from this
Agreement or any indebtedness of either Seller to IBM Credit and no notice
to or consent of IBM Credit shall be required for any modification,
amendment or termination of this Agreement.
2.3 DESIGNATION OF INVENTORY COMPONENTS. Promptly following the Closing,
Vanstar, Buyer and Sellers shall complete a review of the Inventory (including
Spare Parts) constituting a part of the Assets and Vanstar and Buyer shall
designate each item or group of items as:
(a) With regard to Inventory (other than Spare Parts), either
(1) Available for Sale, (2) Discontinued with Current Orders, (3) Open
Box Items or (4) Discontinued with No Demand; and
(b) With regard to Spare Parts, either (1) Accepted Spare Parts
or (2) Rejected Spare Parts.
2.4 VALUATION OF ASSET COMPONENTS. For the purposes of this Article II,
Buyer shall, at the time or times required herein, obtain a valuation (the
"Valuation") of one or more components of the Assets. With regard to any such
Valuation, at the times required in this Article II, Buyer shall first attempt
to reach an agreement with Sellers with respect thereto and
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failing such agreement shall either (i) secure an offer to purchase the
applicable Asset from a Person other than an Affiliate of Vanstar, Buyer or
either Seller or (ii) cause a Person having experience in valuing the property
or rights who is not an Affiliate of Vanstar, Buyer or either Seller to be so
valued to render an opinion regarding the fair market value of such property or
right, assuming an orderly liquidation in bulk, without warranty other than as
to title thereof, and without giving any consideration or value to good will
associated with the Business or any value which might be the result of the
combination of such property or rights with any other property or rights. The
Valuation shall assign a dollar value to the rights or property in question and
shall be in writing. Any Person rendering a Valuation shall be required to
exercise ordinary care in doing so, but shall otherwise have no liability to
Vanstar, Buyer or either Seller and none of Vanstar, Buyer or either of the
Sellers shall make any claim against any such Person arising from this Agreement
or any Valuation obtained hereunder.
2.5 EFFECT OF VALUATIONS, RETURN OF CERTAIN ASSETS.
(a) Not later than forty-five (45) days following the Closing
Date, Buyer shall obtain and provide Sellers with prompt notice of a
Valuation (as of the date made) of each of the Inventory and the Spare
Parts designated by Buyer as Rejected Inventory and Rejected Spare
Parts, together with a computation of the Inventory Difference. The
"Inventory Difference" shall be the difference, between the aggregate
Net Value of the Rejected Inventory and Rejected Spare Parts as of the
Determination Date and the aggregate of the Valuations thereof. Not
later than ten (10) days following receipt of the notice called for in
the first sentence of this Section 2.5(a), Sellers shall notify
Vanstar and Buyer of their election to either (i) pay Buyer in cash an
amount equal to the Net Value as of the Determination Date of the
Rejected Inventory and the Rejected Spare Parts and receive a
conveyance of the Rejected Inventory and the Rejected Spare Parts or
(ii) pay Buyer in cash an amount equal to the Inventory Difference
(and Buyer shall retain the Rejected Inventory and Rejected Spare
Parts). To the extent that Section 2.5(e) shall not have otherwise
required allocation thereof, Sellers may apply amounts to become due
them from Vanstar and Buyer thereunder to Sellers' obligations under
this Section 2.5(a). Failure by Sellers to so notify Vanstar and
Buyer of their election shall constitute an election to pay an amount
equal to the Inventory Difference and apply amounts due under
Section 2.5(e), to the extent available in partial satisfaction of
such payment obligation. Any cash received by Buyer with respect to
Rejected Inventory or Rejected Spare Parts following the date of the
Valuation thereof and prior to consummation of the transaction
contemplated in this subsection shall be held by Buyer for the benefit
of (or credit to) the party entitled to receive or retain the Rejected
Inventory and Rejected Spare Parts in accordance with this Section
2.5(a).
(b) Not later than ninety (90) days after the Closing Date,
Buyer shall obtain and provide Sellers with prompt notice of a
Valuation (as of the date made) of each of the Accounts Receivable
designated by Buyer as an Uncollected Account Receivable together with
a computation of the AR Adjustment Amount
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with respect thereto. The "AR Adjustment Amount" shall be the
difference, between the Net Value of the Uncollected Accounts
Receivable as of the Determination Date and the Valuation thereof. If
the aggregate Net Value of the Uncollected Accounts Receivable as of
the Determination Date is less than the aggregate Valuations thereof,
Vanstar and Buyer shall, within ten (10) days following the notice
called for in the preceding sentence, pay cash in an amount equal to
the AR Adjustment Amount to Sellers and Buyer shall retain the
Uncollected Accounts Receivable. If the aggregate Net Value of the
Uncollected Accounts Receivable as of the Determination Date is more
than the aggregate Valuation thereof, then, in such event, not later
than ten (10) days after receiving the notice called for in the first
sentence of this Section 2.5(b), Sellers shall notify Vanstar and
Buyer of their election to (i) pay Buyer in cash an amount equal to
the Net Value as of the Determination Date of the Uncollected Accounts
Receivable and receive from Buyer an assignment of the Uncollected
Accounts Receivable, free and clear of any liens, claims or
encumbrances resulting solely from the actions of Vanstar or Buyer or
(ii) pay Buyer in cash an amount equal to the AR Adjustment Amount
(and Buyer shall retain the Uncollected Accounts Receivables). To the
extent that Section 2.5(e) shall not have otherwise required
allocation thereof, Sellers may apply amounts to become due them from
Vanstar and Buyer thereunder to Sellers' obligations under this
Section 2.5(b). Failure by Sellers to so notify Vanstar and Buyer of
their election shall constitute an election to pay the AR Adjustment
Amount and apply amounts due under Section 2.5(e), to the extent
available, in partial satisfaction of such payment obligations. Any
cash payment received by Buyer with respect to any Uncollected
Accounts Receivable following the date of the Valuation thereof and
prior to consummation of the transaction contemplated in this
subsection shall be held by Buyer for the benefit of (or credit to)
the party entitled to receive or retain such Uncollected Account
Receivable in accordance with this Section 2.5(b).
(c) Not later than one hundred fifty (150) days following the
Closing Date, Buyer shall obtain and provide Sellers with prompt
notice of a Valuation (as of the date made) of each of the Vendor
Receivables designated by Buyer as an Uncollected Vendor Receivable
together with a computation of the VR Adjustment Amount. The "VR
Adjustment Amount" shall be the difference, if it is a positive
number, between the Net Value of the Uncollected Vendor Receivables as
of the Determination Date and the Valuation thereof. If the aggregate
Net Value of the Uncollected Vendor Receivables as of the
Determination Date is less than the aggregate Valuations thereof,
Vanstar and Buyer shall, within ten (10) days following the notice
called for in the preceding sentence, pay cash in an amount equal to
the VR Adjustment Amount to Sellers and Buyer shall retain the
Uncollected Vendor Receivables. If the aggregate Net Value of the
Uncollected Vendor Receivables on the Determination Date is more than
the aggregate Valuation thereof, then, in such event, not later than
ten (10) days after receiving the notice called for in the first
sentence of this Section
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2.5(c), Sellers shall notify Vanstar and Buyer of their election to
(i) pay Buyer in cash an amount equal to the Net Value as of the
Determination Date of the Uncollected Vendor Receivables and receive
from Buyer an assignment of the Uncollected Vendor Receivables, free
and clear of any liens, claims or encumbrances resulting solely from
the actions of Vanstar or Buyer or (ii) pay Buyer in cash an amount
equal to the VR Adjustment Amount (and Buyer shall retain the
Uncollected Vendor Receivables). To the extent that Section 2.5(e)
shall not have otherwise required allocation thereof, Sellers may
apply amounts to become due them from Vanstar and Buyer thereunder to
Sellers' obligations under this Section 2.5(c). Failure by Sellers to
so notify Vanstar and Buyer of their election shall constitute an
election to pay the VR Adjustment Amount and apply amounts due under
Section 2.5(e), to the extent available in partial satisfaction of
such payment allocation. Any cash payment received by Buyer with
respect to any Uncollected Vendor Receivable following the date of the
Valuation thereof and prior to consummation of the transaction
contemplated in this subsection shall be held by Buyer for the benefit
of (or credit to) the party entitled to receive or retain such
Uncollected Vendor Receivable in accordance with this Section 2.5(c).
(d) Within sixty (60) days following the Closing Date, Sellers'
Accountants shall furnish Buyer, Vanstar and Sellers with a report
(the "Net Worth Report"), which shall set forth, in reasonable detail,
the Tangible Net Worth of the Business on the Determination Date. In
making such determination, Sellers' shall prepare a balance sheet for
the Assets and the Assumed Liabilities as of the Determination Date
audited by Sellers' Accountants and shall include such audited balance
sheet, and their report thereon, as part of the Net Worth Report. The
Net Worth Report shall indicate the procedures employed by Sellers'
Accountants in preparing the Net Worth Report and shall contain such
other financial information and methods of calculation as may be
reasonably necessary for Sellers to evaluate the accuracy thereof.
Vanstar and Buyer shall have a period of ten (10) days after receipt
of the Net Worth Report to notify Sellers of their election to accept
or reject (and in the case of a rejection, there shall be included in
such notice the reasons for such rejection in reasonable detail) the
Net Worth Report. In the event no notice is received by Sellers
during such ten (10) day period, the Net Worth Report and any required
adjustments resulting therefrom shall be deemed accepted by Vanstar
and Buyer. In the event Vanstar and Buyer shall timely reject the Net
Worth Report, Sellers' Accountants and Buyers' Accountants shall
promptly (and in any event within thirty (30) days following the date
upon which Sellers shall reject the Net Worth Report), attempt to make
a joint determination of the Tangible Net Worth of the Business on the
Determination Date and such determination and any required adjustments
resulting therefrom shall be final and binding on the parties hereto.
In the event Sellers' Accountants and Buyers' Accountants shall be
unable to agree upon the required Tangible Net Worth determination as
herein provided, within 120 days from the Closing Date, such
determination shall be made by KPMG Peat
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Marwick at or prior to the expiration of 150 days from the Closing
Date and such determination and any required adjustments resulting
therefrom shall be final and binding on all the parties hereto. In
making the calculation of the Tangible Net Worth of the Business on
the Determination Date, as herein contemplated, calculations shall be
made in such a manner as to give effect to, and so as to not create an
additional deduction from or addition to the Assets for the
adjustments being made under Sections 2.5(a), (b) and (c) above and
shall properly reflect the costs to Vanstar and Buyer with respect to
the Transferred Employees and Transition Employees and similar
expenses for the period between the Closing and the Determination Date
which would otherwise have been borne by Sellers during such period
and shall reflect, as a liability, any portion of the IBM Liabilities
assumed by Vanstar or Buyer pursuant to Section 2.9(i)(F) hereof. If
the Tangible Net Worth of the Business on the Cut-off Date shall
exceed the Tangible Net Worth of the Business on the Determination
Date, the amount of such difference, if any, as finally determined in
accordance with the provisions of this Section 2.5(d), shall represent
a Loss to Vanstar and Buyer hereunder and shall be payable by Sellers
to Vanstar and Buyer as an adjustment to the purchase price. If the
Tangible Net Worth of the Business on the Determination Date shall
exceed the Tangible Net Worth on the Cut-off Date, an amount equal to
the amount of such difference, if any, as finally determined in
accordance with this Section 2.5(d) shall be paid by Vanstar and Buyer
as an adjustment to the purchase price. Payment of any amounts due
Vanstar and Buyer or Sellers with respect to the differences in the
Tangible Net Worth of the Business on the Cut-off Date and the
Tangible Net Worth of the Business on the Determination Date, as
determined hereunder, shall be made within ten (10) days of Vanstar's
and Buyer's acceptance of the Net Worth Report.
(e) Subject to any claims Vanstar and Buyer may have as of such
date under Section 9.1 with respect to Losses in excess of $3,000,000
in the aggregate, and subject to any application by Sellers first
under Section 2.5(a) and then under Section 2.5(b) and (c), in that
order, Sellers shall be entitled to an additional cash payment or
credit, as the case may be, equal to $2,000,000, which shall be
payable or credited by Buyer, as the case may be, from the amounts
under the Escrow Agreement at the time the adjustments, if any,
required by Section 2.5(d) are made.
(f) Any payments required to be made by Sellers hereunder may at
the election of Sellers under this Section 2.5 be treated as
reductions of the Indemnity Basket in accordance with Section 2.7
hereof up to the total amount of such entitlement ($600,000). To the
extent any such reductions are made and Losses or any other amounts
for which Vanstar and Buyer are owed indemnity under Article IX,
together with any other credits or adjustments to which Vanstar or
Buyer shall be entitled hereunder, shall exceed the amount remaining
in the Indemnity Basket, Sellers shall immediately upon demand
reimburse Vanstar and Buyer therefor.
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2.6 ESCROW AGREEMENT. Subject to Sellers' obligations to pay amounts to
Vanstar and Buyer pursuant to Sections 2.5 and 9.1 hereof, Buyer and Vanstar
have agreed to pay, as part of the purchase price, an amount equal to (i)
$5,000,000 (which shall include the amount called for in Section 2.5(e) above),
plus (ii) interest at an annual rate equal to seven and three quarters percent
(7-3/4%) from the date hereof until delivered into escrow. In connection
therewith, no later than the seventh (7th) day following the Closing, Sellers,
on the one hand, and Buyer and Vanstar, on the other, will enter into an Escrow
Agreement with U.S. Trust of Texas, N.A. or with such other Person as the
parties may agree (the "Escrow Agent") in form and substance reasonably
satisfactory to each of the parties thereto, providing for the deposit with the
Escrow Agent of the sum of $5,000,000 (together with the interest called for in
the preceding sentence) and payment by the Escrow Agent as follows:
(i) subject to any Vanstar Claims in excess of $3,000,000 plus
amounts owed by Sellers under Section 2.5, if any, $2,000,000 will be
paid to Sellers on the first to occur of the delivery of a joint
written notice from Vanstar and Dataflex or the tenth day following
the delivery and acceptance by the parties pursuant to Section 2.5(d)
of the Net Worth Report; and
(ii) on the first day following the passage of six (6) complete
calendar months from the Closing Date, the difference between (A)
$3,000,000 and (B) the sum of $1,000,000 and all Vanstar Claims; and
(iii) on the first business day following the passage of twelve
(12) complete calendar months from the Closing Date, the difference
between (x) $3,000,000 and (y) the sum of $500,000 and all Vanstar
Claims; and
(iv) on the first business day following the passage of
twenty-four (24) calendar months from the Closing Date any amount then
held by the Escrow Agent in excess of Vanstar Claims; and
(v) thereafter, from time to time, any amount held by the Escrow
Agent in excess of the Vanstar Claims.
For the purposes of this Section 2.6, Vanstar and Buyer shall be permitted to
make claims to the Escrow Agent for amounts due them from Sellers, or either of
them, pursuant to Sections 2.5 or 9.1 and such amounts shall be deemed "Vanstar
Claims". The Escrow Agreement will provide that to the extent that any amount
due Vanstar and Buyer hereunder shall become fixed or determinable as to amount
or shall be finally determined, either in accordance with the provisions of this
Agreement, by mutual agreement of Vanstar and Dataflex, by reason of any final
judgment or non-appealable order of any arbitrator or similar authority, the
Escrow Agent shall pay cash in the amount of such claim to Vanstar and Buyer.
The Escrow Agreement shall take into account the provisions of Section 2.7
hereof. In addition, the Escrow Agreement shall provide that all payments
otherwise due to Sellers shall be paid directly to IBM Credit and not to Sellers
or their assigns.
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2.7 ARRANGEMENTS RELATED TO THE INDEMNITY BASKET. The parties have agreed
to share equally certain losses and costs with the result that Sellers shall be
entitled to receive a maximum benefit of $600,000 (the "Indemnity Basket").
Sellers shall be entitled to apply, from time to time, any then remaining
portion of the Indemnity Basket to satisfy liabilities to Vanstar and Buyer
under Section 2.5 and Section 9.1. The Indemnity Basket shall be reduced by an
amount equal to one-half of any Losses (including, without limitation, Losses in
the amount of the Inventory Difference, the AR Adjustment Amount and VR
Adjustment Amount) which Sellers elect to apply to the Indemnity Basket, and any
amounts resulting from the application of the provisions of Section 2.5(d)
hereof. In no event shall the Indemnity Basket be reduced below zero or be
increased by amounts, if any, due Sellers by Vanstar or Buyer. Sellers shall be
fully liable for all amounts owed Vanstar and Buyer under this Agreement in
excess of the Indemnity Basket.
2.8 ALLOCATION OF PURCHASE PRICE.
(a) The purchase price for the Assets shall be allocated within 60
days of the Closing (or as soon as practicable thereunder) among the Assets
in accordance with an allocation schedule to be prepared by Buyer and
consented to by Sellers, which consent will not be unreasonably withheld.
Such allocation schedule shall be prepared in accordance with section 1060
of the Code.
(b) In connection with the determination of the schedule contemplated
in Section 2.8(a) above, the parties shall cooperate with each other and
provide such information as any of them shall reasonably request. The
parties will each report the federal, state and local and other Tax
consequences of the purchase and sale contemplated hereby (including the
filing of Internal Revenue Service Form 8594) in a manner consistent with
such allocation schedule.
2.9 ASSUMPTION OF LIABILITIES.
(a) Subject to the terms and conditions set forth herein, at the
Closing, Buyer shall assume and agree to pay, honor and discharge when due,
all of the following liabilities relating to the Assets and existing at or
arising on or after the Closing Date (collectively, the "Assumed
Liabilities"):
(i) any and all liabilities, obligations and commitments
relating exclusively to the Business or the Assets that are (y)
reflected on the Cut-off Date Balance Sheet or (z) incurred after the
date of the Cut-off Date Balance Sheet in the ordinary course of
business consistent with prior practice and in accordance with the
terms of this Agreement, EXCEPT, in each case, (A) liabilities related
to product liability claims, (B) Environmental Liabilities and Costs,
(C) liabilities for Taxes, (D) liabilities in respect of employees or
Employee Benefit Plans, except to the extent specifically assumed by
Buyer pursuant to Article VI, and (E) accounts or amounts payable to
officers, directors, employees or Affiliates of either Seller which do
not represent trade accounts payable or compensation due
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in the ordinary course and not delinquent, in each case reflected in
the Cut-off Date Balance Sheet, (F) the IBM Liabilities (except any
portion thereof which Vanstar or Buyer shall elect, in their sole
discretion after the date hereof, to assume, in which event any such
portion so assumed shall be a liability of Sellers for the purposes of
preparing the Net Worth Report) and (G) to the extent that all such
Assumed Liabilities exceed in the aggregate an amount equal to the
Maximum Liability;
(ii) any and all liabilities, obligations and commitments (x)
arising out of the agreements, contracts and commitments set forth on
Schedule 3.1.12(a) and designated therein as "Assumed" (or not
required to be set forth therein because of the amount involved), but
not including any obligation or liability for any amount owed with
respect to or arising as a result of a breach thereof occurring prior
to the Closing Date or (y) listed on Schedule 2.9(a)(ii); and
(iii) liabilities in respect of Transferred Employees to the
extent specifically assumed by Buyer pursuant to Article VI or Article
IX.
(b) At the Closing, Buyer shall assume and agree to discharge the
Assumed Liabilities relating to the Business, up to the Maximum Liability,
by executing and delivering to Sellers an assumption agreement
substantially in the form of Exhibit B attached hereto (the "Assumption
Agreement").
2.10 EXCLUDED LIABILITIES. Notwithstanding the provisions of Section 2.9
or any other provision hereof or any schedule or exhibit hereto and regardless
of any disclosure to Vanstar or Buyer, neither Vanstar nor Buyer nor any of
their Affiliates shall assume any liabilities, obligations or commitments
(collectively, the "Excluded Liabilities") of Sellers, or any other Person which
in any way relate to or arise out of the Valtron Business or the Onyx Business,
the IBM Liabilities (other than any portion thereof assumed by Buyer or Vanstar
pursuant to Section 2.9(i)(F) hereof), or which in any relates to or arises out
of the operation of the Business or the ownership of the Assets during any
period prior to the Closing Date other than the those obligations and
commitments comprising the Assumed Liabilities.
2.11 CONSENT OF THIRD PARTIES. Notwithstanding anything to the contrary in
this Agreement, this Agreement shall not constitute an agreement to assign or
transfer any Governmental Approval, instrument, contract, lease, permit or other
agreement or arrangement or any claim, right or benefit arising thereunder or
resulting therefrom if an assignment or transfer or an attempt to make such an
assignment or transfer without the consent of a third party would constitute a
breach or violation thereof or affect adversely the rights of Vanstar, Buyer or
either Seller thereunder; and any transfer or assignment to Buyer by either
Seller of any interest under any such instrument, contract, lease, permit or
other agreement or arrangement that requires the consent of a third party shall
be made subject to such consent or approval being obtained. In the event any
such consent or approval is not obtained on or prior to the Closing Date,
unless the parties hereto shall otherwise agree, Sellers shall continue to use
all reasonable efforts to obtain any such approval or consent after the Closing
Date until such
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time as such consent or approval has been obtained, and Sellers will cooperate
with Vanstar and Buyer in any lawful and economically feasible arrangement to
provide that Buyer shall receive the interests of Sellers in the benefits under
any such instrument, contract, lease or permit or other agreement or
arrangement, including performance by Sellers, as agent, if economically
feasible; PROVIDED that Buyer shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent Buyer
would have been responsible therefor hereunder if such consent or approval had
been obtained. Sellers shall pay and discharge, and shall indemnify and hold
Vanstar, Buyer and their Affiliates harmless from and against, any and all out-
of-pocket costs of seeking to obtain or obtaining any such consent or approval
whether before or after the Closing Date. Nothing in this Section 2.11 shall be
deemed a waiver by Buyer of its rights to have received on or before the Closing
an effective assignment of all of the Assets nor shall this Section 2.11 be
deemed to constitute an agreement to exclude from the Assets any assets
described under Section 1.1.
2.12 INTELLECTUAL PROPERTY LICENSES.
(a) Vanstar and Buyer, effective as of the Closing, grant Dataflex a
fully paid, perpetual license to utilize and exploit certain computer
software written in Hypertext Markup Language or any other programming
language (the "Website Software") (which is utilized in the presentation,
maintenance and operation of the Dataflex "website" on the so called "World
Wide Web" and to make one or more copies thereof and modifications and
enhancements thereto. The license granted Dataflex herein shall be limited
to use of the Website Software in connection with Dataflex business
operations, and shall not include the right to grant sublicenses. No
warranty of title, fitness for a particular purpose or any warranty
regarding the absence of infringement on the rights of third parties is
made hereby by Vanstar or Buyer, nor shall any be implied. The license
granted hereby may be transferred by Dataflex in connection with any sale
or transfer of all or any substantial portion of its assets but not
otherwise. Vanstar and Buyer shall have no obligation to provide any
support, modifications or enhancements to Dataflex or any transferee in
connection with the Website Software.
(b) Dataflex and DSC hereby grant Vanstar and Buyer a fully paid,
perpetual license to utilize any copyright or other proprietary interest in
the graphical presentation methodology and the "look and feel" of the Flex
Direct Catalog owned or otherwise held by Dataflex or DSC. No warranty of
title, fitness for a particular purpose or any warranty regarding the
absence of infringement on the rights of third parties is made hereby by
Vanstar or Buyer, nor shall any be implied.
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ARTICLE III REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF SELLERS. Dataflex and DSC, jointly
and severally, represent and warrant to Vanstar and Buyer as follows:
3.1.1 AUTHORIZATION, ETC. Each of Dataflex and DSC has the
corporate power and authority to execute and deliver this Agreement and
each of the Collateral Agreements to which it will be a party, to perform
fully its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. The execution and delivery
by each of Dataflex and DSC of this Agreement, and the consummation of the
transactions contemplated hereby, have been, and the execution and delivery
of the Collateral Agreements to which it will be a party and the
consummation of the transactions contemplated thereby will have been, duly
authorized by all requisite corporate action of Dataflex and DSC. Each of
Dataflex and DSC has duly executed and delivered this Agreement and on the
Closing Date each will have duly executed and delivered each of the
Collateral Agreements to which it is a party. This Agreement is, and on
the Closing Date each of the Collateral Agreements to which either Dataflex
or DSC is a party will be, legal, valid and binding obligations of Dataflex
or DSC, as the case may be, enforceable against Dataflex or DSC, as the
case may be in accordance with their respective terms subject to
bankruptcy, insolvency, reorganization, fraudulent transfer and conveyance,
receivership, moratorium and similar laws affecting creditors rights
generally.
3.1.2 CORPORATE STATUS.
(a) Each of Dataflex and DSC is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power and
authority to carry on its business and to own or lease and to operate
its properties as and in the places where such business is conducted
and such properties are owned, leased or operated.
(b) Each of Dataflex and DSC is duly qualified or licensed to do
business and is in good standing in each of the jurisdictions
specified in Schedule 3.1.2(b), which are the only jurisdictions in
which the operation of the Business or the character of the properties
owned, leased or operated by it in connection with the Business makes
such qualification or licensing necessary.
(c) Each of Dataflex and DSC has delivered to Buyer complete and
correct copies of its certificate of incorporation and bylaws or other
organizational documents, in each case, as amended and in effect on
the date hereof. Neither Dataflex nor DSC is in violation of any of
the provisions of its certificate of incorporation or bylaws or any
other organizational documents.
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(d) All the issued and outstanding shares of capital stock of
DSC are owned of record and beneficially by Dataflex with no other
party owning any rights in or with respect thereto.
3.1.3 NO CONFLICTS, ETC. The execution, delivery and performance
by each of Dataflex and DSC of this Agreement and each of the Collateral
Agreements to which it is a party, and the consummation of the transactions
contemplated hereby and thereby, do not and will not conflict with or
result in a violation of or a default under (with or without the giving of
notice or the lapse of time or both) (i) any Applicable Law applicable to
either Seller, or any Affiliate of either Seller or any of the properties
or assets of either Seller (including but not limited to the Assets), (ii)
the certificate of incorporation or bylaws or other organizational
documents of either Seller or (iii) except as set forth in Schedule 3.1.3,
any Contract or other contract, agreement or other instrument to which
Dataflex or DSC or any of their Affiliates is a party or by which either
Seller or any of their respective properties or assets, including but not
limited to the Assets, may be bound or affected. Except as specified in
Schedule 3.1.3, no Governmental Approval or other consent is required to be
obtained or made by either Seller in connection with the execution and
delivery of this Agreement or the Collateral Agreements or the consummation
of the transactions contemplated hereby or thereby.
3.1.4 FINANCIAL STATEMENTS. Sellers have delivered to Vanstar and
Buyer (a) consolidated financial statements of Dataflex and its
subsidiaries as at and for the periods ended March 31, 1994 and 1995
together with, in each case, a report thereon by Sellers' Accountants and
the unaudited, consolidated financial statements of Dataflex and its
subsidiaries as at March 31, 1996 (collectively, the "Annual Financial
Statements") and (b) an audited combined Statement of Net Assets Sold of
the Business as at and for the period ended March 31, 1996 together with a
report thereon by Sellers' Accountants (the "Business Financial
Statements"), including in each case a balance sheet, and in each case
except for the Business Financial Statements, a statement of income and
retained earnings and a statement of cash flows (the Annual Financial
Statements and the Business Financial Statements are hereinafter
collectively referred to as the "Financial Statements"). The Financial
Statements are complete and correct in all material respects and have been
prepared in accordance with GAAP consistently applied throughout the
periods indicated. Except as set forth on Schedule 3.1.4, the Business
Financial Statements have been prepared on a basis consistent with the
Annual Financial Statements. Except as set forth on Schedule 3.1.4, the
balance sheet for the period ended March 31, 1996 included in the Business
Financial Statements (the "Cut-off Date Balance Sheet") does not include
the Excluded Assets and Excluded Liabilities or any other material assets
or liabilities (such as the Onyx Receivables and the Valtron Receivables
and any other assets or liabilities associated with the Valtron Business or
the Onyx Business) not intended to constitute a part of the Business or the
Assets, and presents fairly the financial condition of the Business as of
the Cut-off Date.
3.1.5 ABSENCE OF UNDISCLOSED LIABILITIES. Neither Seller has any
liabilities or obligations of any nature, whether known or unknown,
absolute, accrued, contingent or
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otherwise and whether due or to become due, arising out of or relating to
the Business, except (a) as set forth in Schedule 3.1.5, (b) as and to the
extent disclosed or reserved against in the Cut-off Balance Sheet and (c)
for liabilities and obligations that (i) were incurred after the date of
the Cut-off Balance Sheet in the ordinary course of business consistent
with prior practice and (ii) individually and in the aggregate are not
material to the Business and have not had or resulted in, and will not have
or result in, a Material Adverse Effect. Except to the extent specifically
disclosed in Schedule 3.1.5, none of the employees of the Business is now
or will by the passage of time hereinafter become entitled to receive any
vacation time, vacation pay or severance pay attributable to services
rendered prior to such date that is not reflected as an accrued liability
on the Cut-off Balance Sheet.
3.1.6 TAXES.
(a) Sellers have (or by the Closing will have) duly and timely
filed all Tax Returns relating to the Business with respect to Taxes
required to be filed on or before the Closing Date ("Covered
Returns"). Except for Taxes set forth on Schedule 3.1.6(a), which are
being contested in good faith and by appropriate proceedings, the
following Taxes ("Covered Taxes") have (or by the Closing Date will
have) been duly and timely paid: (i) all Taxes shown to be due on the
Covered Returns, (ii) all deficiencies and assessments of Taxes of
which notice has (or by the Closing Date will have) been received by
either Seller that are or may become payable by Vanstar, Buyer or any
of their Affiliates or chargeable as a lien upon the Business, and
(iii) all other Taxes due and payable on or before the Closing Date
for which neither filing of Covered Returns nor notice of deficiency
or assessment is required, if Seller is or reasonably should be (or by
the Closing Date will be or reasonably should be) aware that are or
may become payable by Buyer or chargeable as a lien upon the Business.
All Taxes required to be withheld by or on behalf of either Seller in
connection with amounts paid or owing to any employee, independent
contractor, creditor or other party with respect to the Business
("Withholding Taxes") have been withheld, and such withheld taxes have
either been duly and timely paid to the proper Governmental
Authorities or set aside in accounts for such purpose.
(b) Except as set forth on Schedule 3.1.6(b), no agreement or
other document extending, or having the effect of extending, the
period of assessment or collection of any Covered Taxes or Withholding
Taxes, and no power of attorney with respect to any such Taxes, has
been filed with the IRS or any other Governmental Authority.
(c) Except as set forth on Schedule 3.1.6(c), (i) there are no
Covered Taxes or Withholding Taxes asserted in writing by any
Governmental Authority to be due and (ii) no issue has been raised in
writing by any Governmental Authority in the course of any audit with
respect to Covered Taxes or Withholding Taxes. Except as set forth on
Schedule 3.1.6(c), no Covered Taxes
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and no Withholding Taxes are currently under audit by any Governmental
Authority. Except as set forth on Schedule 3.1.6(c), neither the IRS
nor any other Governmental Authority is now asserting or, to the best
knowledge of Sellers, threatening to assert against either Seller any
deficiency or claim for additional Covered Taxes or any adjustment of
Covered Taxes that would, if paid by Vanstar, Buyer or any of their
Affiliates, have a Material Adverse Effect, and there is no reasonable
basis for any such assertion of which either Seller is or reasonably
should be aware.
(d) Buyer shall not be required to deduct and withhold any
amount pursuant to section 1445(a) of the Code upon the transfer of
the Business to Buyer.
(e) Except as set forth on Schedule 3.16(e), there is no
litigation or administrative appeal pending or, to the best knowledge
of Sellers, threatened against or relating to either Seller in
connection with Covered Taxes.
3.1.7 ABSENCE OF CHANGES. Except as set forth in Schedule 3.1.7,
since the Cut-off Date, each Seller has conducted the Business applicable
to it only in the ordinary course consistent with prior practice and has
not, on behalf of, in connection with or relating to the Business or the
Assets:
(a) suffered or permit to have occurred any Material Adverse
Effect;
(b) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except current
liabilities for trade or business obligations incurred in connection
with the purchase of goods or services in the ordinary course of
business consistent with prior practice, none of which liabilities, in
any case or in the aggregate, could have a Material Adverse Effect;
(c) discharged or satisfied any Lien other than those then
required to be discharged or satisfied, or paid any obligation or
liability, absolute, accrued, contingent or otherwise, whether due or
to become due, other than current liabilities shown on the Cut-off
Date Balance Sheet and current liabilities incurred since the date
thereof in the ordinary course of business consistent with prior
practice;
(d) mortgaged, pledged or subjected to Lien, any property,
business or assets, tangible or intangible, held in connection with
the Business;
(e) sold, transferred, leased to others or otherwise disposed of
any of the Assets, except for inventory sold in the ordinary course of
business, or cancelled or compromised any debt or claim, or waived or
released any right of substantial value;
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(f) received any notice of termination of any contract, lease or
other agreement or suffered any damage, destruction or loss (whether
or not covered by insurance) which, in any case or in the aggregate,
has had a Material Adverse Effect;
(g) transferred or granted any rights under, or entered into any
settlement regarding the breach or infringement of, any Intellectual
Property Assets, or modified, failed to preserve, lost or suffered any
diminution of value of any existing rights with respect thereto;
(h) made any material change in the rate of compensation,
commission, bonus or other direct or indirect remuneration payable, or
paid or agreed or orally promised to pay, conditionally or otherwise,
any bonus, incentive, retention or other compensation, retirement,
welfare, fringe or severance benefit or vacation pay, to or in respect
of any director, officer, employee, salesman, distributor or agent of
either Seller;
(i) encountered any labor union organizing activity, had any
actual or threatened employee strikes, work stoppages, slowdowns or
lockouts, or had any material change in its relations with its
employees, agents, customers or suppliers;
(j) failed to replenish its Inventories in a normal and
customary manner consistent with its prior practice and prudent
business practices prevailing in the industry, or made any purchase
commitment in excess of the normal, ordinary and usual requirements of
its business or at any price in excess of the then current market
price or upon terms and conditions more onerous than those usual and
customary in the industry, or made any change in its selling, pricing,
advertising or personnel practices inconsistent with its prior
practice and prudent business practices prevailing in the industry;
(k) made any capital expenditures or capital additions or
improvements in excess of an aggregate of $50,000;
(l) instituted, settled or agreed to settle any litigation,
action or proceeding before any court or governmental body other than
in the ordinary course of business consistent with past practices but
not in any case involving amounts in excess of $50,000;
(m) entered into any transaction, contract or commitment other
than in the ordinary course of business or paid or agreed to pay any
legal, accounting, brokerage, finder's fee, Taxes or other expenses in
connection with, or incurred any severance pay obligations by reason
of, this Agreement or the transactions contemplated hereby;
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(n) written up the carrying value of any of the Assets;
(o) suffered any significant loss of employees, customers or
suppliers;
(p) entered into any material employment, compensation,
consulting or collateral bargaining agreement with any Person or
group, or modified or amended in any material respect the terms of any
such existing agreement;
(q) materially amended, modified or terminated, or agreed to
amend, modify or terminate, any existing material contract, agreement,
plan, lease, license, permit or franchise;
(r) to the best knowledge of Sellers, exercising ordinary
business prudence, taken any action or failed to take any action, the
result of which can reasonably be expected to be a termination of or
material default under any material contract, agreement, plan, lease,
license, permit or franchise;
(s) amended its certificate of incorporation, bylaws or other
constituent corporate documents, except as may be necessary to
facilitate the consummation of the transactions contemplated in this
Agreement; or
(t) made claims against any supplier or seller of Inventories in
excess of amounts reasonably due either Seller with respect to
defective goods or indemnity obligations of such suppliers or sellers;
or
(u) made any change or modification in Sellers' accounting
practices, policies or procedures which in any way affect the
Business, including any change or modification with respect to the
allocation of revenues, costs and expenses applicable to the Business;
or
(v) taken any action or omitted to take any action that would
result in the occurrence of any of the foregoing.
3.1.8 LITIGATION. Except as set forth on Schedule 3.1.8, there is
no action, claim, demand, suit, proceeding, arbitration, grievance,
citation, summons, subpoena, inquiry or investigation of any nature, civil,
criminal, regulatory or otherwise, in law or in equity, pending or
threatened against either Seller in connection with the Assets or the
Business or against or relating to the transactions contemplated by this
Agreement, and neither Seller knows or has reason to be aware of any basis
for the same. Except as set forth in such Schedule 3.1.8, no citations,
fines or penalties have been asserted against either Seller under any
Environmental Law or any foreign, federal, state or local law relating to
occupational health or safety.
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3.1.9 COMPLIANCE WITH LAWS; GOVERNMENTAL APPROVALS AND CONSENTS;
GOVERNMENTAL CONTRACTS.
(a) Except as disclosed in Schedule 3.1.9(a) each Seller has, to
the best knowledge of Sellers after investigation, complied in all
material respects with all Applicable Laws applicable to or otherwise
in any manner affecting the Business or the Assets, and neither Seller
has received any notice alleging any such conflict, violation, breach
or default.
(b) Schedule 3.1.9(b) sets forth all Governmental Approvals and
other Consents necessary for, or otherwise material to, the conduct of
the Business. Except as set forth in Schedule 3.1.9(b), all such
Governmental Approvals and Consents have been duly obtained and are in
full force and effect, and, to the best knowledge of Sellers after
investigation, each Seller is in compliance with each of such
Governmental Approvals and Consents held by it with respect to the
Assets and the Business.
(c) Schedule 3.1.9(c) sets forth all Contracts with any
Governmental Authority.
(d) Each Seller has filed with the proper authorities all
statements and reports required by the laws, regulations, licensing
requirements and orders to which it or any of its employees (because
of his or her activities on behalf of his or her employer) is subject.
(e) To the best knowledge of Sellers, using ordinary business
prudence but without commissioning or conducting a special
investigation, there are no proposed laws, rules, regulations,
ordinances, orders, judgments, decrees, governmental takings,
condemnations or other proceedings which would be applicable to the
business, operations or properties of or related to the Business and
which might adversely affect the properties, assets, liabilities,
operations or prospects of the Business, either before or after the
Closing Date.
3.1.10 OPERATION OF THE BUSINESS. Except as set forth in Schedule
3.1.10, the Business has been conducted only through Dataflex and DSC and
not through any direct or indirect subsidiary or Affiliate of Dataflex or
DSC.
3.1.11 ASSETS. Except as disclosed in Schedule 3.1.11, Sellers
have good title to all the Assets free and clear of any and all Liens. The
Assets comprise all assets and services used in the Business. The Assets,
taken as a whole, constitute all the properties and assets relating to or
used or held for use in connection with the Business during the past twelve
months (except Inventory sold, cash disposed of, accounts receivable
collected, prepaid expenses realized, Contracts fully performed, properties
or assets replaced by equivalent or superior properties or assets, in each
case in the ordinary course of business, and the Excluded Assets). Except
for Excluded Assets, there are no
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assets or properties used in the operation of the Business and owned by any
Person other than Sellers that will not be leased or licensed to Buyer
under valid, current leases or license arrangements. The Assets are in all
material respects adequate for the purposes for which such assets are
currently used or are held for use, and are in reasonably good repair and
operating condition (subject to normal wear and tear) and, to the knowledge
of Sellers, there are no facts or conditions affecting the Assets which
could, individually or in the aggregate, interfere in any material respect
with the use, occupancy or operation thereof as currently used, occupied or
operated, or their adequacy for such use. At the Closing, Sellers will
convey to Buyer, good and marketable title to all of the Assets, free and
clear of all Liens, other than Permitted Liens. Upon conveyance of the
Assets to Buyer at the Closing, Buyer shall acquire and hold good and
marketable title to the Assets, free and clear of all Liens except for
Permitted Liens.
3.1.12 CONTRACTS.
(a) Schedule 3.1.12(a) contains a complete and correct
description of all agreements, contracts, commitments and other
instruments and arrangements (whether written or oral) of the types
described below (x) by which any of the Assets are bound or affected
or under which either Seller or any of its respective assets,
businesses or operations receive benefits, including, without
limitation, the names and addresses of all others who are parties
thereto, or receive benefits thereunder, or (y) to which either Seller
is a party or by which either Seller is bound in connection with the
Business or the Assets (the "Contracts"):
(i) leases, licenses, permits, franchises, insurance
policies, Governmental Approvals and other contracts concerning
or relating to the Leased Real Property;
(ii) employment, bonuses, vacations, pensions, profit
sharing, retirement, stock options, stock purchases, employee
discounts or other employee benefits, consulting, agency,
collective bargaining or other similar contracts, agreements, and
other instruments and arrangements relating to or for the benefit
of current, future or former employees, officers, directors,
sales representatives, distributors, dealers, agents, independent
contractors or consultants;
(iii) loan agreements, indentures, letters of credit,
mortgages, security agreements, pledge agreements, deeds of
trust, bonds, notes, guarantees, and other agreements and
instruments relating to the borrowing of money or obtaining of or
extension of credit;
(iv) licenses, licensing arrangements and other contracts
providing in whole or in part for the use of, or limiting the use
of, any Intellectual property;
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(v) brokerage or finder's agreements;
(vi) joint venture, partnership and similar contracts
involving a sharing of profits or expenses (including but not
limited to joint research and development and joint marketing
contracts);
(vii) asset purchase agreements and other acquisition or
divestiture agreements, including but not limited to any
agreements relating to the sale, lease or disposal of any Assets
(other than sales of Inventory in the ordinary course of
business) or involving continuing indemnity or other obligations;
(viii) orders and other contracts for the purchase or sale of
Inventories, materials, supplies, products or services open or as
to which any liability will exist as of the Closing Date, each of
which involves aggregate payments in excess of $50,000;
(ix) contracts with respect to which the aggregate amount
that could reasonably expected to be paid or received thereunder
in the future exceeds $50,000;
(x) sales agency, manufacturer's representative, marketing
or distributorship agreements;
(xi) contracts, agreements or arrangements with respect to
the representation of the Business in foreign countries;
(xii) master lease agreements providing for the leasing of
either (A) personal property primarily used in, or held for use
primarily in connection with, the Business and (B) other personal
property;
(xiii) contracts, agreements or commitments with any director,
officer, employee, or Affiliate of either Seller, or with any
holder of more than five percent (5%) of any class of capital
stock of Dataflex outstanding; and
(xiv) any other contracts, agreements or commitments that are
material to the Business.
(b) Sellers have delivered to Vanstar and Buyer complete and
correct copies of all written Contracts, together with all amendments
thereto, and accurate descriptions of all material terms of all oral
Contracts, set forth or required to be set forth in Schedule
3.1.12(a).
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(c) All Contracts are in full force and effect and enforceable
against each party thereto. Neither Seller has received notice of any
plan or intention of any party to any Contract to exercise any right
to cancel or terminate any Contract. To the best knowledge of Sellers
after investigation, there does not exist under any Contract any event
of default or event or condition that, after notice or lapse of time
or both, would constitute a violation, breach or event of default
thereunder on the part of either Seller or, to the best knowledge of
Sellers after investigation, any other party thereto, except as set
forth in Schedule 3.1.12(c) and except for such events or conditions
that, individually and in the aggregate, (i) has not had or resulted
in, and will not have or result in, a Material Adverse Effect and (ii)
has not and will not materially impair the ability of either Seller to
perform its obligations under this Agreement and under the Collateral
Agreements. Except as set forth in Schedule 3.1.12(c), no consent of
any third party is required under any Contract as a result of or in
connection with, and the enforceability of any Contract will not be
affected in any manner by, the execution, delivery and performance of
this Agreement or any of the Collateral Agreements or the consummation
of the transactions contemplated thereby.
(d) Neither Seller has outstanding any power of attorney
relating to the Business.
3.1.13 TERRITORIAL RESTRICTIONS. Except as described in Schedule
3.1.13, neither Seller is restricted by any written agreement or
understanding with any other Person from carrying on the Business anywhere
in the world. Neither Vanstar, Buyer, nor any of their Affiliates will, as
a result of its purchase of the Business from Sellers pursuant hereto and
the assumption of the Assumed Liabilities, become restricted in carrying on
the Business anywhere in the world as a result of any Contract or other
agreement to which either of the Sellers is a party or by which either is
bound.
3.1.14 INVENTORIES. Except as specifically described on Schedule
3.1.14 hereto, all Inventories reflected on the Cut-off Date Balance Sheet
consist of items of quality and quantity which are useable or saleable in
the ordinary course of business of Sellers in the conduct of the Business
and items of below standard quality and items not useable or saleable in
the ordinary course of Sellers' business have been written down in value in
accordance with good business practices to estimated net realizable market
values or adequate reserves have been provided therefor. The values at
which the Inventories are carried on the Cut-off Date Balance Sheet as at
the Cut-off Date reflect the normal valuation policy of Sellers in setting
Inventory at the lower of cost or net realizable market values, all in
accordance with GAAP. Except as set forth on Schedule 3.1.14, since the
Cut-off Date, Inventories have been maintained at normal and adequate
levels for the continuation of the Business in its normal course, no change
has occurred in such Inventories which affect or will affect the useability
or salability thereof, no write-downs or write-ups of the value of such
Inventories has occurred and no additional amounts have been reserved with
respect to such Inventories. Schedule 3.1.14 lists the locations
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of all Inventories together with a brief description of the type and amount
at each location.
3.1.15 CUSTOMERS. Schedule 3.1.15 sets forth (a) the names and
addresses of all customers of each Seller that ordered products, goods or
services from either Seller with an aggregate value for each such customer
of $100,000 or more during the twelve month period ended March 31, 1996 and
which relate to the Business and (b) the amount for which each such
customer was invoiced during such period. Neither Seller has received any
notice and neither Seller has any reason to believe that any significant
customer of either Seller (i) has ceased, or will cease, to use the
products, goods or services of either Seller which relate to the Business,
(ii) has substantially reduced, or will substantially reduce, the use of
products, goods or services of either Seller which relate to the Business
or (iii) has sought, or is seeking, to reduce the price it will pay for
products, goods or services of either Seller, which relate to the Business,
including in each case after the consummation of the transactions
contemplated hereby. To the best knowledge of Sellers, no customer of
either Seller with respect to the Business described in clause (a) of this
section has otherwise threatened to take any action described in the
preceding sentence as a result of the consummation of the transactions
contemplated by this Agreement and the Collateral Agreements.
3.1.16 SUPPLIERS. Schedule 3.1.16 sets forth (a) the names and
addresses of all suppliers from which either Seller ordered Inventories,
and other products, goods and services with an aggregate purchase price for
each such supplier of $100,000 or more during the twelve month period ended
March 31, 1996 and which relate to the Business and (b) the amount for
which each such supplier invoiced such Seller during such period. Neither
Seller has received any notice from any such supplier indicating that there
is or will be a material change in the price of such items or services, and
neither Seller has any reason to believe that there will be any such
material change in the price of such items or services, or that any such
supplier will not sell such items to Buyer at any time after the Closing
Date on terms and conditions similar to those used in its current sales to
such Seller, subject to general and customary price increases. To the best
knowledge of Sellers, no supplier to either Seller described in clause (a)
of the first sentence of this section has otherwise threatened to take any
action described in the preceding sentence as a result of the consummation
of the transactions contemplated by this Agreement or the Collateral
Agreements.
3.1.17 PRODUCT WARRANTIES. Except as set forth in Schedule 3.1.17
and for warranties under Applicable Law, (a) there are no warranties
express or implied, written or oral, with respect to the products of the
Business and (b) there are no pending or threatened claims with respect to
any such warranty, and (c) neither Seller has, and to the best knowledge of
Sellers, neither Vanstar, Buyer nor any of their Affiliates will have, any
liability, after the Closing, with respect to any such warranty, whether
known or unknown, absolute, accrued, contingent or otherwise and whether
due or to become due.
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3.1.18 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither of the
Sellers, nor any officer, employee or agent of either Seller, or any other
Person acting on their behalf, has, directly or indirectly, within the past
five years given or agreed to give any gift, bribe, rebate or kickback or
otherwise provided any similar benefit to any customer, supplier,
governmental employee or other Person who is or may be in a position to
help or hinder Seller or the Business (or assist Seller in connection with
any actual or proposed transaction relating to the Business) (i) which
subjected or might have subjected Seller to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (ii) which if not
given in the past, might have had a Material Adverse Effect, (iii) which if
not continued in the future, might have a Material Adverse Effect or
subject Seller to suit or penalty in any private or governmental litigation
or proceeding, (iv) for any of the purposes described in Section 162(c) of
the Code or (v) for the purpose of establishing or maintaining any
concealed fund or concealed bank account.
3.1.19 INTELLECTUAL PROPERTY.
(a) TITLE. Schedule 3.1.19(a) contains a complete and correct
list and a brief description of all Intellectual Property that is
owned by either Seller and primarily related to, used in, held for use
in connection with, or necessary for the conduct of, or otherwise
material to the Business (the "Owned Intellectual Property"). Sellers
own or have the exclusive right to use pursuant to license,
sublicense, agreement or permission all Intellectual Property Assets,
free from any Liens (other than Permitted Liens) and free from any
requirement of any past, present or future royalty payments, license
fees, charges or other payments, or conditions or restrictions
whatsoever. No Affiliate of either Seller owns or has any interest in
or with respect to any Intellectual Property Asset and the
Intellectual Property Assets comprise all of the Intellectual Property
necessary for Buyer to conduct and operate the Business following the
Closing as now being conducted by Sellers.
(b) TRANSFER. Except as described on Schedule 3.1.19(b),
immediately after the Closing, Buyer will have all of Sellers' rights
with respect to all of the Owned Intellectual Property and will have a
right to use all other Intellectual Property Assets, free from any
Liens (other than Permitted Liens) and on the same terms and
conditions as in effect prior to the Closing.
(c) NO INFRINGEMENT. The conduct of the Business does not
infringe or otherwise conflict with any rights of any Person in
respect of any Intellectual Property. To the knowledge of Sellers,
after investigation, none of the Intellectual Property Assets is being
infringed or otherwise used or available for use, by any other Person.
(d) LICENSING ARRANGEMENTS. Schedule 3.1.19(d) sets forth all
agreements, arrangements or laws (i) pursuant to which either Seller
has leased or licensed Intellectual Property Assets, or the use of
Intellectual Property Assets
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as otherwise permitted (through non-assertion, settlement or similar
agreements or otherwise) by, any other Person and (ii) pursuant to
which either Seller has had Intellectual Property licensed to it, or
has otherwise been permitted to use Intellectual Property (through
non-assertion, settlement or similar agreements or otherwise) together
with a brief description of the Intellectual Property Assets covered
thereby. All of the agreements or arrangements set forth on
Schedule 3.1.19(d) (x) are in full force and effect in accordance with
their terms and no default exists thereunder by either Seller, or to
the knowledge of either Seller, diligent investigation by any other
party thereto, (y) are free and clear of all Liens, and (z) do not
contain any change in control or other terms or conditions that will
become applicable or inapplicable as a result of the consummation of
the transactions contemplated by this Agreement. Sellers have
delivered to Vanstar and Buyer true and complete copies of all
licenses and arrangements (including amendments) set forth on
Schedule 3.1.19(d). All royalties, license fees, charges and other
amounts payable by, on behalf, to, or for the account of, Sellers in
respect of Intellectual Property are disclosed in the Cut-off Date
Balance Sheet.
(e) NO INTELLECTUAL PROPERTY LITIGATION. No claim or demand of
any Person has been made nor is there any proceeding that is pending,
or to the knowledge of either Seller, after investigation, threatened,
nor is there a reasonable basis therefor, which (i) challenges the
rights of either Seller in respect of any of the Intellectual
Property, (ii) asserts that either Seller is infringing or otherwise
in conflict with, or is, except as set forth in Schedule 3.1.19(e),
required to pay any royalty, license fee, charge or other amount with
regard to, any Intellectual Property, or (iii) claims that any default
exists under any agreement or arrangement listed on Schedule
3.1.19(d). None of the Intellectual Property Assets is subject to any
outstanding order, ruling, decree, judgment or stipulation by or with
any court, arbitrator, or administrative agency, or has been the
subject of any litigation within the last five years, whether or not
resolved in favor of either Seller.
(f) DUE REGISTRATION, ETC. The Owned Intellectual Property has
been duly registered with, filed and/or issued by, as the case may be,
the United States Patent and Trademark Office, United States Copyright
Office or such other filing offices, domestic or foreign, and each
Seller has taken such other actions, to ensure full protection under
any applicable laws and regulations, and such registrations, filings,
issuances and other actions remain in full force and effect, in each
case to the extent material to the Business.
(g) USE OF NAME AND MARK. Except as set forth in
Schedule 3.1.19(g), there are, and immediately after the Closing will
be, no contractual restrictions or limitations pursuant to any order,
decisions, injunctions, judgments, awards or decrees of any
Governmental Authority on Buyer's right to use the names and marks set
forth on Schedule 3.1.19(g) in the conduct of the
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Business as presently carried on by Sellers or as such Business may be
carried on and extended by Buyer following the Closing.
3.1.20 INSURANCE. Schedule 3.1.20 contains a complete and correct
list and summary description of all insurance policies maintained by
Sellers for the benefit of or in connection with the Assets or the
Business. Sellers have delivered to Vanstar and Buyer complete and correct
copies of all such policies together with all riders and amendments
thereto. Such policies are in full force and effect, and all premiums due
thereon have been paid. To the best knowledge of Sellers, each Seller has
complied in all material respects with the terms and provisions of such
policies. Schedule 3.1.20 sets out all claims made by Sellers under any
policy of insurance during the past two years with respect to the Business
and in the opinion of Sellers reasonably formed and held, there is no basis
on which a claim should or could be made under any such policy with respect
to it.
3.1.21 REAL PROPERTY.
(a) Neither Seller owns, directly or indirectly, nor does either
Seller have any fixed or contingent obligation to acquire, any
interest in real property that is used in any manner in connection
with the Business.
(b) Schedule 3.1.21(b) hereto contains a complete and correct
list of all Leases, setting forth the address, landlord and tenant for
each Lease. Sellers have delivered to Vanstar and Buyer correct and
complete copies of the Leases. Each Lease is legal, valid, binding,
enforceable, and in full force and effect. Neither of the Sellers nor
any other party is in default, violation or breach in any material
respect under any Lease, and no event has occurred and is continuing
that constitutes or, with notice or the lapse of time or both, would
constitute a default, violation or breach in any respect under any
Lease. Each Seller enjoys peaceful and undisturbed possession under
its Leases.
(c) The Leased Real Property constitutes all of the real
property leased, occupied or utilized by either Seller in any manner
in connection with the Business or the Assets.
3.1.22 ENVIRONMENTAL MATTERS.
(a) COMPLIANCE WITH ENVIRONMENTAL LAWS. To the best knowledge
of Sellers after investigation, each Seller has complied and is in
compliance in all material respects with all applicable Environmental
Laws pertaining to the Leased Real Property or any of the properties
and assets of the Business and the use and ownership thereof, and to
the operation of the Business. No violation by Seller is being
alleged of any applicable Environmental Law relating to any of the
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properties and assets of the Business including the Leased Real
Property or the use or ownership thereof, or to the operation of the
Business.
(b) OTHER ENVIRONMENTAL MATTERS.
(i) Neither of the Sellers nor any other Person (including
any tenant or subtenant) has caused or taken any action that will
result in, and neither Seller is subject to, any material
liability or obligation relating to (x) the environmental
conditions on, under, or about any real property or other
properties leased, operated or used by either Seller or any
predecessor thereto, including the Leased Real Property, at the
present time or in the past, including without limitation, the
air, soil and groundwater conditions at such properties or (y)
the past or present use, management, handling, transport,
treatment, generation, storage, disposal or Release of any
Hazardous Materials.
(ii) To the best knowledge of Sellers after investigation,
Sellers have disclosed and made available to Vanstar and Buyer
all information, including, without limitation, all studies,
analyses and test results, in the possession, custody or control
of or otherwise known to either Seller relating to (x) the
environmental conditions on, under or about any real property,
including the Leased Real Property, or other properties or assets
owned, leased, operated or used by either Seller or any
predecessor in interest thereto at the present time or in the
past, and (y) any Hazardous Materials used, managed, handled,
transported, treated, generated, stored or released by either
Seller or any other Person on, under, about or from the Leased
Real Property, or otherwise in connection with the use or
operation of any of the properties and assets of either Seller,
or the Business.
3.1.23 EMPLOYEES, LABOR MATTERS, ETC. Except as set forth in
Schedule 3.1.23, neither Seller is a party to or bound by any collective
bargaining agreement and there are no labor unions or other organizations
representing, purporting to represent or, to the best knowledge of Sellers,
attempting to represent any employees employed in the operation of the
Business. To the best knowledge of Sellers after investigation, there has
not occurred or been threatened, any material strike, slowdown, picketing,
work stoppage, concerted refusal to work overtime or other similar labor
activity with respect to any employees employed in the operation of the
Business. There are no labor disputes currently subject to any grievance
procedure, arbitration or litigation and there is no representation
petition pending or, to the best knowledge of Sellers after investigation,
threatened with respect to any employee employed in the operation of the
Business. To the best knowledge of Sellers, each Seller has complied and
will comply through the Closing with all provisions of Applicable Law
pertaining to the employment of employees, including, without limitation,
all such Laws relating to labor relations, equal employment, fair
employment practices, entitlement, prohibited discrimination or other
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similar employment practices or acts, except for any failure so to comply
that, individually or together with all such other failures, has not and
will not result in a material liability or obligation on the part of
Vanstar, Buyer or any of their Affiliates or the Business, and has not had
or resulted in, and will not have or result in, a Material Adverse Effect.
3.1.24 EMPLOYEE BENEFIT PLANS. Schedule 3.1.24 lists each pension,
retirement, profit-sharing, deferred compensation, bonus or other incentive
plan, or other employee benefit program, arrangement, agreement or
understanding, or medical, vision, dental or other health plan, or life
insurance or disability plan, or any other employee benefit plan,
including, without limitation, any "employee benefit plan" as defined in
Section 3(3) of ERISA, to which either Seller contributes or to which
either Seller is a party or by which either Seller is bound or under which
either Seller may have any liability and under which employees or former
employees of either Seller involved in the Business (or their
beneficiaries) are eligible to participate or derive a benefit ("Employee
Benefit Plans"). Sellers have delivered to Vanstar and Buyer true, correct
and complete copies of all Employee Benefit Plans. None of the Assets is
subject to any lien in favor of, or enforceable by, the Pension Benefit
Guaranty Corporation.
3.1.25 CONFIDENTIALITY. Except as set forth on Schedule 3.1.25, to
the best knowledge of Sellers, each Seller has taken all steps necessary to
preserve the confidential nature of all material confidential information
(including, without limitation, any proprietary information) with respect
to the Business, including but not limited to information relating to the
distribution, marketing or pricing of any of its products or services or
any promotional plans related thereto.
3.1.26 NO GUARANTEES. Except as set forth on Schedule 3.1.26, none
of the obligations or liabilities of the Business or of either Seller
incurred in connection with the operation of the Business is guaranteed by
or subject to a similar contingent obligation of any other Person. Neither
Seller has guaranteed or become subject to a similar contingent obligation
in respect of the obligations or liabilities of any other Person. Except
as set forth on Schedule 3.1.26, there are no outstanding letters of
credit, surety bonds or similar instruments of either Seller or any
Affiliate of either Seller in connection with the Business or the Assets.
3.1.27 RECORDS. The minute books of Sellers insofar as they relate
to or affect the Business and the Assets are substantially complete and
correct in all material respects. The books of account of Sellers, insofar
as they relate to or affect the Business and the Assets, are sufficient to
prepare the Financial Statements in accordance with GAAP. There are no
false or fictitious entries on the books and records of either Seller.
3.1.28 BROKERS, FINDERS, ETC. All negotiations relating to this
Agreement and the Collateral Agreements, and the transactions contemplated
hereby and thereby, have been carried on without the participation of any
Person acting on behalf of either Seller or any Affiliate of either Seller
in such manner as to give rise to any valid claim against
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the Assets, Vanstar, Buyer or any of their Affiliates for any brokerage or
finder's commission, fee or similar compensation, or for any bonus payable
to any officer, director, employee, agent or sales representative of or
consultant to either Seller or any Affiliate of either Seller upon
consummation of the transactions contemplated hereby or thereby or
otherwise.
3.1.29 DISCLOSURE. Except to the extent specifically limited with
regard to the knowledge of any Person in this Article III, no
representation or warranty by either Seller contained in this Agreement nor
any certificate or agreement furnished or to be furnished by or on behalf
of either Seller to Vanstar or Buyer or their representatives in connection
herewith or pursuant hereto contains or will contain any untrue statement
of a material fact, or omits or will omit to state any material fact
required to make the statements contained herein or therein not misleading.
There is no fact (other than matters of a general economic or political
nature which do not affect the Business uniquely) known to either Seller
that has not been disclosed by Sellers to Vanstar and Buyer that might
reasonably be expected to have or result in a Material Adverse Effect with
respect to the Business or the Assets.
3.1.30 RECEIVABLES. All of Sellers' Accounts Receivable which have
arisen in connection with the Business and which are reflected in the
Financial Statements, and all such receivables which will have arisen since
the Cut-off Date through the Closing, shall have arisen only from bona fide
transactions in the ordinary course of business. Neither Seller has any
knowledge of any facts or circumstances generally (other than general
economic conditions) which would result in any material increase in the
uncollectability of such receivables in excess of the reserves therefor set
forth on the Cut-off Balance Sheet. Schedule 3.1.30 hereto accurately
lists as of the Cut-off Date all receivables arising out of or relating to
the Business, the amount owing and the aging of such receivables, the name
and last known address of the party from whom such receivable is owing, and
any security in favor of either Seller for the repayment of such receivable
which such Seller purports to have. Sellers have delivered to Vanstar and
Buyer complete and correct copies of all instruments, documents and
agreements evidencing such receivables and of all instruments, documents or
agreements, if any, creating security therefor ("Security"). To the best
knowledge of Sellers, each Seller has valid and perfected security
interests in such Security (to the extent such priority may be obtained
under Applicable Law by possession of such Security or the filing of
financing statements or similar documents with respect thereto).
3.1.31 BACKLOG. All of Sellers' backlog of unfilled orders for
products manufactured or sold by either Seller in or with respect to the
Business represent bona fide transactions incurred in the ordinary course
of the respective business of such Seller and are set forth in
Schedule 3.1.31 hereto.
3.1.32 LIABILITIES TO AFFILIATES. Except as set forth on
Schedule 3.1.32, as of the Closing, the Assumed Liabilities will not
include any amounts owed by DSC to Dataflex
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or by Dataflex to DSC or any other amounts owing to any other Affiliate of
Dataflex or any Person acting as the transferee of any of them.
3.1.33 EXCLUDED BUSINESSES. The Cutoff Date Balance Sheet does
not reflect and the Net Worth Report will not reflect any asset, liability,
cost, expense, income or other item constituting an asset, liability, cost,
expense, income or other item of or properly attributable to, the Valtron
Business or the Onyx Business.
3.2 REPRESENTATIONS AND WARRANTIES OF VANSTAR AND BUYER. Vanstar and
Buyer, jointly and severally, represent and warrant to Sellers as follows:
3.2.1 CORPORATE STATUS; AUTHORIZATION, ETC. Each of Vanstar and
Buyer is a corporation duly organized, validly existing and in good
standing, under the laws of the jurisdiction of its incorporation with full
corporate power and authority to execute and deliver this Agreement and the
Collateral Agreements to which it is a party, to perform its obligations
thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by each of Vanstar and Buyer of this
Agreement, and the consummation of the transactions contemplated hereby,
have been, and on the Closing Date the Collateral Agreements to which it is
a party will have been, duly authorized by all requisite corporate action
of Vanstar and Buyer. Each of Vanstar and Buyer has duly executed and
delivered this Agreement and on the Closing Date each of Vanstar and Buyer
will have duly executed and delivered the Collateral Agreements to which it
is a party. This Agreement is, and on the Closing Date each of the
Collateral Agreements to which Vanstar or Buyer is a party will be, valid
and legally binding obligations of Vanstar or Buyer, as the case may be,
enforceable against Vanstar or Buyer, as the case may be, in accordance
with their respective terms.
3.2.2 NO CONFLICTS, ETC. The execution, delivery and performance
by each of Vanstar and Buyer of this Agreement and each of the Collateral
Agreements to which it is a party, and the consummation of the transactions
contemplated hereby and thereby, do not and will not conflict with or
result in a violation of or under (with or without the giving of notice or
the lapse of time, or both) (i) the articles of incorporation or bylaws of
Vanstar and Buyer, (ii) any Applicable Law applicable to Vanstar, Buyer, or
any of their Affiliates or any of their properties or assets or (iii) any
contract, agreement or other instrument applicable to Vanstar, Buyer or any
of their Affiliates or any of their properties or assets, except, in the
case of clause (iii), for violations and defaults that, individually and in
the aggregate, have not and will not materially impair the ability of
Vanstar or Buyer to perform its obligations under this Agreement or under
any of the Collateral Agreements to which it is a party. Except as
specified in Schedule 3.2.2, no Governmental Approval or other Consent is
required to be obtained or made by Vanstar or Buyer in connection with the
execution and delivery of this Agreement or the Collateral Agreements or
the consummation of the transactions contemplated thereby.
3.2.3 LITIGATION. There is no action, claim, suit or proceeding
pending, or to the best knowledge of Vanstar or Buyer, threatened, by or
against or affecting Vanstar,
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Buyer or any of their Affiliates in connection with or relating to the
transactions contemplated by this Agreement or of any action taken or to be
taken in connection herewith or the consummation of the transactions
contemplated hereby.
3.2.4 BROKERS, FINDERS, ETC. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried on
without the participation of any Person acting on behalf of Vanstar or
Buyer in such manner as to give rise to any valid claim against either
Seller for any brokerage or finder's commission, fee or similar
compensation.
ARTICLE IV COVENANTS
4.1 COVENANTS OF SELLERS.
4.1.1 CONDUCT OF BUSINESS. From the date hereof to the Closing
Date, except as expressly permitted or required by this Agreement or as
otherwise consented to by Vanstar and Buyer in writing, each Seller will:
(a) carry on the Business in, and only in, the ordinary course,
in substantially the same manner as heretofore conducted, and with
respect to the Business, use all reasonable efforts to preserve intact
its present business organization, maintain its properties in good
operating condition and repair, keep available the services of its
present officers and significant employees, and preserve its
relationship with customers, suppliers and others having business
dealings with it, with the goal and intent that its goodwill and
ongoing business shall be in all material respects unimpaired
following the Closing;
(b) pay accounts payable and other obligations of the Business
when they become due and payable in the ordinary course of business
consistent with prior practice;
(c) perform in all material respects all of its obligations
under all Contracts and other agreements and instruments relating to
or affecting the Business or the Assets, and comply in all material
respects with all Applicable Laws applicable to it, the Assets or the
Business:
(d) other than sales and purchases of Inventories in the
ordinary course where delivery is contemplated not later than the
calendar month following the Determination Date, not enter into or
assume any material agreement, contract or instrument relating to the
Business, or enter into or permit any material amendment, supplement,
waiver or other modification in respect thereof;
(e) not grant (or commit to grant) any increase in the
compensation (including incentive or bonus compensation) of any
employee employed in the
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operation of the Business (other than normal merit pay increases made
in the ordinary course of the Business, consistent with past
practices) or institute, adopt or amend (or commit to institute, adopt
or amend) any compensation or benefit plan, policy, program or
arrangement or collective bargaining agreement applicable to any such
employee;
(f) continue all policies of insurance relating to the Business
in full force and effect;
(g) not make any change or modification in Sellers' accounting
practices, policies or procedures which in any way affect the
Business, including any change or modification with respect to the
allocation of revenues, costs and expenses applicable to the Business;
and
(h) not take any action or knowingly omit to take any action,
which action or omission would result in a breach of any of the
representations and warranties set forth in Section 3.1.
4.1.2 NO SOLICITATION. Neither of the Sellers nor any Affiliate
of either of the Sellers, nor any Person acting on either's behalf shall
(i) solicit or encourage any inquiries or proposals for, or enter into any
discussions with respect to, the acquisition of any properties and assets
held for use in connection with, necessary for the conduct of, or otherwise
material to, the Business or (ii) furnish or cause to be furnished any
non-public information concerning the Business to any Person (other than
Buyer and its agents and representatives), other than in the ordinary
course of business or pursuant to Applicable Law and after prior written
notice to Buyer. Neither Seller shall sell, transfer or otherwise dispose
of, grant any option or proxy to any Person with respect to, create any
Lien upon, or transfer any interest in, any Asset, other than in the
ordinary course of business and consistent with this Agreement. Neither
Seller shall transfer or otherwise dispose of, grant any option or proxy to
any Person with respect to, create any Lien upon, or transfer any interest
in, any of the capital stock of DSC which would impair either Seller's
ability to perform its obligations hereunder, other than pursuant to the
provisions of this Agreement.
4.1.3 ACCESS AND INFORMATION.
(a) Subject to the remainder hereof, each Seller will retain all
books and records relating to the Business (and which are not
transferred to Vanstar or Buyer hereunder or pursuant hereto) in
accordance with Sellers' record retention policies as presently in
effect and will make such books and records available to Vanstar and
Buyer from time to time, upon reasonable notice, for the purpose of
making copies of or extracts therefrom in connection with tax matters
or similar corporate purposes. During the seven-year period beginning
on the Closing Date, neither Seller shall dispose of or knowingly
permit the disposal of any such books and records without first giving
60 days' prior written notice to Vanstar
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and Buyer offering to surrender the same to Vanstar or Buyer at
Vanstar's or Buyer's expense.
4.1.4 PUBLIC ANNOUNCEMENTS. Except as required by Applicable Law,
neither Seller shall, and neither Seller shall permit any Affiliate to,
make any public announcement in respect of this Agreement or the
transactions contemplated hereby without the prior written consent of
Vanstar and Buyer.
4.1.5 FURTHER ACTIONS.
(a) Each Seller agrees to use all reasonable good faith efforts
to take all actions and to do all things necessary, proper or
advisable to consummate the transactions contemplated hereby by the
Expected Closing Date.
(b) Other than providing any notices permitted to be delivered
to creditors under any bulk sales or similar laws, the provision of
which is elective, Sellers will, as promptly as practicable, file or
supply, or cause to be filed or supplied, all applications,
notifications and information required to be filed or supplied by
either of them pursuant to Applicable Law in connection with this
Agreement, the Collateral Agreements, the sale and transfer of the
Assets pursuant to this Agreement and the consummation of the other
transactions contemplated thereby, including but not limited to any
necessary filings pursuant to the HSR Act.
(c) Sellers, as promptly as practicable, will use all reasonable
efforts to obtain, or cause to be obtained, all Consents (including,
without limitation, all Governmental Approvals and any Consents
required under any contract) necessary to be obtained by either of
them in order to consummate the sale and transfer of the Assets
pursuant to this Agreement and the consummation of the other
transactions contemplated thereby.
(d) Each Seller will, and will cause each of its Affiliates to,
coordinate and cooperate with Vanstar and Buyer in exchanging such
information and supplying such assistance as may be reasonably
requested by Vanstar or Buyer in connection with the filings and other
actions contemplated by Section 4.2.2.
(e) At all times prior to the Closing, each Seller shall
promptly notify Vanstar and Buyer in writing of any fact, condition,
event or occurrence known to either of them in the exercise of
reasonable business prudence that will or may result in the failure of
any of the conditions contained in Sections 5.1 and 5.2 to be
satisfied, promptly upon either of them becoming aware of the same.
4.1.6 FURTHER ASSURANCES. Following the Closing, each Seller
shall, and shall cause each of its Affiliates to, from time to time,
execute and deliver such additional instruments, documents, conveyances or
assurances and take such other actions as shall
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be necessary, or otherwise reasonably requested by Vanstar or Buyer, to
confirm and assure the rights and obligations provided for in this
Agreement and in the Collateral Agreements and render effective the
consummation of the transactions contemplated thereby. Without limiting
the generality of the foregoing, the parties specifically contemplate
closing the transactions contemplated herein prior to the time that full
compliance by Sellers with the conditions precedent set forth in
Sections 5.2.3, 5.2.7(b) and (c) and 5.2.8 will be practicable. As a
result, notwithstanding the Closing, this Section 4.1.6 shall require
prompt delivery thereafter by Sellers of the consents, instruments and
agreements called for herein, including in Sections 5.2.3, 5.2.7 and 5.2.8.
4.1.7 LIABILITY FOR TRANSFER TAXES. Sellers shall be responsible
for the timely payment of, and shall indemnify and hold harmless Vanstar,
Buyer and their Affiliates against, all sales (including, without
limitation, bulk sales), use, value added, documentary, stamp, gross
receipts, registration, transfer, conveyance, excise, recording, license
and other similar Taxes and fees ("Transfer Taxes"), arising out of or in
connection with or attributable to the transactions effected pursuant to
this Agreement and the Collateral Agreements. Sellers shall prepare and
timely file all Tax Returns required to be filed in respect of Transfer
Taxes (other than any elective notices permitted to be given to creditors
as provided in any applicable bulk transfer laws), provided that Vanstar or
Buyer shall be permitted to prepare any such Tax Returns that are the
primary responsibility of Vanstar or Buyer under Applicable Law. Vanstar's
or Buyer's preparation of any such Tax Returns shall be subject to Sellers'
approval, which approval shall not be withheld unreasonably.
4.1.8 CERTIFICATES OF TAX AUTHORITIES. On or before the Closing
Date, if reasonably obtainable, or promptly thereafter, Sellers shall
provide to Vanstar and Buyer copies of certificates from the appropriate
taxing authority stating that no Taxes are due to any state or other taxing
authority for which Vanstar, Buyer or any of their Affiliates could have
liability to withhold or pay Taxes with respect to the transfer of the
Assets or the Business; PROVIDED, HOWEVER, that any failure to provide such
certificates to Vanstar and Buyer which is not the fault of either Seller
shall not relieve Vanstar and Buyer of their obligations to complete the
Closing. If Sellers shall fail to provide such certificates, Vanstar or
Buyer may withhold such amount as may be necessary, based upon Vanstar's or
Buyer's reasonable estimate of the amount of such potential liability, or
as determined by the appropriate taxing authority, to cover such Taxes
until such time as certificates are provided.
4.2 COVENANTS OF VANSTAR AND BUYER.
4.2.1 PUBLIC ANNOUNCEMENTS. Prior to the Closing, except as
required by Applicable Law, neither Vanstar nor Buyer shall, and neither
Vanstar nor Buyer shall permit any Affiliate to, make any public
announcement in respect of this Agreement or the transactions contemplated
hereby without the prior written consent of Sellers.
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4.2.2 FURTHER ACTIONS.
(a) Vanstar and Buyer agree to use all reasonable good faith
efforts to take all actions and to do all things necessary, proper or
advisable to consummate the transactions contemplated hereby by the
Expected Closing Date.
(b) Vanstar and Buyer will, as promptly as practicable, file or
supply, or cause to be filed or supplied, all applications,
notifications and information required to be filed or supplied by
Vanstar or Buyer pursuant to Applicable Law in connection with this
Agreement, the Collateral Agreements, Buyer's acquisition of the
Assets pursuant to this Agreement and the consummation of the other
transactions contemplated hereby and thereby, including but not
limited to, any necessary filings pursuant to the HSR Act.
(c) Vanstar and Buyer will coordinate and cooperate with Sellers
in exchanging such information and supplying such reasonable
assistance as may be reasonably requested by either Seller in
connection with the filings and other actions contemplated by Section
4.1.5.
(d) At all times prior to the Closing, Vanstar and Buyer shall
promptly notify Sellers in writing of any fact, condition, event or
occurrence that will or may result in the failure of any of the
conditions contained in Sections 5.1 and 5.3 to be satisfied, promptly
upon becoming aware of the same.
(e) Promptly following the Closing, Vanstar, Buyer and Sellers
shall review the Onyx Business. Following that review, Vanstar and
Buyer may elect, in their discretion, but subject to the approval of
Onyx and Sellers, to accept an assignment of the Onyx Agreement or to
modify or amend such agreement in a manner that would contemplate the
continuation of the Onyx Business in any manner by or with Buyer.
Vanstar, Buyer and Sellers shall also review such other ways or
methods that might be acceptable to Vanstar and Buyer, in their
discretion, and solely as an accommodation to Sellers, to assist
Sellers in the collection of the Onyx Receivables and/or to assist
Sellers in providing services or products pursuant to the Onyx
Agreement. Notwithstanding the foregoing, in no event shall Vanstar
or Buyer in any way be obligated to enter into or otherwise consummate
any arrangement relating to the Onyx Agreement or the Onyx Business or
to otherwise incur any obligation or liability with respect thereto,
all of which obligations and liabilities shall remain with and shall
be discharged by Sellers except to the extent Vanstar and Buyer shall
elect, in their discretion, to assume or discharge in connection with
any arrangements that might be implemented pursuant to this
Section 4.2.2(e). Nothing in this subsection is intended to nor shall
it be interpreted or applied in such a fashion as to interfere with
the rights of Sellers or any third party.
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4.2.3 CONDUCT OF THE BUSINESS. From and after the Closing and
until the Determination Date, except as expressly permitted or required by
this Agreement or as otherwise consented to by Sellers in writing, Vanstar
and Buyer will:
(a) carry on the Business in, and only in the ordinary course,
in substantially the same manner as previously conducted by Sellers;
(b) perform in all material respects all of their respective
obligations, or the obligations assigned them hereunder, under all
Contracts and other agreements and instruments relating to or
affecting the Business or the Assets, and complying in all material
respects with all Applicable Laws applicable to them, the Businesses
or the Assets;
(c) apply all cash received from the operation of the Business
(including, without limitation, cash received from the collection of
Accounts Receivable), to the payment of liabilities and obligations
relating solely to the Business (including, without limitation, the
reimbursement payments to Dataflex for employees pursuant to
Section 6.1(c) hereof), or to the purchase of inventory or other
assets specifically related to the Business and which will be
reflected as an asset on the Net Worth Report.
(d) except as may occur in the ordinary course, not permit any
termination or any material modification or amendment or waive any
obligation arising from or relating to Accounts Receivable or Vendor
Receivables; and
(e) not make any change or modification in the accounting
policies, procedures or practices utilized in or by the Business, or
modify any database, computer software or device utilized in
connection therewith (except that Vanstar and Buyer may install and
operate their own systems, so long as Sellers are maintained intact);
and
4.2.4 FURTHER ASSURANCES. Following the Closing, Vanstar and
Buyer each shall, and each shall cause all of its Affiliates to, from time
to time, execute and deliver such additional instruments, documents,
conveyances or assurances and take such other actions as shall be
necessary, or otherwise reasonably requested by either Seller, to confirm
and assure the rights and obligations provided for in this Agreement and in
the Collateral Agreements and render effective the consummation of the
transactions contemplated thereby.
4.2.5 SELLERS' RECORDS. Vanstar and Buyer will retain all books
and records relating to the Business (and which are to be transferred by
Sellers to Vanstar and Buyer hereunder) in accordance with their record
retention policies as presently in effect and will make such books and
records available to Sellers from time to time, upon reasonable notice, for
the purpose of making copies of or extracts therefrom in connection with
tax matters or similar corporate purposes. During the seven (7) year
period beginning on
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the Closing Date, neither Vanstar nor Buyer shall dispose of or knowingly
permit the disposal of any such books and records without first giving
sixty (60) day's prior written notice to Sellers offering to surrender the
same to Sellers at Sellers expense.
4.2.6 PERFORMANCE BY BUYER. Vanstar hereby guarantees the
performance of all covenants of Buyer contained herein and the payment and
performance by Buyer of the Assumed Liabilities.
4.3 USE OF BUSINESS NAMES BY BUYER. To the extent that the trademarks,
service marks, brand names or trade, corporate or business names which are not
part of the Assets (the "Names") of either Seller or of any of their Affiliates
are used by the Business on stationery, signage, invoices, receipts, forms,
packaging, advertising and promotional materials, product, training and service
literature and materials, computer programs or like materials ( "Marked
Materials") or appear on Inventory at the Closing, Vanstar and Buyer may use
such Marked Materials or sell such Inventory after the Closing. In addition,
for a period of not less than one year following the Closing, Vanstar and Buyer
shall be entitled to use the Names, and variations thereof in connection with
the Assets and the Business, including, but not limited to, collection of
outstanding Accounts Receivable constituting part of the Assets; provided,
however, Vanstar and Buyer agree that the foregoing right to use the Marked
Materials and Names are for the limited purposes specified herein and that
Vanstar and Buyer will cease using such Marked Materials and Names as soon as
reasonably practicable. Notwithstanding the foregoing, Buyer and Vanstar shall
only use the Marked Materials to the extent necessary to collect accounts
receivable and assure the transition of the operations relating to the Business
to Vanstar and Buyer and shall not seek to derive any other benefit therefrom.
Without limiting the generality of the foregoing, Vanstar and Buyer shall use
reasonable efforts to cover or conceal (without repackaging or causing damage)
the Names displayed on packing cases, shipping materials, buildings, uniforms
and other signage and shall have clearly indicate on any letterhead, purchase
orders, notices or similar items the fact of the acquisition of the Business by
Vanstar and Buyer, with the intent that customers of the Business not be
confused as to the source of any Marked Materials utilized by Vanstar and Buyer.
ARTICLE V CONDITIONS PRECEDENT
5.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The obligations of the
parties to consummate the transactions contemplated hereby shall be subject to
the fulfillment on or prior to the Closing Date of the following conditions:
5.1.1 HSR ACT NOTIFICATION. In respect of any necessary
notifications of Vanstar, Buyer and Sellers pursuant to the HSR Act, the
applicable waiting period and any extensions thereof shall have expired or
been terminated.
5.1.2 NO INJUNCTION, ETC. Consummation of the transactions
contemplated hereby shall not have been restrained, enjoined or otherwise
prohibited by any Applicable Law, including any order, injunction, decree
or judgment of any court or other
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Governmental Authority. No court or other Governmental Authority shall have
determined any Applicable Law to make illegal the consummation of the
transactions contemplated hereby or by the Collateral Agreements, and no
proceeding with respect to the application of any such Applicable Law to
such effect shall be pending.
5.2 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Vanstar and
Buyer to consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by Vanstar and Buyer, in their sole discretion) on or
prior to the Closing Date of the following additional conditions, which each
Seller agrees to use reasonable good faith efforts to cause to be fulfilled:
5.2.1 REPRESENTATIONS, PERFORMANCE. The representations and
warranties of each Seller contained in this Agreement and in the Collateral
Agreements (i) shall be true and correct in all respects (in the case of
any representation or warranty containing any materiality qualification) or
in all material respects (in the case of any representation or warranty
without any materiality qualification) at and as of the date hereof, and
(ii) shall be repeated and shall be true and correct in all respects (in
the case of any representation or warranty containing any materiality
qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) on and as
of the Closing Date with the same effect as though made on and as of the
Closing Date. Each Seller shall have duly performed and complied in all
material respects with all agreements and conditions required by this
Agreement and each of the Collateral Agreements to be performed or complied
with by it prior to or on the Closing Date. Each Seller shall have
delivered to Vanstar and Buyer a duly authorized, properly executed
certificate, dated the Closing Date to the foregoing effect.
5.2.2 FINANCING. Vanstar and Buyer shall have obtained the
consent of IBM Credit to the consummation of the transactions contemplated
hereby, on terms and conditions reasonably satisfactory to Vanstar and
Buyer.
5.2.3 CONSENTS. Sellers shall have obtained and shall have
delivered to Vanstar and Buyer copies of (i) all Governmental Approvals
required to be obtained by either Seller in connection with the execution
and delivery of this Agreement and the Collateral Agreements and the
consummation of the transactions contemplated hereby or thereby and (ii)
all Consents (including, without limitation, all Consents required under
any Contract), other than elective notices to creditors permitted under
applicable bulk transfer laws, necessary to be obtained in order to
consummate the sale and transfer of the Assets pursuant to this Agreement
and the consummation of the other transactions contemplated thereby and by
the Collateral Agreements, unless the failure to obtain any such Consent
would not, individually or in the aggregate, have a Material Adverse
Effect.
5.2.4 NO MATERIAL ADVERSE EFFECT. No event, occurrence, fact,
condition, change, development or effect shall have occurred, exist or come
to exist since the Cut-off Date, that, individually or in the aggregate,
has constituted or resulted in, or could reasonably be expected to
constitute or result in, a Material Adverse Effect.
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5.2.5 OPINION OF COUNSEL. Vanstar and Buyer shall have received
an opinion, addressed to them and dated the Closing Date, from Greenbaum,
Rowe, Smith, Ravin, Davis & Himmel, counsel to Seller, in substance and
form reasonably satisfactory to Vanstar and Buyer.
5.2.6 CORPORATE, OTHER PROCEEDINGS. All corporate and other
proceedings of Sellers in connection with this Agreement and the Collateral
Agreements and the transactions contemplated thereby, and all documents and
instruments incident thereto, shall be reasonably satisfactory in substance
and form to Vanstar and Buyer and their counsel, and Vanstar and Buyer and
their counsel shall have received all such documents and instruments, or
copies thereof, certified if requested, as may be reasonably requested.
5.2.7 TRANSFER DOCUMENTS. Sellers shall have delivered to Vanstar
and Buyer at the Closing all documents, certificates and agreements
necessary to transfer to Buyer good and marketable title to the Assets,
free and clear of any and all Liens thereon, other than Permitted Liens,
including without limitation:
(a) a bill of sale, assignment and general conveyance, in form
and substance reasonably satisfactory to Vanstar and Buyer, dated the
Closing Date, with respect to the Assets;
(b) assignments of all Contracts, leases (including the Leases),
Intellectual Property and any other agreements and instruments
constituting Assets, dated the Closing Date, assigning to Buyer all of
Sellers' rights, title and interests therein and thereto, with, at
Vanstar's election, any required Consent endorsed thereon:
(c) certificates of title to all motor vehicles included in the
Assets to be transferred to Buyer hereunder, duly endorsed for
transfer to Buyer as of the Closing Date.
5.2.8 VENDOR ARRANGEMENTS. To the extent transferable, Vanstar
and Buyer shall have received appropriate transfers of dealer or dealership
authorizations from the major vendors to the Business, which shall include
the transfer, without any material modification thereof, of the rights of
each Seller to receive or otherwise participate in any special pricing
arrangements, promotional programs, rebate arrangements, return policies or
special terms (or Sellers will use their best efforts following Closing to
assist Vanstar and Buyer in attempting to secure such transfers, to the
extent transferable, in the event such transfers have not been received by
Closing). Without limiting the foregoing, Sellers shall transfer to
Vanstar and Buyer any economic benefits relating to any special pricing
arrangements, promotional programs, rebate arrangements, return policies or
special terms, applicable to the Business to the extent of any rights which
either Seller may have in respect thereof.
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5.2.9 COBRA OBLIGATIONS. Vanstar and Buyer shall have received
assurances in form and substance satisfactory to them (that may include
insurance certificates) that Sellers have made all provisions necessary
under Applicable Law, including for these purposes proposed Regulation
Section 1.162-26 et. seq., of the regulations currently proposed to be
adopted pursuant to the Internal Revenue Code of 1986, as amended (the
"Proposed Regulations") with regard to an employer's obligation to provide
for a continuation of health insurance and other benefits of an employee of
Seller relating to the Business, whether or not employed by Vanstar or
Buyer following termination of employment.
5.2.10 CERTAIN EMPLOYMENT ARRANGEMENTS. Vanstar and Buyer shall
have determined, in their sole discretion, that the employment of Mr. Peter
Jackson, currently, the Co-President of Dataflex, with Vanstar and Buyer
following the Closing will be on terms and conditions satisfactory to
Vanstar and Buyer.
5.2.11 ACCOUNTING MATTERS. Vanstar and Buyer shall have received
such reasonable assurances as they shall have deemed appropriate, including
such assurances from Buyers' Accountants, to the effect that (i) the
accounting practices, policies and procedures utilized by Sellers'
Accountants in preparing the Business Financial Statements fairly present
the financial condition of and results of operations for the Business for
the periods indicated; (ii) Sellers have not breached the representations
and warranties contained in Section 3.1.7(u); and (iii) except as set forth
on Schedule 5.2.11, the Business Financial Statements do not differ
materially from the unaudited financial statements of the Business
previously furnished by Sellers to Vanstar and Buyer in connection with the
negotiation and preparation of this Agreement.
5.3 CONDITIONS TO OBLIGATIONS OF SELLERS. The obligation of Sellers to
consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by Sellers in their sole discretion), on or prior to the
Closing Date, of the following additional conditions, which Vanstar and Buyer
agree to use reasonable good faith efforts to cause to be fulfilled.
5.3.1 REPRESENTATIONS, PERFORMANCE, ETC. The representations and
warranties of Vanstar and Buyer contained in this Agreement and the
Collateral Agreements (i) shall be true and correct in all respects (in the
case of any representation or warranty containing any materiality
qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) at and as
of the date hereof and (ii) shall be repeated and shall be true and correct
in all respects (in the case of any representation or warranty containing
any materiality qualification) or in all material respects (in the case of
any representation or warranty without any materiality qualification) on
and as of the Closing Date with the same effect as though made at and as of
such time. Each of Vanstar and Buyer has duly performed and complied in all
material respects with all agreements and conditions required by this
Agreement and the Collateral Agreements to be performed or complied with by
it prior to or on the Closing Date. Each of Vanstar and Buyer shall have
delivered to Sellers a certificate, dated the Closing Date and signed by
its duly authorized officer, to the foregoing effect.
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5.3.2 ASSUMPTION AGREEMENT. Sellers shall have received from
Buyer the Assumption Agreement in the form attached hereto as Exhibit B.
5.3.3 OPINION OF COUNSEL. Sellers shall have received an opinion,
addressed to them and dated the Closing Date, of Arter & Hadden, counsel
for Vanstar and Buyer, in form and substance reasonably satisfactory to
Sellers.
5.3.4 CORPORATE PROCEEDINGS. All corporate proceedings of Vanstar
and Buyer in connection with this Agreement and the Collateral Agreements
and the transactions contemplated hereby and thereby, and all documents and
instruments incident thereto, shall be reasonably satisfactory in substance
and form to Sellers, and their counsel, and Sellers and their counsel shall
have received all such documents and instruments, or copies thereof,
certified if requested, as may be reasonably requested.
5.3.5 CONSENTS AND APPROVALS. Sellers shall have obtained all
Governmental Approvals necessary to consummate the transactions
contemplated hereby.
5.3.6 COLLATERAL AGREEMENTS. Vanstar and Buyer shall have entered
into each of the Collateral Agreements to which it is a party.
ARTICLE VI EMPLOYEES AND EMPLOYEE BENEFIT PLANS
6.1 EMPLOYMENT OF SELLERS' EMPLOYEES.
(a) Sellers will use all reasonable efforts to cause the
employees employed in the Business to make available their employment
services to Buyer. Notwithstanding the foregoing, however, neither
Vanstar, Buyer nor any of their Affiliates shall have any obligation
to hire or otherwise retain the services of any such employee. As to
any such employee offered employment by Buyer (including any
Transition Employee who becomes a Transferred Employee), for a period
of two years from the Closing Date, neither Seller will and neither
Seller will permit any of its Affiliates to, solicit, offer to employ
or retain the services of or otherwise interfere with the relationship
of Vanstar, Buyer or any of their Affiliates with any former employee
of either Seller employed by or otherwise engaged to perform services
for Vanstar, Buyer or any of their Affiliates.
(b) Contemporaneously with the Closing, Buyer shall offer
employment to those employees selected by Buyer, in its sole
discretion, who are employed by either Seller in the Business, at wage
or salary levels, as applicable, and with employee benefits that are
competitive with its similarly situated employees. Those employees
who accept such offers of employment effective as of the Closing Date
shall be referred to herein as the "Transferred Employees".
Notwithstanding the provisions hereof, except as specifically provided
in this Section 6.1(b), such Transferred Employees shall be considered
"new hires" and
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Buyer shall not assume any liability of either Seller in respect of
the Transferred Employees or any other Person, including any liability
for accrued but unpaid salaries, wages, vacation or sick pay or
incentive compensation and Sellers shall remain liable therefor and
shall also remain responsible for payment of any and all retention,
change in control or other similar compensation or benefits which are
or may become payable in connection with the consummation of the
transactions contemplated by this Agreement or the Collateral
Agreements. Subject to Buyer receiving satisfactory verification of
amounts due from each employee in question, Buyer shall assume
Sellers' obligations with respect to accrued vacation pay and accrued
but unpaid salaries, wages and commissions incurred in the ordinary
course and set forth on the Determination Date Balance Sheet in
respect of Transferred Employees, but only to the extent described in
the Cut-off Date Balance Sheet (or incurred in the ordinary course
thereafter) and included among the Assumed Liabilities.
Notwithstanding the foregoing provisions, as a matter of convenience
or otherwise, it is anticipated that Sellers may pay all or part of
the vacation pay and other obligations with respect to the Transferred
Employees assumed by Vanstar and Buyer hereunder and, in such event,
all such amounts so paid by Sellers shall not be included as
liabilities in the Net Worth Report, except to the extent of any cash
reimbursement thereby is made by Vanstar or Buyer.
(c) On or prior to the Closing Date, Buyer shall designate, in
its discretion, those employees employed by either Seller in the
Business whose services Buyer desires such Seller to make available to
Buyer to assist Buyer during a specified period for each such employee
determined by Buyer, in its discretion, which period shall be not more
than ninety (90) days following the Closing Date (each employee so
designated by Buyer shall be referred to herein as a "Transition
Employee" and such employment period, determined with reference to
each such employee, being referred to herein as the "Transition
Period"). Sellers shall use all reasonable efforts to retain the
services of each Transition Employee and to cause each Transition
Employee to make available his or her employment services to Buyer.
During the Transition Period such Transition Employees shall remain
employees of the applicable Seller, and Buyer shall continue all
Employee Benefit Plans, employee benefits and policies of insurance
(including workers compensation and liability) relating to such
Transition Employees. Vanstar or Buyer shall pay to Sellers within
ten (10) business days following each payment of salary to the
Transition Employees, an amount equal to each such Employee's salary,
plus 24% together with an amount equal to any Stay Bonuses that have
been paid during such period pursuant to Section 6.1(e) hereof. At
any time during the Transition Period with respect to a Transition
Employee, Buyer shall have the right, but not the obligation, to make
an offer of employment, in its sole discretion, to such Transition
Employee, at wage or salary levels, and with employee benefits
competitive with those being offered by Buyer to its other similarly
situated employees. Those Transition
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Employees who accept such offers of employment shall thereupon be
considered "Transferred Employees."
(d) Neither Vanstar, Buyer nor any of their Affiliates shall
have any liability under or pursuant to ERISA, or otherwise, with
respect to any employee of Sellers or any of their Affiliates or with
respect to any Employee Benefit Plan or any claim thereof or related
thereto. Except as specifically provided in Section 6.1(b) with
regard to vacation pay applicable to Transferred Employees, from and
after the Closing, Sellers shall remain solely responsible for any and
all liabilities, claims and obligations in respect of the Transition
Employees, Transferred Employees and their beneficiaries and
dependents, relating to or arising in connection with or as a result
of (i) the employment or the actual or constructive termination of
employment of any such employee by either Seller or any of their
Affiliates (including, without limitation, in connection with the
consummation of the transactions contemplated by this Agreement or the
Collateral Agreements), (ii) the participation in or accrual of
benefits or compensation under, or the failure to participate in or to
accrue compensation or benefits under, any Employee Benefit Plan or
other employee or retiree benefit or compensation plan, program,
practice, policy, agreement or arrangement of either Seller or any of
their Affiliates, and (iii) accrued but unpaid salaries, wages,
bonuses, incentive compensation, vacation or sick pay or other
compensation or payroll items (including, without limitation, deferred
compensation).
(e) Not later than the Closing Date, Sellers shall offer each
Transition Employee a bonus (the "Stay Bonus") payable upon the first
to occur of the (i) end of the Transition Period, if such Transition
Employee shall then be employed by Sellers, and (ii) the date that
such Transition Employee shall accept employment with Vanstar or
Buyer, equal to twenty-five percent (25%) of the gross wages or salary
actually received by such Transition Employee during the Transition
Period; provided, however, that the Stay Bonus shall not be payable in
the event of the voluntary termination of a Transition Employee
without the consent of Vanstar and Buyer. Vanstar and Buyer shall,
promptly upon invoice therefore, reimburse Sellers for any Stay
Bonuses actually paid.
6.2 WELFARE AND BENEFIT PLANS.
(a) From and after the Closing Date, Sellers shall remain solely
responsible for any and all liabilities, claims and obligations in respect
of any employee of Sellers or any of their Affiliates (i) under any
Employee Benefit Plan that is an "employee welfare benefit plan" (within
the meaning of section 3(1) of ERISA) that provides post-employment
benefits of any kind (a "Seller Retiree Welfare Plan") or (ii) otherwise in
connection with the provision of, or the failure to provide,
post-employment welfare benefits or coverage to or in respect of any such
employee.
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(b) From and after the Closing Date, Sellers shall remain solely
responsible for any and all liabilities, claims and obligations relating to
or arising in connection with the requirements of section 4980B of the Code
to provide continuation of health care coverage under any Employee Benefit
Plan, in respect of (A) employees of Sellers or any of their Affiliates,
other than the Transferred Employees and their covered dependents, and (B)
to the extent related to a qualifying event occurring on or before the
Closing Date, Transferred Employees and their covered dependents.
6.3 WORKERS COMPENSATION. From and after the Closing Date, Sellers shall
remain solely responsible for any and all liabilities, claims and obligations to
or in respect of any of Sellers' or any of their Affiliates' employee relating
to or arising in connection with any and all claims for workers' compensation
benefits arising in connection with any occupational injury or disease occurring
or existing on or prior to the Closing.
6.4 EMPLOYMENT TAXES. Sellers will, and Vanstar and Buyer will (i) treat
Buyer as a "successor employer" and Sellers as "predecessors," within the
meaning of sections 3121(a)(1) and 3306(b)(1) of the Code, with respect to
Transferred Employees who are employed by Buyer for purposes, and only such
purposes, of Taxes imposed under the United States Federal Unemployment Tax Act
("FUTA") or the United States Federal Insurance Contributions Act ("FICA") and
(ii) cooperate with each other to avoid, to the extent possible, the filing of
more than one IRS Form W-2 with respect to each such Transferred Employee for
the calendar year within which the Closing Date occurs.
ARTICLE VII TERMINATION
7.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by the written agreement of the parties hereto;
(b) by either Sellers or Vanstar and Buyer by written notice to the
other parties if the transactions contemplated hereby shall not have been
consummated pursuant hereto by 5:00 p.m. local Dallas, Texas time on
June 30, 1996, unless such date shall be extended by the mutual written
consent of Sellers, Vanstar and Buyer;
(c) by Vanstar and Buyer by written notice to Sellers if (i) the
representations and warranties of either Seller shall not have been true
and correct in all respects (in the case of any representation or warranty
containing any materiality qualification) or in all material respects (in
the case of any representation or warranty without any materiality
qualification) as of the date when made or (ii) if any of the conditions
set forth in Section 5.1 or 5.2 shall not have been, or if it becomes
apparent that any of such conditions will not be, fulfilled by 5:00 p.m.
local Dallas, Texas time on June 30, 1996, unless such failure shall be due
to the failure of Vanstar or Buyer to perform or comply with any of
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the covenants, agreements or conditions hereof to be performed or complied
with by it prior to the Closing; or
(d) by Sellers by written notice to Vanstar and Buyer if (i) the
representations and warranties of Vanstar or Buyer shall not have been true
and correct in all respects (in the case of any representation or warranty
containing any materiality qualification) or in all material respects (in
the case of any representation or warranty without any materiality
qualification) as of the date when made or (ii) if any of the conditions
set forth in Section 5.1 or 5.3 shall not have been, or if it becomes
apparent that any of such conditions will not be, fulfilled by 5:00 p.m.
local Dallas, Texas time on June 30, 1996, unless such failure shall be due
to the failure of either Seller to perform or comply with any of the
covenants, agreements or conditions hereof to be performed or complied with
by it prior to the Closing.
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to the provisions of Section 7.1, this Agreement shall become
void and have no effect, without any liability to any Person in respect here of
or of the transactions contemplated hereby on the part of any party hereto, or
any of its directors, officers, employees, agents, consultants, representatives,
advisers, stockholders or Affiliates, except as specified in Section 10.1 and
except for any liability resulting from such party's breach of this Agreement.
ARTICLE VIII NON-COMPETITION AND DELIVERY OF FINANCIAL STATEMENTS
8.1 NON-COMPETITION.
(a) Except as provided in Section 8.1(b) below, during the period
commencing with the Closing and continuing thereafter for a period of two
(2) years, Dataflex and DSC agree that they will not and will not permit
any of their Affiliates to, directly or indirectly, own, manage, operate,
control, participate in the ownership, management or control of, or be
connected with or have any interest in, as a stockholder, agent, partner or
otherwise, any business which provides goods, products or services within
the Business Territory competitive with those currently provided by the
Business; provided, however, that nothing contained herein shall prohibit
Sellers from engaging in or participating in the Onyx Business or prohibit
Sellers or any of their Affiliates from owning less than 5% of any class of
securities listed on a national securities exchange or traded publicly in
the over-the-counter market. Sellers recognize and acknowledge that
irreparable damage will result to Vanstar and Buyer in the event of a
breach of by Sellers or any of their Affiliates of the provisions of this
Section 8.1 and, accordingly, in the event of such a breach, Buyer shall be
entitled, in addition to any other legal or equitable damages and remedies
to which it may be entitled or which may be available, to an injunction to
restrain the violation thereof. If any provision of this Section 8.1 shall
be adjudicated by a court of competent jurisdiction to be invalid or
unenforceable because of the scope, duration or area of its applicability,
the court making such determination
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shall have the power to modify such scope, duration or area, or all of them
and such provision shall then be applicable in such modified form.
(b) From and after the Closing, notwithstanding the provisions of
Section 8.1(a) to the contrary, Sellers shall be entitled to continue to
fulfill their obligations under the written agreements with the "National
Account" customers (the "National Accounts") described on Schedule 8.1(b)
to the extent relating to written agreements with customers existing as of
the date hereof and only if such participation is incidental to Sellers'
respective business operations outside of the Business Territory; provided,
however, that in fulfilling its obligations or participating in such
business or benefits, Sellers shall not establish new business locations
within the Business Territory, permit any employees or sales
representatives of either of the Sellers or any of their Affiliates to
actively solicit any business from such National Accounts within the
Business Territory, or outside the Business Territory for the purpose of
servicing orders within the Business Territory, it being understood and
agreed that the sale of products to or the engagement in other transactions
with the National Accounts in the business Territory is intended to be
incidental to and necessary for Dataflex or DSC and/or their Affiliates to
sell products to or otherwise engage in business transactions with the
National Accounts outside of the Business Territory; and provided further,
that none of the agreements set forth on Schedule 8.1(b) shall be
materially modified or amended if the result is to add any new customer
with locations in the Business Territory.
8.2 DELIVERY OF AUDITED FINANCIAL STATEMENTS. Promptly following the
Closing, Sellers shall cause to be delivered to Vanstar and Buyer the Annual
Financial Statements relating to the Business, together with such consents to
the filing thereof by Buyer under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended (collectively the "Securities
Acts"). If Dataflex would not, after giving effect to the consummation of the
transactions contemplated in this Agreement, or otherwise, be required to
prepare such Annual Financial Statements but for the requirement set forth in
this Section 8.2, the direct out-of-pocket costs associated with the preparation
thereof shall be borne by Vanstar. If from time to time after the delivery of
such Annual Financial Statements, Vanstar shall require auditors consents to the
inclusion or the incorporation by reference of the Annual Financial Statements
in any filing under the Securities Acts, or either of them, Sellers shall use
their respective best efforts to cause the delivery thereof promptly upon
request.
ARTICLE IX INDEMNIFICATION
9.1 INDEMNIFICATION BY SELLERS. Each Seller covenants and agrees to
defend, indemnify and hold harmless Vanstar and Buyer and their respective
officers, directors, employees, agents, advisers, representatives and Affiliates
(collectively, the "Buyer Indemnitees") from and against, and pay or reimburse
Buyer Indemnitees for, any and all claims, liabilities, obligations, losses,
fines, costs, royalties, proceedings, deficiencies or damages (whether absolute,
accrued, conditional or otherwise and whether or not resulting from third party
claims, including out-of pocket expenses and reasonable attorneys' and
accountants'
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fees) incurred in the investigation or defense of any of the same or in
asserting any of their respective rights hereunder (collectively, "Losses"),
resulting from or arising out of:
(i) any inaccuracy of any representation or warranty made by
either Seller herein or in any Collateral Agreement or in connection
herewith or therewith;
(ii) the Inventory Difference, AR Adjustment Amount, the VR
Adjustment Amount or any other adjustment to the purchase price
contemplated in Section 2.2 or 2.5, including, without limitation, any
adjustments required by Section 2.5(d).
(iii) any failure of either Seller to perform any covenant or
agreement hereunder or under any Collateral Agreement or to fulfill
any other obligation in respect hereof or of any Collateral Agreement;
(iv) any Excluded Liabilities, including any Assumed Liabilities
to the extent the aggregate of such Assumed Liabilities exceeds the
Maximum Liability;
(v) the Excluded Assets;
(vi) any and all Taxes of either Seller and all Affiliates of
Sellers including, but not limited to, any and all Taxes arising from
or relating to the transactions contemplated in this Agreement and the
Collateral Agreements;
(vii) any and all liabilities, obligations or claims in respect of
employees or former employees of either Seller or any of their
Affiliates, including any and all liabilities, obligations or claims
relating to or in respect of the Transition Employees or any actual or
alleged misconduct or negligence thereof, except, with respect to
Transition Employees and Transferred Employees, to the extent
expressly assumed by Buyer pursuant to Article VI;
(viii) all Environmental Liabilities and Costs arising out of the
Operations of the Business prior to the Closing Date or relating to
the Excluded Assets; and
(ix) any product liability claim with respect to any products,
goods or services distributed or sold or for which compensation was
received prior to the Closing Date;
(x) any liability or claim by any Person asserted against
Vanstar or Buyer by reason of any actual or alleged non-compliance by
Sellers, or either of them, with any bulk sales or bulk transfer law
of any state, to the extent that such claims or liabilities have not
otherwise been assumed by Vanstar or Buyer hereunder.
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9.2 TREATMENT OF SELLERS. For the purposes of this Section 9.2, the
rights, duties and obligations of Dataflex and DSC (and their respective
successors and assigns) shall be joint and several, and the action of one of
them, or notice to or from one of them, shall be the action of, notice to or
from and binding upon the other for all purposes. No dissolution, liquidation,
winding up or any other action of either Dataflex or DSC shall have the effect
of limiting the rights, duties or obligations of Vanstar or Buyer or the Buyer
Indemnitees under this Article IX with respect to Dataflex, DSC or the Seller
Indemnitees, who, in any such circumstance, shall continue to consist of both
Dataflex and DSC (and their respective successors and assigns.)
9.3 INDEMNIFICATION BY VANSTAR AND BUYER. Vanstar and Buyer each covenant
and agree to defend, indemnify and hold harmless Sellers and their officers,
directors, employees, agents, advisers, representatives and Affiliates
(collectively, the "Seller Indemnitees") from and against any and all Losses
resulting from or arising out of:
(i) any inaccuracy in any representation or warranty by Vanstar
or Buyer made or contained in this Agreement or any Collateral
Agreement; or
(ii) any failure of Vanstar or Buyer to perform any covenant or
agreement made or contained in this Agreement or any Collateral
Agreement or to fulfill any other obligation in respect thereof;
(iii) the Assumed Liabilities;
(iv) except to the extent provided for in Section 6.5 or this
Section 9.3, the operation of the Business by Buyer or Buyer's
ownership, operation or use of the Assets following the Closing Date;
and
(v) any actual or alleged act or failure to act by any
Transition Employee occurring after the Closing and while such
Transition Employee is employed by Sellers, or either of them, at the
request of Vanstar or Buyer pursuant to Section 6.1(c);
except, in the case of clause (iv) or (v) to the extent such Losses result
from or arise out of the Excluded Liabilities or are attributable to acts
or circumstances occurring prior to the Closing Date or constitute Losses
for which Seller is required to indemnify Buyer Indemnitees under
Article IX.
9.4 ADJUSTMENTS TO INDEMNIFICATION PAYMENTS. Any payment made by either
Seller to Buyer Indemnitees, on the one hand, or by Vanstar or Buyer to Seller
Indemnitees, on the other hand, pursuant to this Article IX in respect of any
claim shall be net of any insurance proceeds realized by and paid to the
Indemnified Party in respect of such claim. The Indemnified Party shall use its
reasonable efforts to make insurance claims relating to any claim for which it
is seeking indemnification pursuant to this Article IX; provided that the
Indemnified Party shall not be obligated to make such an insurance claim if the
Indemnified Party in its reasonable judgment believes that the cost of pursuing
such an insurance claim together with any
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corresponding increase in insurance premiums or other chargebacks to the
Indemnified Party, as the case may be, would exceed the value of the claim for
which the Indemnified Party is seeking indemnification.
9.5 INDEMNIFICATION PROCEDURES. In the case of any claim entitling a
party hereto to indemnification (the "Indemnified Party"), notice shall be given
by the Indemnified Party to the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and the Indemnified Party
shall permit the Indemnifying Party (at the expense of such Indemnifying Party)
to assume the defense of any claim or any litigation resulting therefrom;
PROVIDED that (1) the counsel for the Indemnifying Party who shall conduct the
defense of such claim or litigation shall be reasonably satisfactory to the
Indemnified Party, (ii) the Indemnified Party may participate in such defense at
such Indemnified Party's expense, and (iii) the omission by any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of its indemnification obligation under this Agreement except to the extent that
such omission results in a failure of actual notice to the Indemnifying Party
and such Indemnifying Party is materially damaged as a result of such failure to
give notice. Except with the prior written consent of the Indemnified Party, no
Indemnifying Party, in the defense of any such claim or litigation, shall
consent to entry of any judgment or enter into any settlement that provides for
injunctive or other nonmonetary relief affecting the Indemnified Party or that
does not include as an unconditional term thereof the giving by each claimant or
plaintiff to such Indemnified Party of a release from all liability with respect
to such claim or litigation. In the event that the Indemnified Party shall in
good faith determine that the conduct of the defense of any claim subject to
indemnification thereunder or any proposed settlement of any such claim by the
Indemnifying Party might be expected to affect adversely the Indemnified Party's
Tax liability or the ability of the Indemnified Party to conduct its business,
or that the Indemnified Party may have available to it one or more defenses or
counterclaims that are inconsistent with one or more of those that may be
available to the Indemnifying Party in respect of such claim or any litigation
relating thereto, the Indemnified Party shall have the right at all times to
take over and assume control over the defense, settlement, negotiations or
litigation relating to any such claim at the sole cost of the Indemnifying
Party, PROVIDED that if the Indemnified Party does so take over and assume
control, the Indemnified Party shall not settle such claim or litigation without
the written consent of the Indemnifying Party, such consent not to be
unreasonably withheld. In the event that the Indemnifying Party does not accept
the defense of any matter as above provided, the Indemnified Party shall have
the full right to defend against any such claim or demand and shall be entitled
to settle or agree to pay in full such claim or demand. In any event, the
Indemnifying Party and the Indemnified Party shall cooperate in the defense of
any claim or litigation subject to this Section 9.5 and the records of each
shall be available to the other with respect to such defense.
9.6 TIME LIMITATION. All claims for indemnification under clause (i) of
the first sentence of Section 9.1 or clause (i) of the first sentence of
Section 9.3 must be asserted within 30 days of the termination of the respective
survival periods set forth in Section 9.7.
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9.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. The representations
and warranties contained in this Agreement shall survive the execution and
delivery of this Agreement, any examination by or on behalf of the parties
hereto and the completion of the transactions contemplated herein, but only to
the extent specified below:
(a) except as set forth in clauses (b) and (c) below, the
representations and warranties contained in Section 3.1 and Section 3.2
shall survive for a period of 3 years following the Closing Date.
(b) the representations and warranties contained in Sections 3.1.1,
3.1.2, 3.1.3, 3.1.11, 3.1.13, 3.1.22, 3.2.1 and 3.2.2 shall survive without
limitation; and
(c) the representations and warranties of Seller contained in Section
3.1.6 shall survive as to any Tax covered by such representations and
warranties for so long as any statute of limitations for such Tax remains
open, in whole or in part, including without limitation, by reason of
waiver of such statute of limitations.
ARTICLE X MISCELLANEOUS
10.1 EXPENSES. Except as provided in Section 8.2, each Seller, on the
one hand, and Vanstar and Buyer, on the other hand, shall bear their respective
expenses, costs and fees (including attorneys', auditors' and financing
commitment fees) in connection with the transactions contemplated hereby,
including the preparation, execution and delivery of this Agreement and
compliance herewith (the "Transaction Expenses"), whether or not the
transactions contemplated hereby shall be consummated.
10.2 SEVERABILITY. If any provision of this Agreement, including any
phrase, sentence, clause, section or subsection is inoperative or unenforceable
for any reason, such circumstances shall not have the effect of rendering the
provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein contained
invalid, inoperative, or unenforceable to any extent whatsoever.
10.3 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally or (b) sent by reputable next-day or overnight mail or delivery,
proof of delivery requested.
(i) if to Vanstar or Buyer,
Vanstar Corporation
5964 W. Las Positas Blvd.
Pleasanton, CA 94566-9012
Attention: General Counsel
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with a copy to:
Stanley R. Huller, Esq.
Arter & Hadden
1717 Main Street, Suite 4100
Dallas, Texas 75201
(ii) if to Sellers,
Dataflex Corporation
Dataflex Southwest Corporation
3920 Park Avenue
Edison, New Jersey 08820
Attention: Chairman
with a copy to:
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel
Metro Corporate Campus One
P. O. Box 5600
Woodbridge, NJ 07095
Attention: W. Raymond Felton, Esq.
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other communications shall
be deemed to have been received (w) if by personal delivery on the day of such
delivery, or (x) if by next-day or overnight mail or delivery, on the day after
delivery.
10.4 HEADINGS. The headings contained in this Agreement are for
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
10.5 ENTIRE AGREEMENT. This Agreement (including the Schedules
hereto) and the Collateral Agreements (when executed and delivered) constitute
the entire agreement and supersede all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
10.6 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
10.7 GOVERNING LAW, ETC. This Agreement shall be governed in all
respects, including as to validity, interpretation and effect, by the internal
laws of the State of Delaware, without giving effect to the conflict of laws
rules thereof.
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10.8 BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, successors and
permitted assigns.
10.9 ASSIGNMENT. This Agreement shall not be assignable or otherwise
transferable by any party hereto without the prior written consent of the other
parties hereto. In the event of any merger, consolidation, liquidation,
dissolution or winding up of or similar transaction involving either Dataflex or
DSC, Dataflex and DSC shall cause any Person who shall be a successor to or
assignee of the property of Dataflex or DSC, as the case may be, or the
recipient of any distribution by Dataflex or DSC in respect of its equity
securities to assume the obligations of Sellers hereunder, without restriction,
and shall deliver notice of such transaction and assumption to Vanstar and Buyer
not less than thirty (30) days prior to the consummation thereof.
10.10 NO THIRD PARTY BENEFICIARIES. Except as provided in Article IX
with respect to indemnification of Indemnified Parties hereunder, nothing in
this Agreement shall confer any rights upon any Person or entity other than the
parties hereto and their respective, successors and permitted assigns. Without
limiting the generality of the foregoing, no provision of this Agreement or any
Collateral Agreement shall constitute an offer, guaranty or contract of
employment.
10.11 AMENDMENT; WAIVERS, ETC. No amendment, modification or discharge
of this Agreement, and no waiver hereunder, shall be valid or binding unless set
forth in writing and duly executed-by the party against whom enforcement of the
amendment, modification, discharge or waiver is sought. Any such waiver shall
constitute a waiver only with respect to the specific matter described in such
writing and shall in no way impair the rights of the party granting such waiver
in any other respect or at any other time. Neither the waiver by any of the
parties hereto of a breach of or a default under any of the provisions of this
Agreement, nor the failure by any of the parties, on one or more occasions, to
enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions, rights or
privileges hereunder. The rights and remedies herein provided are cumulative
and are not exclusive of any rights or remedies that any party may otherwise
have at law or in equity. The rights and remedies of any party based upon,
arising out of or otherwise in respect of any inaccuracy or breach of any
representation, warranty, covenant or agreement or failure to fulfill any
condition shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of any such inaccuracy
or breach is based may also be the subject matter of any other representation,
warranty, covenant or agreement as to which there is no inaccuracy or breach.
The representations and warranties of Sellers shall not be affected or deemed
waived by reason of any investigation made by or on behalf of Vanstar or Buyer
(including but not limited to, by any of its advisors, consultants or
representatives) or by reason of the fact that Vanstar or Buyer or any of such
advisors, consultants or representatives knew or should have known that any such
representation or warranty is or might be inaccurate
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
VANSTAR CORPORATION
By: /s/ Jeffrey S. Rubin
-----------------------------------------------
Name: Jeffrey S. Rubin
---------------------------------------------
Title: Vice Chairman
--------------------------------------------
VST WEST, INC.
By: /s/ Jeffrey S. Rubin
-----------------------------------------------
Name: Jeffrey S. Rubin
---------------------------------------------
Title: Vice President
--------------------------------------------
DATAFLEX CORPORATION
By: /s/ Raymond DioGuardi
-----------------------------------------------
Name: Raymond DioGuardi
---------------------------------------------
Title: Senior Vice President
--------------------------------------------
DATAFLEX SOUTHWEST CORPORATION
By: /s/ Raymond DioGuardi
-----------------------------------------------
Name: Raymond DioGuardi
---------------------------------------------
Title: Senior Vice President
--------------------------------------------
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SCHEDULES AND EXHIBITS
The Schedules and Exhibits to this Asset Purchase Agreement have been
omitted in reliance upon Item 601(b)(2) of Regulation S-K. The omitted
Schedules and Exhibits are listed below. The Registrant hereby undertakes to
furnish the Commission supplementally, upon request, a copy of any omitted
Schedule or Exhibit to this Asset Purchase Agreement.
SCHEDULES
Schedule No.
------------
Excluded Assets.........................................................1.2
Additional Assumed Liabilities...................................2.9(a)(ii)
Jurisdictions of Dataflex and DSC..................................3.1.2(b)
Consents..............................................................3.1.3
Extraordinary Costs and Adjustments to
Annual Financial Statements ........................................3.1.4
Liabilities, including, Employee Vacation
Time, Vacation Pay, Severance, Etc..................................3.1.5
Contested Taxes....................................................3.1.6(a)
Extension for Period of Assessments on Taxes.......................3.1.6(b)
Assertion of Taxes Owed............................................3.1.6(c)
Litigation, Administrative Appeal of Taxes.........................3.1.6(e)
Changes Outside Ordinary Course of Business...........................3.1.7
Actions, Claim, Etc...................................................3.1.8
Compliance with Applicable Law Exception...........................3.1.9(a)
Governmental Approvals.............................................3.1.9(b)
Governmental Contracts.............................................3.1.9(c)
Business Operations Through Direct or Indirect Subsidiary............3.1.10
Permitted Liens......................................................3.1.11
Agreements, Contracts, Commitments................................3.1.12(a)
Events of Default on Contracts, Etc...............................3.1.12(c)
Territorial Restrictions.............................................3.1.13
Location of Inventories..............................................3.1.14
Customer Lists.......................................................3.1.15
Suppliers............................................................3.1.16
Warranties...........................................................3.1.17
Intellectual Property.............................................3.1.19(a)
Intellectual Property Exceptions..................................3.1.19(b)
Leased or Licensed Intellectual Property..........................3.1.19(d)
Intellectual Property Litigation..................................3.1.19(e)
Restrictions on Use of Name and Mark..............................3.1.19(g)
Insurance Policies...................................................3.1.20
Leases............................................................3.1.21(b)
Collective Bargaining Agreements.....................................3.1.23
<PAGE>
Pension, Bonuses & Other Compensation................................3.1.24
Confidentiality Exceptions...........................................3.1.25
Guarantee Exceptions.................................................3.1.26
Receivables..........................................................3.1.30
Backlog..............................................................3.1.31
Governmental Approval and Other Consents
Required by Vanstar and/or Buyer....................................3.2.2
Operating and Applications Software................................5.2.5(b)
Material Differences in Financials ..................................5.2.11
EXHIBITS
Exhibit A Transferred Affiliate Receivables
Exhibit B Assumption Agreement
<PAGE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE CONTACT
Karin Ball, Vanstar Corporation
510-734-4362 or [email protected]
Rich Layne, Neale-May & Partners
212-317-0900 or [email protected]
VANSTAR CORPORATION COMPLETES ACQUISITION
OF WESTERN REGION BUSINESS OPERATIONS OF DATAFLEX
PLEASANTON, CALIF., MAY 24, 1996 -- Vanstar Corp. (VST-NYSE), a leading
provider of PC network integration services, today announced that it has
completed its acquisition of the western regional business operations of
Dataflex Corporation of Edison, New Jersey. Dataflex Corporation is a service
provider and reseller into corporate PC desktop and network environments. Its
Western Region accounted for approximately $145 million of revenue of which
approximately 10% was service revenue during the fiscal year ending March 31,
1996. The company's western region includes offices in Alameda, Los Angeles,
and San Diego, California and Tempe and Tucson, Arizona.
The acquisition further strengthens Vanstar's presence among large
corporate customers seeking to outsource the design, integration, and management
of large PC desktop and network infrastructures.
The intention to acquire the western regional business operations of
Dataflex had been announced on April 25.
ABOUT THE COMPANIES
Vanstar is a leading provider of services and products designed to build
and manage personal computer network infrastructures primarily for Fortune 1000
companies and other large enterprises. The company provides customized,
integrated solutions for its customers' network infrastructure needs by
combining a comprehensive offering of value-added services with its expertise in
sourcing and distributing PCs, network products, computer peripherals and
software from a variety of vendors.
Dataflex Corporation, headquartered in Edison, NJ, has offices in Illinois,
Georgia, Florida, Tennessee and New York.
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