PURCHASE AGREEMENT
By and Among
CHS ELECTRONICS, INC.
As Buyer
And
MERISEL, INC.,
and
MERISEL EUROPE, INC.
As Sellers
Dated as of August 29, 1996
TABLE OF CONTENTS
Page
Background 1
Terms 1
ARTICLE 1 THE TRANSACTIONS 1
1.1Sale and Purchase of the Stock and Europe Assets 1
1.2Purchase Price; Post-Closing Adjustments; Payment 2
1.3 Closing 7
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLERS 8
2.1 Organization 8
2.2Capitalization and Ownership: Power and Authority 9
2.3 Subsidiaries 9
2.4 Qualification; Location of Business and Assets 9
2.5 Authorization and Enforceability 10
2.6 No Violation of Laws or Agreements 10
2.7 Financial Statements 12
2.8 No Undisclosed Liabilities 13
2.9 No Changes 13
2.10 Taxes 15
2.11 Inventory 17
2.12 Accounts Receivable 17
2.13 No Pending Litigation or Proceedings 17
2.14 Contracts; Compliance 18
2.15 Compliance With Laws 18
2.16 Consents 19
2.17 Title 19
2.18 Real Estate 20
2.19 Transactions with Related Parties 20
2.20 Condition of Assets 20
2.21Compensation Arrangements; Officers and Directors 20
2.22 Labor Relations 21
2.23 Products Liability 21
2.24 Insurance 21
2.25 Patents and Intellectual Property Rights 22
2.26 Employee Benefits 22
2.27 Brokerage 25
2.28 Questionable Payments 25
2.29 Disclosure 25
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BUYER 26
3.1 Organization 26
3.2 Power and Authority 26
3.3 Authorization and Enforceability 26
3.4 Brokerage 26
3.5 Securities Act 26
3.6 No Violation of Laws or Agreements 26
3.7 Consents 27
3.8 Litigation 27
3.9 Financing 27
3.10 Disclosure 27
ARTICLE 4 CERTAIN OBLIGATIONS OF THE PARTIES 28
4.1 Conduct of Business Pending Closing 28
4.2 Insurance 30
4.3 Fulfillment of Agreements by Sellers 30
4.4 Access, Information and Documents 31
4.5 Exclusivity 31
4.6 Section 338(h)(10) Election 32
4.7 Resignations 32
4.8 Accounts Payable 32
4.9 Fulfillment of Agreements by Buyer 32
4.10 Elimination of 30-Day Automatic Return Policy 33
ARTICLE 5 CONDITIONS TO CLOSING; TERMINATION 33
5.1 Conditions Precedent to Obligations of Buyer 33
5.2Conditions Precedent to the Obligations of Sellers 36
5.3 Termination 37
ARTICLE 6 CERTAIN ADDITIONAL COVENANTS 39
6.1 Costs and Expenses 39
6.2 Covenant Not to Compete 39
6.3 Confidential Information 40
6.4 Indemnification By Sellers 40
6.5 Indemnification by Buyer 42
6.6 Indemnification Procedures 42
6.7Claims Against Latin America, Mexico or any Subsidiary 44
6.8 European Anti-Competition Legislation 44
6.9 Brokers 44
6.10 Access 44
6.11 Cooperation With Respect to Tax Matters 45
6.12 Released Obligations 46
6.13 Employee Obligations 46
6.14 Reduction of Revolving Credit Agreement 47
6.15 Fulfillment Agreement 47
6.16 Audits of Purchased Entities 47
ARTICLE 7 MISCELLANEOUS 47
7.1 Nature and Survival of Representations 47
7.2 Certain Definitions 47
7.3 Notices 49
7.4 Successors and Assigns 49
7.5 Governing Law 49
7.6 Headings 49
7.7 Counterparts 50
7.8 Further Assurances 50
7.9 Amendment and Waiver 50
7.10 Entire Agreement 50
7.11 Interpretations 50
7.12 Attorney's Fees 50
7.13 Public Announcement 51
7.14 Knowledge of Sellers and Buyer 51
7.15 Material Adverse Effect 51
LIST OF SCHEDULES
Schedule 1.1 Europe Assets and Assumed Liabilities
Schedule 2.1 List of Subsidiaries
Schedule 2.2 Capitalization
Schedule 2.4 Jurisdictions of Qualification; Location of
Business and Assets
Schedule 2.6 No Violations
Schedule 2.7 July Balance Sheets
Schedule 2.8 No Undisclosed Liabilities
Schedule 2.9 Changes Since Balance Sheet Date
Schedule 2.10 Taxes
Schedule 2.11 Inventory
Schedule 2.13 Pending Litigation or Proceedings
Schedule 2.14 Contracts
Schedule 2.15 Compliance with Laws
Schedule 2.16 Consents
Schedule 2.17 Permitted Liens and Encumbrances
Schedule 2.18 Real Estate
Schedule 2.19 Transactions with Related Parties
Schedule 2.20 Condition of Assets
Schedule 2.21 Compensation Arrangements, Bank Accounts and
Officers and Directors
Schedule 2.22 Labor Relations
Schedule 2.23 Products Liability
Schedule 2.24 Insurance
Schedule 2.25 Patents and Intellectual Property Rights
Schedule 2.26 Employee Benefit Plans
Schedule 4.1(b) Preservation of Business
Schedule 4.1(c) Material Transactions
Schedule 4.6 Consolidated Group
Schedule 5.1(viii) Executive Management
Schedule 5.1(xx) Miami, Florida Leases
Schedule 6.11 Cooperation Group
Schedule 6.12 Guarantees
Schedule 6.13 Certain Employees
Schedule 7.14 Individuals with Knowledge
LIST OF EXHIBITS
Exhibit A Formula to Adjust Net Book
Value of Merisel Europe, Inc.
Exhibit B Escrow Agreement
Exhibit C Landlord Estoppel Certificate
Exhibit D Vendors
PURCHASE AGREEMENT
THIS IS A PURCHASE AGREEMENT (the "Agreement") dated August
29, 1996 by and among CHS Electronics, Inc., a Florida
corporation ("Buyer"), and Merisel, Inc., a Delaware corporation
("Merisel"), and Merisel Europe, Inc., a Delaware corporation
("Europe"). Merisel and Europe are collectively referred to
herein as the "Sellers."
Background
Merisel, through a wholly-owned subsidiary, owns all of the
issued and outstanding capital stock (the term "capital stock"
shall mean, for purposes of this Agreement, ownership interest,
which may be measured in terms of stock or registration with the
appropriate governmental agency) of Merisel Latin America, Inc.
("Latin America" and with respect to its capital stock, the
"Latin America Stock") and Merisel Mexico S.A. de C.V. ("Mexico"
and with respect to its capital stock, the "Mexico Stock") (the
Latin America Stock and the Mexico Stock are collectively
referred to herein as the "Latin/Mexico Stock"). Europe owns all
of the issued and outstanding capital stock of the European
Subsidiaries (as such term is defined in Section 2.1) (such stock
is collectively referred to herein as the "Europe Stock" and
together with the Latin/Mexico Stock, the "Stock") and certain
assets as set forth on Schedule 1.1 (the "Europe Assets"). Buyer
desires to purchase and Sellers desire to sell the Europe Stock,
the Latin America Stock and the Mexico Stock and the Europe
Assets on the terms and subject to the conditions set forth in
this Agreement.
Terms
In consideration of the mutual covenants contained herein
and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE 1
THE TRANSACTIONS
1.1 Sale and Purchase of the Stock and Europe Assets. At
the Closing referred to in Section 1.3 below, Sellers will sell
and assign to Buyer, and Buyer will purchase from Sellers, the
Stock and Europe Assets, as set forth on Schedule 1.1 hereto,
free and clear of all liens and encumbrances of any nature
whatsoever except as set forth in Schedule 2.17. Buyer will
assume the liabilities and obligations set forth on Schedule 1.1.
1.2 Purchase Price; Post-Closing Adjustments; Payment.
(a) Purchase Price. The aggregate purchase price for all
of the Stock and the Europe Assets (the "Purchase Price") shall
be as follows: (i) Forty Million Dollars ($40,000,000) for the
Latin America Stock and the Mexico Stock, subject to adjustment
as set forth in Section 1.2(d)(ii) hereof (the "Latin/Mexico
Purchase Price"), (ii) with respect to the Europe Stock, an
amount equal to the Total Adjusted Capital of the European
Subsidiaries and (iii) with respect to the Europe Assets, the
book value of the Europe Assets (the "Europe Assets Value") as of
the Closing Date (the aggregate of items (ii) and (iii) are
defined as the "Purchase Price of Europe Stock and the Europe
Assets"). Each of the Latin/Mexico Purchase Price and the
Purchase Price of the Europe Stock and the Europe Assets shall be
apportioned between the Latin American Stock and the Mexico Stock
and among the Europe Stock and Europe Assets, respectively, in
accordance with the apportionment schedules set forth on Schedule
1.2(a). "Total Adjusted Capital of the European Subsidiaries" is
hereby defined to be Net Assets, excluding any Amounts Due to or
from Related Parties, as defined hereafter, as adjusted by the
formula set forth in Exhibit A. "Net Assets" is defined as
assets reflected on the Europe Closing Balance Sheet (as such
term is defined in Section 1.2(c)(i)) increased by any
receivables subject to the Asset Amortization Agreement (as such
term is defined in Section 1.2(b), but decreased by liabilities
to third parties reflected on such balance sheet. The Europe
Closing Balance Sheet shall be deemed to have cash on hand and
marketable securities of no more than $500,000, with the excess
being distributed to Sellers immediately upon the determination
of the actual amount thereof. "Amounts Due to or from Related
Parties" shall include any payables to or receivables from
Related Parties (as such term is defined in Section 2.19)
including, without limitation, any amounts outstanding under the
Revolving Credit Agreement dated as of December 26, 1993 and
amended and restated as of April 12, 1996 among Europe and
Merisel America, Inc. as borrowers and Citicorp USA Inc. as agent
(the "Revolving Credit Agreement") and intercompany tax accounts
but excluding deferred tax liabilities and deferred tax assets
which will be assumed by the Buyer. The Purchase Price shall be
further reduced by (X) $4 million for the cost of eliminating
duplicative facilities and severance of redundant personnel and
relocation costs and (Y) $3,216,000 representing the rent payable
under certain leases in the Netherlands during the 12 months
following the Closing Date. Attached as Schedule 1.2(a) is a
sample calculation of what the Purchase Price would be if the
same were determined on the June 30, 1996 balance sheet. Merisel
and Buyer shall cause a physical inventory to be taken on the
Closing Date in connection with the foregoing calculation.
(b) Payments. The Purchase Price shall be payable as
follows: on the Closing Date, Buyer shall pay (i) to Europe, by
wire transfer, a cash amount (the "Europe Cash Payment") equal to
the Estimated Purchase Payment Amount (as defined below) less Ten
-2-
Million Dollars ($10,000,000) and less the amount payable to
Deutsche Financial Services (UK) Ltd. under the Asset
Amortization Agreement as of the Closing Date, (ii) to Merisel,
by wire transfer, a cash amount (the "Latin/Mexico Cash Payment")
equal to Forty Million Dollars ($40,000,000) and (iii) to an
escrow agent reasonably satisfactory to Buyer and Sellers
("Escrow Agent"), by wire transfer, a cash amount equal to Ten
Million Dollars ($10,000,000) (the "Escrow Payment") to be held
in accordance with the terms of the escrow agreement in the form
of Exhibit B (the "Escrow Agreement"). For purposes of this
Agreement, the term "Estimated Purchase Payment Amount" means the
dollar amount of an estimate of the Purchase Price of the Europe
Stock and Europe Assets, prepared by Europe in good faith based
upon the combining balance sheets and underlying supporting
information of Europe and the European Subsidiaries as of August
31, 1996, which estimate shall be in reasonable detail with sup
porting documentation and shall be subject to the approval of
Buyer (such approval not to be unreasonably withheld). In addi
tion, Buyer shall assume the liability of Europe under the Asset
Amortization Agreement between Deutsche Financial Services, (UK)
Ltd., and Merisel (U.K.) Limited dated as of October 12, 1995
(the "Asset Amortization Agreement") and the liabilities and
obligations set forth on Schedule 1.1.
(c) Regarding the Closing Balance Sheets. (i) Promptly
after the Closing Date, but in any event no later than 60 days
after the Closing Date, Europe shall prepare and deliver to
Buyer, or cause to be prepared and delivered to Buyer, a
combining balance sheet of the European Subsidiaries and Europe
Assets as of the close of business on the Closing Date (the
"Europe Closing Balance Sheet"), together with the draft audit
report of Deloitte & Touche, LLP thereon. The Europe Closing
Balance Sheet shall be prepared in accordance with United States
generally accepted accounting principles ("U.S. GAAP") applied
consistently with those U.S. GAAP principles applied in the
preparation of the 1995 Balance Sheets (as defined in Section
2.7) (such accounting principles being, the "Accounting
Principles"), except that the accounts receivable and inventory
on the Europe Closing Balance Sheet will be valued utilizing the
adjustments listed in Exhibit A. In addition, the combining
closing balance sheet will convert foreign currencies to U.S.
dollars at the closing exchange rate published in the Wall Street
Journal as of the Closing Date, and the Europe Closing Balance
Sheet will be prior to the application of purchase accounting and
recordation of the transactions contemplated in the Agreement.
MIFINCO, Inc.'s investment in shares of Merisel France, Inc. and
Mexico will be valued at zero for the combining Closing Balance
Sheet. The report of Deloitte & Touche, LLP shall state (without
qualification as to scope of audit or other matters) that in
their opinion the Europe Closing Balance Sheet presents fairly in
all material respects, the net assets of Europe sold as of the
Closing Date, on the basis of accounting defined in this
Agreement and Exhibit A. The Europe Closing Balance Sheet shall
be subject to the review of Xxxxx Xxxxxxxx L.L.P. The parties
shall allow and cause the European Subsidiaries to allow the
-3-
parties, Xxxxx Xxxxxxxx, L.L.P. and other representatives of the
parties full and complete access to all work papers, books and
records and all additional information used in preparing the
Europe Closing Balance Sheet and will make their and the European
Subsidiaries' officers and employees reasonably available to
discuss with the parties and their representatives such papers,
books, records and information. Buyer and its representatives
shall be provided complete access to all work papers and other
information used by Deloitte & Touche, LLP in examining the
Europe Closing Balance Sheet which are not proprietary to
Deloitte & Touche, LLP and Sellers and their representatives
shall be provided complete access to all work papers and other
information used by Xxxxx Xxxxxxxx, L.L.P. in reviewing the
Europe Closing Balance Sheet which are not proprietary to Xxxxx
Xxxxxxxx, LLP. The Europe Closing Balance Sheet, when delivered
by Europe to Buyer, shall be deemed final, conclusive and binding
on the parties and will be deemed to be the Europe Closing
Balance Sheet, upon which the Purchase Price of the Europe Stock
and the Europe Assets will be based, unless either Europe or
Buyer notifies the other, within 10 days after receipt of the
Europe Closing Balance Sheet, of its disagreement therewith
(which notice shall state with reasonable specificity the reasons
for any disagreement and the amounts in dispute). If neither
Europe nor Buyer disagrees with the draft Europe Closing Balance
Sheet, Deloitte & Touche, LLP will issue their final audit
report. In the event that the parties agree the Purchase Price
of the Europe Stock and the Europe Assets is higher (or lower)
than the Estimated Purchase Price Amount and agree on the minimum
amount of such difference, pending resolution of any other dis
agreements, such minimum amount shall be paid by the Escrow Agent
from the Escrow Fund (as defined in the Escrow Agreement) to
Europe (if the Purchase Price of the Europe Stock and the Europe
Assets is higher than the Estimated Purchase Price Amount), or to
Buyer (if the Purchase Price of the Europe Stock and the Europe
Assets is lower than the Estimated Purchase Price Amount). If
there is a disagreement, and such disagreement cannot be resolved
by Buyer and Europe (each of which shall use their "reasonable
efforts" to so resolve the claim) within 30 days following the
receipt by Europe of the Europe Closing Balance Sheet, the items
in dispute shall be submitted to a nationally recognized firm of
independent auditors acceptable to both Buyer and Europe (or, in
the absence of agreement, the auditing firm of KPMG Peat Marwick
L.L.P.) (the "Resolution Accountants"). The sole function of the
Resolution Accountants shall be to select as most accurately
reflecting the Europe Closing Balance Sheet, without adjustment
or alteration, the Europe Closing Balance Sheet submitted by
Buyer or the Europe Closing Balance Sheet submitted by Europe as
the true Europe Closing Balance Sheet, and the determination by
such independent auditing firm shall be binding and conclusive
upon the parties. If the Resolution Accountants select the
Europe Closing Balance Sheet submitted by Buyer, Europe shall pay
the fees and expenses of the Resolution Accountants; if the
Resolution Accountants select the Europe Closing Balance Sheet
submitted by Europe, Buyer shall pay the fees and expenses of the
-4-
Resolution Accountants. Europe shall pay the cost of the fees
and expenses of Deloitte & Touche, L.L.P. and Buyer shall pay the
cost of the fees and expenses of Xxxxx Xxxxxxxx L.L.P. There
shall be no adjustment to the Purchase Price unless and until
such adjustment exceeds $250,000 and only to the extent of that
excess of $250,000.
(i) Promptly after the Closing Date, but in any event no
later than 60 days after the Closing Date, Merisel shall prepare
and deliver to Buyer, or cause to be prepared and delivered to
Buyer, a combining balance sheet of Latin America and Mexico (the
"Latin/Mexico Closing Balance Sheet") as of the close of business
on the Closing Date, together with the draft audit report of
Deloitte & Touche, LLP thereon. The Latin/Mexico Closing Balance
Sheet shall be prepared in accordance with U.S. GAAP applied con
sistently with those U.S. GAAP principles applied in the prepara
tion of the 1995 Balance Sheets, except that the Latin/Mexico
Closing Balance Sheet will convert Mexican pesos to U.S. dollars
at the closing exchange rate published in the Wall Street Journal
as of the Closing Date and the Latin/Mexico Closing Balance Sheet
will be prior to the application of purchase accounting and
recordation of the transactions contemplated in this Agreement
(the "Latin American Accounting Principles"). The report of
Deloitte & Touche, L.L.P. shall state (without qualification as
to scope of audit or other matters) that in their opinion the
Latin/Mexico Closing Balance Sheet presents fairly in all
material respects, the net assets of Mexico and Latin America
sold as of the Closing Date, on the basis of the Latin American
Accounting Principles defined in this Agreement. The parties
shall allow and cause Latin America and Mexico to allow the
parties, Xxxxx Xxxxxxxx, L.L.P. and other representatives of the
parties, full and complete access to all work papers, books and
records and all additional information used in preparing the
Latin/Mexico Closing Balance Sheet and will make their and will
use their reasonable efforts to make Latin America's and Mexico's
officers and employees available to discuss with the parties and
their representatives such papers, books, records and
information. Buyer and all its representatives shall be provided
complete access to all work papers and other information used by
Deloitte & Touche, LLP in auditing the Latin/Mexico Closing
Balance Sheet which are not proprietary to Deloitte & Touche LLP
and Sellers and their representatives should be provided complete
access to all work papers and other information used by Xxxxx
Xxxxxxxx L.L.P. in reviewing the Latin/Mexico Closing Balance
Sheet which are not proprietary to Xxxxx Xxxxxxxx L.L.P. The
Latin/Mexico Closing Balance Sheet, when delivered by Sellers to
Buyer, shall be deemed final, conclusive and binding on the
parties and will be deemed to be the Latin/Mexico Closing Balance
Sheet upon which the Latin/Mexico Purchase Price may be adjusted,
unless either Merisel or Buyer notifies the other, within 10 days
after receipt of the Latin/Mexico Closing Balance Sheet, of its
disagreement therewith (which notice shall state with reasonable
specificity the reasons for any disagreement and the amounts in
dispute). If neither Sellers nor Buyer disagrees with the draft
Latin/Mexico Closing Balance Sheet, Deloitte & Touche, LLP will
-5-
issue their final audit report. If such disagreement cannot be
resolved by Buyer and Merisel (each of which shall use their
"reasonable efforts" to so resolve the claim) within 30 days
following the receipt from Latin America and Mexico of the
Latin/Mexico Closing Balance Sheet, the items in dispute shall be
submitted to the Resolution Accountants. The sole function of
the Resolution Accountants shall be to select as most accurately
reflecting the Latin/Mexico Closing Balance Sheet, without adjust
ment or alteration, the Latin/Mexico Closing Balance Sheet sub
mitted by Buyer to the Resolution Accountants, which closing
balance sheet reflects the results of any previous discussions
between the parties or the Latin/Mexico Closing Balance Sheet
submitted by Merisel to the Resolution Accountants, which closing
balance sheet reflects the results of any previous discussions
between the parties as the true Latin/Mexico Closing Balance
Sheet, and the determination by such independent auditing firm
shall be binding and conclusive upon the parties. If the
Resolution Accountants select the Latin/Mexico Closing Balance
Sheet submitted by Buyer, Merisel shall pay the fees and expenses
of the Resolution Accountants; if the Resolution Accountants
select the Latin/Mexico Closing Balance Sheet submitted by
Merisel, Buyer shall pay the fees and expenses of the Resolution
Accountants. Merisel shall pay the cost of the fees and expenses
of Deloitte & Touche, LLP and Buyer shall pay the cost of the
fees and expenses of Xxxxx Xxxxxxxx L.L.P.
(ii) The balance sheet of each European Subsidiary to be
used in the preparation of the Europe Closing Balance Sheet and
the balance sheet of each entity included in the Latin/Mexico
Closing Balance Sheet shall be prepared by the individual who is
the Managing Director and the individual who is the Chief
Financial Officer of the respective entity on the date hereof.
If one of these individuals is unavailable, the other will act
solely. Xxxxx Xxxxxxxx, L.L.P. shall be permitted to review the
draft balance sheets and work papers of each entity prepared
under the supervision of said individuals. Buyer shall have the
right to meet with Deloitte & Touche, LLP in conjunction with
their planning of the procedures with respect to the audit of the
Europe Closing Balance Sheet and the Latin/Mexico Balance Sheet,
such approval not to be unreasonably withheld.
(d) Post-Closing Determination.
(i) To the extent that the Estimated Purchase Payment
Amount shall have been more than the sum of the Total Adjusted
Capital of the European Subsidiaries and Europe Assets Value, the
amount of such difference (less any interim payments to Buyer
pursuant to Section 1.2(c)(i)) shall be paid to Buyer by Escrow
Agent in accordance with the terms of the Escrow Agreement within
five business days after the determination of such amount. The
balance of the Escrow Fund together with interest earned on all
amounts distributed to Seller, if any, shall thereafter be paid
to Seller. To the extent the amount of the Escrow Fund is
insufficient to pay to Buyer the excess of the Estimated Purchase
-6-
Payment Amount over the Total Adjusted Capital of the European
Subsidiaries and the Europe Assets Value, Merisel shall pay to
Buyer any shortfall within five business days of the
determination of such amount by wire transfer. To the extent
that the Estimated Purchase Payment Amount is less than the Total
Adjusted Capital of the European Subsidiaries and the Europe
Assets Value, the total Escrow Payment plus a cash consideration
equal to the amount of any remaining difference (less any interim
payments to Europe, pursuant to Section 1.2(c)(i)) shall be paid
by Buyer to Europe, within five business days after the
determination of such amount, by wire transfer. Notwithstanding
anything to the contrary in this Agreement, the terms of the
Escrow Agreement shall govern all payments to Buyer or Europe
from the Escrow Fund.
(ii) To the extent that the amount of the shareholders
equity of Latin America and Mexico as set forth on the
Latin/Mexico Closing Balance Sheet, assuming all liabilities of
Latin America and Mexico to Merisel or any of its other
affiliates have been capitalized (the "Closing Equity Value"), is
less than the sum of (x) the amount of adjusted shareholders
equity of Latin America and Mexico as of June 30, 1996 which the
parties hereby agree is $36,698,191 computed as shown on Schedule
1.2(a) plus (y) the net pretax earnings of Latin America and the
net earnings of Mexico between July 1, 1996 and the Closing Date
as reflected in the monthly financial statements of Latin America
and Mexico plus any provision which would increase the reserve
for inventory, receivables and/or other accruals in excess of
normal provisions for inventory, receivables and/or other
accruals, computed consistently with past practice, less (z) $1.5
million (the "Minimum Latin/Mexico Equity Value"), the amount of
such difference shall be deducted from the Escrow Fund and paid
to Buyer by Escrow Agent in accordance with the terms of the
Escrow Agreement within five business days after the determin
ation of such amount; provided, however, that no amount in excess
of $2,000,000 shall be so deducted. The balance of the Escrow
Fund, if any, shall thereafter be paid to Merisel unless further
obligations exist under Section 1.2(d)(i), in which case the
funds shall continue to be held in accordance with that Section.
To the extent that the amount of the Escrow Fund is insufficient
to pay to Buyer the excess of the Minimum Latin/Mexico Equity
Value over the Closing Equity Value, Merisel shall pay to Buyer
any shortfall within five business days after the determination
of such amount, by wire transfer. Notwithstanding anything to
the contrary in this Agreement, the terms of the Escrow Agreement
shall govern all payments to Buyer or Merisel from the Escrow
Fund.
1.3 Closing.
(a) Time and Place. The closing under this Agreement (the
"Closing") will take place at 9:00 a.m., local time, on September
27, 1995 as prescribed by Section 4.8 hereof or on such later
date as the conditions precedent contained in Section 5.1 and 5.2
-7-
hereof are satisfied or waived (subject, however, to the provi
sions of Section 5.3(a)(iv)), at the offices of Greenberg,
Traurig, Hoffman, Lipoff, Xxxxx & Xxxxxxx, P.A., 0000 Xxxxxxxx
Xxxxxx, Xxxxx, Xxxxxxx, or at such other time, date or place as
the parties shall mutually agree. The date on which the Closing
occurs is referred to herein as the "Closing Date."
(b) Deliveries and Proceedings at the Closing. At the
Closing:
(i) Deliveries by Europe. Europe will deliver to Buyer
(A) certificates evidencing its shares of the Europe Stock
accompanied by stock powers duly executed in blank or duly
executed instruments of transfer, and any other documents that
are necessary to transfer to Buyer good title to the Europe
Stock, free and clear of all liens, claims, security interests,
pledges, charges, equities, options, restrictions and
encumbrances of whatever nature, and (B) such documents and
instruments of conveyance, including but not limited to, bills of
sale, warranty deeds, assignments, or their equivalents, as shall
be sufficient to convey to the Buyer all right, title and
interest in and to the Europe Assets, free and clear of all
liens, mortgages, pledges, claims, encumbrances or other restric
tions or limitations whatsoever except as set forth on Schedule
2.17.
(ii) Deliveries by Merisel. Merisel will deliver to Buyer
certificates evidencing its shares of the Latin/Mexico Stock
accompanied by stock powers duly executed in blank or duly
executed instruments of transfer, and any other documents that
are necessary to transfer to Buyer good title to the Latin/Mexico
Stock, free and clear of all liens, claims, security interests,
pledges, charges, equities, options, restrictions and
encumbrances of whatever nature.
(iii) Deliveries By Buyer. Buyer will deliver (A) to
Europe the Europe Cash Payment, (B) to Merisel the Latin/Mexico
Cash Payment and (C) to the Escrow Agent the Escrow Payment.
(iv) Other Deliveries. The closing certificates, opinions
of counsel and other documents required to be delivered pursuant
to this Agreement will be exchanged.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers represent and warrant to Buyer as follows,
except as set forth in the Disclosure Schedule attached hereto
specifically identifying the Section number to which it relates:
2.1 Organization. Each of Merisel, Europe, Latin America
and Mexico is a corporation duly organized, validly existing and
-8-
in good standing under the laws of Delaware, Delaware, Delaware
and Mexico, respectively. Each Subsidiary of Europe listed on
Schedule 2.1 (the "European Subsidiaries"), and any subsidiaries
of Latin America and Mexico (the "Latin/Mexico Subsidiaries")
listed on Schedule 2.1 (each a "Subsidiary" and, collectively,
the "Subsidiaries") is duly organized, validly existing and in
good standing (to the extent such concept is applicable) in the
countries of their organization. Each of Merisel, Europe, Latin
America, Mexico, and the Subsidiaries has all requisite power and
authority to own or lease its properties and assets as now owned
or leased and to carry on its business as and where now being con
ducted, except in each such case as would not have a Material
Adverse Effect. The copies of each of Merisel's, Europe's, Latin
America's, Mexico's and the Subsidiaries' charter documents, as
amended to date, which have been delivered to Buyer, are correct
and complete and are in full force and effect.
2.2 Capitalization and Ownership: Power and Authority. Set
forth on Schedule 2.2 is a list of the authorized and outstanding
capital stock of Latin America, Mexico and each of the
Subsidiaries together with the holders thereof. All of the
foregoing outstanding shares have been duly authorized, validly
issued and are fully paid and nonassessable. None of such shares
were issued in violation of the terms of any agreement or other
understanding, and all were issued in compliance with all
applicable securities laws and regulations except where such
violation or lack of compliance could not reasonably be expected
to have a Material Adverse Effect. There are no outstanding
options, warrants, rights, agreements, calls, commitments or
demands of any character relating to such capital stock and no
securities convertible into or exchangeable for any of such
capital stock. All of such stock owned by the Sellers is owned,
free and clear of any lien, security interest, restriction,
encumbrance or claim. Sellers have the right, power and
authority to enter into this Agreement, transfer the Stock or
Europe Assets, as the case may be, to Buyer in accordance with
this Agreement and to perform its other respective obligations
hereunder.
2.3 Subsidiaries. Except as set forth in Schedule 2.1,
none of Merisel, Europe, Latin America or Mexico, directly or
indirectly, owns any stock of, or any other interest in, any
other corporation, joint venture, partnership, trust or other
business entity that conducts business in a country located on
the continents of Europe (including Eastern Europe, but excluding
the Russian Federation) and South America, any country in Latin
America or in Mexico.
2.4 Qualification; Location of Business and Assets. Each of
Merisel, Europe, Latin America, Mexico and the Subsidiaries is
duly qualified and in good standing as a corporation (to the
extent such concept is applicable), duly authorized to do
business in those jurisdictions wherein the character of the
properties owned or leased or the nature of activities conducted
by such entities make such qualification necessary, except in
-9-
such case would not have a Material Adverse Effect. Set forth on
Schedule 2.4 is each location (specifying country and city) where
each of Merisel, Europe, Latin America, Mexico and any Subsidiary
(a) has a place of business, (b) owns or leases real property or
(c) owns or leases any other property, including inventory,
equipment or furniture with an aggregate value at such location
in excess of $100,000.
2.5 Authorization and Enforceability. This Agreement has
been, and each other agreement and instrument required to be exe
cuted and delivered by Sellers in connection with or pursuant
hereto, will be, duly executed and delivered by Sellers and con
stitutes and will constitute, as applicable, the legal, valid and
binding obligations of Sellers, enforceable in accordance with
their terms, subject to the qualification that enforcement of the
rights and remedies created hereby and thereby may be limited by
bankruptcy, insolvency, reorganization and other similar laws of
general application relating to or affecting the rights and
remedies of creditors and that the remedy of specific enforcement
or of injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought. Upon
delivery to Buyer at the Closing of instruments of title and
conveyance, including but not limited to, bills of sale, warranty
deeds and assignments, or their equivalents, for the Europe
Assets in accordance herewith, Buyer will acquire good and valid
title to the Europe Assets free and clear of all liens, claims,
security interests, mortgages, pledges, charges, equities,
options, restrictions and encumbrances of whatsoever nature
(collectively, "Liens"), other than a Lien arising as a result of
any action by Buyer and other than as set forth on Schedule 2.17.
The execution, delivery and performance of this Agreement shall
have been duly authorized by all necessary corporate action on
the part of Sellers (including stockholder approval).
2.6 No Violation of Laws or Agreements. Except as set forth
on Schedule 2.6 hereto, the execution and delivery of this Agree
ment does not, and the performance of this Agreement by Sellers
will not (a) contravene any provision of Merisel's, Europe's,
Latin America's, Mexico's or any Subsidiary's charter documents;
(b) conflict with or result in a breach of or constitute a
default (or an event which could reasonably be expected to, with
the passage of time or the giving of notice or both, constitute a
default) under any of the terms, conditions or provisions of
(i) any Material Contract to which Merisel (with respect to
Europe, Latin America or Mexico), Europe, Latin America, Mexico,
or any Subsidiary is a party or by which any of them or any of
their respective assets may be bound or affected, or (ii) any
judgment or order of any court or governmental department,
commission, board, agency or instrumentality, domestic or
foreign, or any applicable law, rule or regulation except in the
case of such judgment, order, law, rule or regulation as would
not reasonably be expected to have a Material Adverse Effect on
such entity; (c) result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of
-10-
Europe's, Latin America's, Mexico's or any Subsidiary's assets or
give to others any interests or rights therein other than
pursuant to this Agreement, which lien, charge, encumbrance,
interest or right could reasonably be expected to have a Material
Adverse Effect; (d) result in the maturation or acceleration of
any liability or obligation of Merisel (with respect to the
Europe Stock, the Europe Assets and Latin/Mexico Stock), Europe
(with respect to the Europe Stock and the Europe Assets), Latin
America, Mexico or any Subsidiary (or give others the right to
cause such a maturation or acceleration); or (e) result in the
termination of or loss of any right (or give others the right to
cause such a termination or loss) under any Material Contract to
which Merisel, Europe, Latin America, Mexico or any Subsidiary is
a party or by which any of them may be bound. For the purposes of
this Agreement, the term "Material Contract" shall mean those
contracts, agreements and commitments, written or, to the
Knowledge of Sellers (as such term is defined in Section 7.14
hereof), Latin America, Mexico or any Subsidiary, oral, to which
any of Merisel (with respect to the Europe Stock, the Europe
Assets or the Latin/Mexico Stock), Europe (with respect to the
Europe Stock and the Europe Assets), Latin America, Mexico or any
Subsidiary are a party or by which any of their respective assets
are bound and which constitute:
(a) an agreement to purchase or sell any capital assets
(excluding inventory) involving an amount in excess of $100,000;
(b) any union or other collective bargaining contracts;
(c) any management, consulting, employment, personal
service, agency or other contract or contracts providing for
employment or rendition of services at an annual base
compensation of $100,000 or more (including any promised,
expected or customary bonus);
(d) the Revolving Credit Agreement, the Asset Amortization
Agreement or any other agreements or notes evidencing any
liabilities or obligations of Merisel (with respect to Europe,
Latin America or the Subsidiaries), Europe, Latin America, Mexico
or any Subsidiary, whether primary or secondary or absolute or
contingent: (i) for borrowed money; or (ii) evidenced by notes,
bonds, debentures or similar instruments; or (iii) secured by or
granting Liens on any assets of Merisel, Europe, Latin America,
Mexico or any Subsidiary;
(e) a power of attorney (whether revocable or irrevocable)
given to any person by Merisel (with respect to Latin America or
Mexico), Europe (with respect to the European Subsidiaries),
Latin America, Mexico or any Subsidiary that is in force;
-11-
(f) an agreement by Merisel (with respect to Latin America
or Mexico), Europe (with respect to the European Subsidiaries),
Latin America, Mexico or any Subsidiary not to compete in any
business or in any geographical area;
(g) a partnership, joint venture or similar arrangement;
(h) an Intellectual Property license other than the right
to distribute computer products in the ordinary course of
business;
(i) an agreement with any affiliate of either Seller other
than agreements between or among the European Subsidiaries, Latin
America or Mexico;
(j) any lease, sublease, license, or occupancy agreement
for real property and equipment leases with an annual rental in
excess of $100,000 ("Lease"); or
(k) any other agreement in excess of $100,000 individually
or $250,000 in the aggregate, which is not in the ordinary course
of business of Europe, Latin America, Mexico or any Subsidiary.
2.7 Financial Statements. Sellers have delivered to Buyer
the following financial statements (the "Financial Statements"):
(a) statements of income and retained earnings and cash
flows of Europe, Latin America, Mexico and each Subsidiary for
the years ended December 31, 1993 through December 31, 1995,
inclusive, and balance sheets of Europe, Latin America, Mexico
and the Subsidiaries as at each of such dates.
(b) a statement of income, cash flows and stockholders'
equity of Europe, Latin America, Mexico and each Subsidiary for
the six-month period ended June 30, 1996 and a balance sheet of
Europe, Latin America, Mexico, and each Subsidiary as at such
date.
The Financial Statements: (a) are correct and complete and
in accordance with the books and records of Europe, Latin
America, Mexico and each Subsidiary, respectively, (b) fairly pre
sent the financial condition, assets and liabilities of Europe,
Latin America, Mexico, and each Subsidiary as at their respective
dates and the results of operations and cash flows for the
periods covered thereby, (c) have been prepared in accordance
with GAAP consistently applied, except as may be indicated
therein or in the notes thereto and except that the Interim
Statements do not contain footnotes, and except for normal
year-end adjustments. All references in this Agreement to the
"1995 Balance Sheets" shall mean the balance sheets of Europe,
Latin America, Mexico and the Subsidiaries as at December 31,
1995 included in the Financial Statements, all references in this
-12-
Agreement to the "June Balance Sheets" shall mean the balance
sheets of Europe, Latin America, Mexico and the Subsidiaries as
at June 30, 1996 included in the Financial Statements, and all
references to the "Balance Sheet Date" shall mean December 31,
1995. Attached as Schedule 2.7 are the Financial Statements, as
adjusted to be presented in accordance with the Accounting
Principles.
2.8 No Undisclosed Liabilities. None of Europe, Latin
America, Mexico or the Subsidiaries has any material liability or
obligation of any nature, whether due or to become due, absolute,
contingent or otherwise, except (a) to the extent reflected as a
liability or adequately reserved, disclosed or otherwise provided
for, on the June Balance Sheets, (b) liabilities incurred in the
ordinary course of business since June 30, 1996 and of the same
character, kind and magnitude as are consistent with past prac
xxxx and fully reflected as liabilities on their books of account
and (c) liabilities disclosed on Schedule 2.8.
2.9 No Changes. Except as disclosed on Schedule 2.9, since
June 30, 1996, each of Europe, Latin America, Mexico and the Sub
sidiaries has conducted its business only in the ordinary course
consistent with past practice. Without limiting the generality
of the foregoing sentence, since June 30, 1996, there has not
been:
(a) any change in the financial condition, assets,
liabilities, net worth or business of Europe, Latin America,
Mexico or the Subsidiaries, except changes in the ordinary course
of business, none of which, individually or in the aggregate, has
been or will be materially adverse to any of Europe, Latin
America, Mexico or any Subsidiary;
(b) any damage, destruction or loss, whether or not covered
by insurance, other than normal wear and tear, of assets with an
aggregate book value of $50,000 or greater adversely affecting
the properties, business or prospects of any of Europe, Latin
America, Mexico or any Subsidiary, or any material deterioration
in the operating condition of the assets of Europe, Latin
America, Mexico or any Subsidiary;
(c) any mortgage, pledge or subjection to lien, charge or
encumbrance of any kind of any of the assets, tangible or intan
gible with a value in excess of $50,000 individually, or $250,000
in the aggregate, of Europe, Latin America, Mexico or any Subsidi
ary not set forth on the June Balance Sheets;
(d) any declaration, setting aside or payment of a dividend
or other distribution in respect of any of the capital stock of
Latin America, Mexico or a subsidiary of Mexico, or any direct or
indirect redemption, purchase or other acquisition of any capital
stock of Latin America, Mexico or a subsidiary of Mexico or any
rights to purchase such capital stock or securities convertible
into or exchangeable for such capital stock;
-13-
(e) Except as set forth on Schedule 4.1 and except for the
obligations to employees for which Sellers are responsible after
the Closing Date which Sellers hereby agree shall be fulfilled,
any increase in the salaries or other compensation payable or to
become payable to, or any advance (excluding advances for
ordinary business expenses) or loan to, any officer, director or
shareholder of Latin America, Mexico or any Subsidiary, any in
crease in the salaries or other compensation payable or to become
payable to, or any advance (excluding advances for ordinary busi
ness expenses) or loan to, any employee of Latin America, Mexico
or any Subsidiary (except those made in the ordinary course of
business and consistent with past practice), any increase in, or
any addition to, other benefit (including without limitation any
bonus, profit sharing, pension or other plan) to which any of
their respective officers, directors or employees may be entitled
(excluding as to employees only, those made in the ordinary
course of business consistent with prior practice), or any pay
ment to any pension, retirement, profit sharing, bonus or similar
plan except payments in the ordinary course of business and
consistent with past practice made pursuant to the employee
benefit plans described on Schedule 2.26.
(f) any making or authorization of any capital expenditures
in excess of $100,000 in the aggregate;
(g) any sale, transfer or other disposition of any capital
asset with a value on the 1995 Balance Sheets of Europe, Latin
America, Mexico or any Subsidiary in excess of $50,000
individually or $250,000 in the aggregate, except sales of inven
tory and receivables in the ordinary course of business
consistent with past practices;
(h) any adverse change or any threat of any adverse change
in the relations of Europe, Latin America, Mexico or any
Subsidiary with, or any loss or threat of loss of, any of the
suppliers listed on Exhibit D or any customers representing
individually in excess of 5% and in the aggregate more than 10%
of the sales in the eighteen months ended June 30, 1996 of any of
Europe, Latin America, Mexico or any Subsidiary;
(i) other than intercompany accounts, any writeoffs as
uncollectible of any notes or accounts receivable of Latin
America, Mexico or any Subsidiary or write-downs of the value of
any assets or inventory by Europe, Latin America, Mexico or any
Subsidiary other than in the ordinary course of business
consistent with past practice;
(j) except as set forth on Schedule 2.9(j), any change by
Europe, Latin America, Mexico or any Subsidiary in any accounting
practices, method of accounting or the accounting principles
applicable to the keeping its books of account;
-14-
(k) any creation, incurrence, assumption or guarantee by
Latin America, Mexico or any Subsidiary of the obligations or
liabilities of any person other than Latin America, Mexico or any
Subsidiary (whether absolute, accrued, contingent or otherwise
and whether due or to become due), except in the ordinary course
of business, or any creation, incurrence, assumption or guarantee
by Europe, Latin America, Mexico or any Subsidiary of any
indebtedness for money borrowed in excess of $100,000
individually or $500,000 in the aggregate;
(l) any purchase, sale or other transfer of inventory from
or to any Related Party at other than arms-length prices; or
(m) any disposition of or failure to keep in effect any
rights in, to or for the use of any patent, trademark, service
xxxx, trade name or copyright, material to the operation of
Europe, Latin America, Mexico or the Subsidiaries.
2.10 Taxes.
(a) For the purpose of this Agreement:
"Audit" means any audit, assessment of Taxes, reassess
ment of Taxes, or other examination by any taxing authority or
any judicial or administrative proceedings or appeal of such
proceedings.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Governmental Body" means any foreign, federal, state,
local or other governmental authority or regulatory body.
"Tax" or "Taxes" means any federal, state, local,
foreign or other net income, gross income, gross receipts,
windfall profits, severance, property, production, sales, use,
transfer, gains, license, excise, franchise, employment, payroll,
withholding, value added, estimated, alternative or add on
minimum tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together
with any interest or any penalty, addition to tax or additional
amount imposed by any Governmental Body.
"Tax Return" means any return, report or similar state
ment required to be filed with respect to any Taxes (including
any attached schedules), including, without limitation, any
information return, claim for refund, amended return and
declaration of estimated Tax.
"Tax Ruling" means a written private ruling of a taxing
authority to or with respect to Europe, Latin America, Mexico or
any Subsidiary relating to Taxes.
-15-
(b) Except as set forth in Schedule 2.10:
(i) Filing of Tax Returns. Europe (with respect to the
Europe Assets and the European Subsidiaries), and each of Latin
America, Mexico and the Subsidiaries have filed (or have had
filed on their behalf) all material Tax Returns required to be
filed by each of them and such Tax Returns are in all material
respects true, complete and correct and filed on a timely basis.
(ii) Payment of Taxes. Europe (with respect to the Europe
Assets and the European Subsidiaries), and each of Latin America,
Mexico and the Subsidiaries have, within the time and in the
manner prescribed by law, paid (or have had paid on their behalf)
all Taxes currently due and payable, except for those for which
adequate reserves have been established on the books and records
of such companies, and none of such companies is or will be
required to pay any Tax attributable to any other person by
reason of filing a consolidated, combined, unitary or other
return or report with any such other person in respect of any
Taxable period closing on or prior to the Closing Date.
(iii) Extensions of Time for Filing. None of Merisel
(with respect to Europe, Latin America and Mexico), Latin
America, Mexico or the Subsidiaries has requested (or has had
requested on its behalf) any extension of time within which to
file any material Tax Return, which Tax Return has not yet been
filed.
(iv) Waivers of Statute of Limitations. None of Merisel
(with respect to Europe, Latin America and Mexico), Latin
America, Mexico or the Subsidiaries has executed any outstanding
waivers or comparable consents (or has had any such waivers or
consents executed on its behalf) regarding the application of the
statute of limitations with respect to any material Taxes or Tax
Returns.
(v) Audit, Administrative and Court Proceedings. No Audits
are presently pending with regard to any Tax Returns of Merisel
(with respect to Europe, Latin America and Mexico), Europe (with
respect to the European Subsidiaries), Latin America, Mexico or
the Subsidiaries.
(vi) Powers of Attorney. No power of attorney currently in
force has been granted by Merisel (with respect to Europe, Latin
America and Mexico), Europe (with respect to the European
Subsidiaries), Latin America, Mexico or the Subsidiaries
concerning any material Taxes or Tax Returns.
(vii) Tax Rulings. None of Merisel (with respect to
Europe, Latin America and Mexico), Europe (with respect to the
European Subsidiaries), Mexico, Latin America or any Subsidiary
has received a Tax Ruling with any taxing authority that has or
-16-
would have a continuing effect on Mexico, Latin America, any
Subsidiary or any of the European Assets.
(viii) Tax Sharing Agreements. None of Merisel (with
respect to Europe, Latin America and Mexico), Europe (with
respect to the European Subsidiaries), Mexico, Latin America or
any Subsidiary is a party to any agreement relating to allocating
or sharing of Taxes other than any such agreements solely between
or among Latin America, Mexico and the Subsidiaries.
2.11 Inventory. All of the inventories reflected in the
1995 Balance Sheets are valued at the lower of cost or market,
the cost thereof being determined on a first-in, first-out basis,
except as disclosed in the Financial Statements. Except as set
forth on Schedule 2.11, all of the inventories reflected in the
June Balance Sheets, and all inventories acquired by Latin
America, Mexico and the Subsidiaries since the date of the June
Balance Sheets consist of items of a quality and quantity usable
and saleable in the ordinary course of the business of Latin
America, Mexico and the Subsidiaries.
2.12 Accounts Receivable. All of the accounts and notes
receivable of Latin America, Mexico and the Subsidiaries
represent amounts receivable for merchandise actually delivered
or services actually provided (or, in the case of non-trade
accounts or notes represent amounts receivable in respect of
other bona-fide business transactions), have arisen in the
ordinary course of business, are not subject to any defenses,
counterclaims or offsets, except to the extent of a reserve in an
amount not in excess of the reserve for doubtful accounts
reflected on the June Balance Sheets, and have been billed and
are generally due within 45 days after such billing. All such
receivables are fully collectible in the normal and ordinary
course of business, except to the extent of a reserve in an
amount not in excess of the reserve for doubtful accounts
reflected on the June Balance Sheets.
2.13 No Pending Litigation or Proceedings. Except as set
forth on Schedule 2.13 there are no actions, suits,
investigations, or proceedings pending or, to the Knowledge of
Sellers, threatened against or affecting Merisel (with respect to
Europe, Latin America and Mexico), Europe (with respect to the
European Subsidiaries), Latin America, Mexico or the Subsidiaries
or any of their assets or affecting the Stock, at law or in
equity, by or before any court or governmental department, agency
or instrumentality, and no party has manifested an intention to
commence such action, suit, investigation or proceeding. There
are presently no outstanding judgments, decrees or orders of any
court or any governmental or administrative agency against
Merisel (with respect to Europe, Latin America and Mexico),
Europe (with respect to the European Subsidiaries), or against
Europe, Latin America, Mexico or the Subsidiaries.
-17-
2.14 Contracts; Compliance. All Material Contracts are
listed on Schedule 2.14, and copies of all of which have been
provided to Buyer. All Material Contracts to which Europe, Latin
America, Mexico or the Subsidiaries is a party or by which any of
them is bound are in full force and effect and each of Europe,
Latin America, Mexico and the Subsidiaries has complied with the
provisions thereof; and to the Knowledge of Sellers, all parties
to such Material Contracts have complied with the provisions
thereof, no party is in default under any of the terms thereof,
and no event has occurred that with the passage of time or the
giving of notice or both would constitute a default by any party
under any provision thereof which default could reasonably be
expected to have a Material Adverse Effect.
2.15 Compliance With Laws.
(a) Except as set forth in Schedule 2.15(a) (and any sub-
schedules thereto),
(i) each of Europe, Latin America, Mexico and the
Subsidiaries are in material compliance with Statutes regulating
any hazardous, toxic or polluting contaminant, substance or
waste, including petroleum products and radioactive materials
("Hazardous Substances") (such Statutes hereinafter defined as
"Environmental Laws"), including material compliance with
permits, certificates, licenses, approvals, registrations and
authorizations ("Permits") required under such Environmental
Laws, in connection with its respective business;
(ii) none of Europe, Latin America, Mexico or the
Subsidiaries have received written notice that remains outstand
ing from any governmental entity or third party alleging that
their respective businesses, or any property owned or leased by
any of them, is not in compliance with any Environmental Law;
(iii) there has been no release, spill, discharge,
disposal, emission, injection or dumping of a Hazardous Substance
by Europe, Latin America, Mexico or the Subsidiaries,
respectively, in violation of any Environmental Law on any of
their respective owned or leased real property, which could
reasonably be expected to have a Material Adverse Effect; and
(iv) there are no environmental priority liens or other deed
restrictions on any properties owned by Latin America, Mexico or
any Subsidiary or which have attached as a result of actions of
Sellers, Latin America, Mexico or any Subsidiary with respect to
leased property.
(b) Other Laws. All material permits, certificates,
licenses, orders, registrations, franchises, authorizations and
other approvals from all federal, state, local and foreign
governmental and regulatory bodies held by Merisel (with respect
to Europe, Latin America and Mexico), Europe (with respect to the
-18-
European Subsidiaries), Latin America, Mexico or any Subsidiary
are in full force and effect and each of Merisel (with respect to
Europe, Latin America and Mexico), Europe (with respect to the
European Subsidiaries), Latin America, Mexico and the
Subsidiaries is in material compliance with the terms and condi
tions thereof. Except where the failure to have the same would
not reasonably be expected to have a Material Adverse Effect, no
other permits, certificates, licenses, orders, registrations,
franchises or authorizations or other approvals are necessary for
the operation of the business of such entities as currently
conducted. No notice, citation, summons or order has been issued
that remain outstanding, no complaint has been filed, no penalty
has been assessed that remains unpaid and no investigation or
review is pending or, to the Knowledge of Sellers, threatened by
any governmental or other entity (a) with respect to any alleged
violation by Merisel (with respect to Europe, Latin America and
Mexico), Europe (with respect to the European Subsidiaries),
Latin America, Mexico or any Subsidiary of any law, ordinance,
rule, regulation or order of any governmental entity or (b) with
respect to any alleged failure by Merisel (with respect to
Europe, Latin America and Mexico), Europe (with respect to the
European Subsidiaries), Latin America, Mexico or any Subsidiary
to have any permit, certificate, license, approval, registration
or authorization required in connection with its business.
2.16 Consents. Except as set forth in Schedule 2.16 or 3.7
or where the failure to obtain the same could not be reasonably
expected to have a Material Adverse Effect, no consent, approval
or authorization of, or registration or filing with, any person,
including any governmental authority or other regulatory agency,
is required in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated
hereby.
2.17 Title. Each of Europe, Latin America, Mexico and the
Subsidiaries has good and marketable title to all of its
properties and assets, including the properties and assets
reflected in the June Balance Sheets (except those disposed of in
the ordinary course of business since June 30, 1996), free and
clear of any mortgage, pledge, lien, restriction, encumbrance,
tenancy, license, encroachment, covenant, condition, right of
way, easement, claim, security interest, charge or any other
matter affecting title, except (a) minor imperfections of title,
none of which, individually or in the aggregate, materially
detracts from the value of or impairs the use of the affected
properties or impairs the operations of Latin America, Mexico or
the Subsidiaries, (b) liens for current taxes not yet due and
payable, and (c) as disclosed on Schedule 2.17 (collectively
"Permitted Encumbrances"). All real property owned is listed on
Schedule 2.17.
-19-
2.18 Real Estate. Except as set forth on Schedule 2.18,
Sellers have delivered to Buyer a true, correct and complete copy
of each Lease with respect to real property. Europe, Latin
America, Mexico or the applicable Subsidiary is in quiet and
undisturbed possession of the real property with respect to which
it is the lessee and each Lease is valid and subsisting and in
full force and effect in accordance with its terms and has not
been modified, in writing or otherwise except with respect to
those modifications, copies of which have been delivered to
Buyer.
2.19 Transactions with Related Parties. Except as disclosed
on Schedule 2.19, no Related Party currently:
(a) has any contractual or other claim, express or implied,
of any kind whatsoever against Europe, Latin America, Mexico or
any Subsidiary; or
(b) has any interest in any property or assets used by
Europe, Latin America, Mexico or any Subsidiary in its business.
For purposes of this Agreement, a "Related Party" means each of
the Sellers, any of the officers or directors of Sellers, Latin
America, Mexico or any Subsidiary, any affiliate, or relative of
Sellers, Latin America, Mexico or any Subsidiary, or any business
or entity in which Sellers, Latin America, Mexico or any Subsidi
ary, or any affiliate, associate or relative of any such person
has any direct or material indirect interest. For the purposes
of this Section 2.19, a transaction solely among any of Latin
America, Mexico or any of the Subsidiaries shall not be deemed to
be a Related Party transaction.
2.20 Condition of Assets. Except as set forth on Schedule
2.20 and except for assets which in the aggregate do not have a
book value in excess of $100,000, the buildings, machinery, equip
ment, furniture, improvements and other assets of Latin America,
Mexico and the Subsidiaries are in good operating condition and
repair, subject to normal wear and tear, and are suitable for the
purposes for which they are used in its business.
.21 Compensation Arrangements; Officers and Directors.
Schedule 2.21 sets forth the following information:
(a) the names and current annual salary, including any
bonus or amounts payable upon a "change in control" as such term
is defined in Section 280G of the Code, if applicable, of all
present officers and employees of Europe, Latin America, Mexico
and each Subsidiary whose current annual salary, including any
promised, expected or customary bonus, equals or exceeds
$100,000, together with a statement of the full amount of all
remuneration paid by Europe, Latin America, Mexico and each
Subsidiary to each such person and to any director of Europe,
Latin America, Mexico and each Subsidiary, during the twelve-
month period ending December 31, 1995 and the six-month period
ending June 30, 1996; and
-20-
(b) as of the date hereof, the names and titles of all
directors and officers of Europe, Latin America, Mexico and each
Subsidiary and of each trustee, fiduciary or plan administrator
of each employee benefit plan of Europe, Latin America, Mexico
and each Subsidiary.
2.22 Labor Relations. Except as disclosed on Schedule 2.22
(a) no employee of Europe, Latin America, Mexico or any
Subsidiary is represented by any union or other labor
organization; (b) there is no unfair labor practice complaint
against Europe, Latin America, Mexico or any Subsidiary pending
or to Seller's Knowledge threatened;(c) there is no labor strike,
dispute, slow down or stoppage actually pending or, to the
Knowledge of Sellers, threatened against or involving Europe,
Latin America, Mexico or any Subsidiary; (d) no grievance which
could reasonably be expected to have a Material Adverse Effect on
Europe, Latin America, Mexico or any Subsidiary or the conduct of
their respective businesses is pending; (e) no agreement
restricts Europe, Latin America, Mexico or any Subsidiary from
relocating, closing or terminating any of its operations or faci
lities; and (f) none of Europe, Latin America, Mexico or any
Subsidiary in the past year has experienced any work stoppage,
other event set forth in (b)-(d) above or has committed any
unfair labor practice.
2.23 Products Liability. Except as set forth in Schedule
2.23 and except for lawsuits, claims, damages and expenses
adequately covered by insurance or indemnified by the suppliers
of Europe, Latin America, Mexico and each Subsidiary in
accordance with industry practice, there are no (a) liabilities,
fixed or contingent, asserted or unasserted, with respect to any
product liability or any similar claim that relates to any
product stored, distributed or sold by Latin America, Mexico or
any Subsidiary to others, or (b) liabilities, fixed or
contingent, asserted or unasserted, with respect to any claim for
the breach of any express or implied product warranty or any
other similar claim with respect to any product stored, dis
tributed or sold by Latin America, Mexico or any Subsidiary to
others.
2.24 Insurance. Attached hereto as Schedule 2.24 is a com
plete and correct list of all policies or binders of insurance of
which Merisel (with respect to Europe, Latin America and Mexico),
Europe (with respect to the European Subsidiaries), Latin
America, Mexico or any Subsidiary is the owner, insured or
beneficiary, or covering any of its property or product liability
or general liability, copies of each of which have been provided
to Buyer. Also set forth on Schedule 2.24 is a loss history for
the past three years with respect to each of Latin America,
Mexico and each Subsidiary and a list of all pending claims with
respect to any insurance policies and a description of any
provision contained in such policies which provides for retrospec
tive or retroactive premium adjustments. All such policies are
outstanding and in full force and effect. No notice of
cancellation or non-renewal with respect to, or disallowance of
any claim under, any such policy has been received by Sellers,
-21-
Latin America, Mexico or any Subsidiary. None of Merisel (with
respect to Europe, Latin America or Mexico), Europe, Latin
America, Mexico or any Subsidiary has been refused any insurance,
nor has coverage of any of them been limited by any insurance
carrier to which any of them has applied for insurance or with
which any of them has carried insurance during the last two
years. Since 1994, all general liability policies have been
"occurrence policies."
2.25 Patents and Intellectual Property Rights. Attached
hereto as Schedule 2.25 is a correct list of all material
patents, patent applications, trademarks, service marks and any
applications for registrations therefor, copyrights, trade names,
brand names, logos and the like, and any registrations therefor,
and all material licenses, sublicenses or other rights entered
into with respect thereto (other than rights to distribute
computer products in the ordinary course of business), both U.S.
and foreign, presently held, owned or used by Merisel (with
respect to Europe, Latin America and Mexico), Europe (with
respect to the European Subsidiaries), Latin America, Mexico or
any Subsidiary. All of the Intellectual Property presently held,
owned or used by Merisel (with respect to Europe, Latin America
and Mexico), Europe (with respect to the European Subsidiaries),
Europe, Latin America, Mexico or any Subsidiary (the
"Intellectual Property") is held of record in the name of Europe,
Latin America, Mexico or the applicable Subsidiary, is valid and
in good standing and none of which infringes the intellectual
property rights of others. To the Knowledge of Sellers, there
are no pending claims by any Person that challenges the rights of
Europe, Latin America, Mexico or the applicable Subsidiary with
respect to any of the Intellectual Property. To the Knowledge of
Sellers, the operation of the business of Europe, Latin America,
Mexico and the Subsidiaries did not and does not infringe (nor
has any claim been made that any such operation infringes) the
intellectual property rights of others. For purposes of this
Agreement, the term "Intellectual Property" shall mean all
material patents, patent applications, trademarks, service marks
and any applications for registrations therefor, copyrights,
trade names, brand names, logos and the like, and any
registrations therefor, and all licenses, sublicenses or other
rights entered into with respect thereto, trade secrets, know-how
or other proprietary information, which is used in such Person's
business.
2.26 Employee Benefits.
(a) Schedule 2.26 sets forth a true and complete list of
each bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance or termination pay, hospitaliza
tion or other medical, life or other insurance, supplemental un
employment benefits, profit-sharing, pension, or retirement plan,
program, agreement or arrangement, vacation pay, sick pay and
each other employee benefit plan, program, agreement or
arrangement, sponsored, maintained or contributed to or required
to be contributed to by Merisel, Europe, Latin America, Mexico or
-22
any Subsidiary or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that together with Merisel,
Europe, Latin America, Mexico or any Subsidiary would be deemed a
"single employer" within the meaning of Section 4001 of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), for the benefit of any U.S. Employee (each a "U.S.
Plan") and each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance or termina
tion pay, hospitalization or other medical, life or other insur
ance, supplemental unemployment benefits, profit-sharing,
pension, or retirement plan, program, agreement or arrangement,
vacation pay, sick pay and each other employee benefit plan,
program, agreement or arrangement, sponsored, maintained or con
tributed to or required to be contributed to by Merisel, Europe,
Latin America, Mexico or any Subsidiary for the benefit of any
Non-U.S. Employee (each a "Non-U.S. Plan", the U.S. Plans and the
Non-U.S. Plans being referred to collectively as the "Plans").
(b) With respect to each U.S. Plan, Sellers have heretofore
delivered to Buyer true and complete copies of each of the follow
ing documents;
(i) a copy thereof;
(ii) a copy of the most recent form 5500 as filed with the
Internal Revenue Service for the most recent plan year and, for
all funded U.S. Plans the most recent annual audit and accounting
of Plan assets.
(iii) a copy of the most recent Summary Plan
Description required under ERISA with respect thereto;
(iv) if the Plan is funded through a trust or any third
party funding vehicle, a copy of the trust or other funding
agreement and the latest financial statements thereof; and
(v) the most recent determination letter received from
the Internal Revenue Service with respect to each Plan intended to
qualify under Section 401 of the Code.
(c) No U.S. Plan (or other employee benefit plan, program,
agreement or arrangement to which any Employer or any ERISA
Affiliate made, or was required to make, contributions during the
five (5) year period ending on the Closing Date) is subject to
Title IV of ERISA.
(d) With respect to each U.S. Plan, neither any Employer
nor any ERISA Affiliate, or any trust created thereunder, or, to
the Knowledge of Sellers, any trustee or administrator thereof
has engaged in a transaction in connection with which any
Employer or any such ERISA Affiliate, any such trust, or any such
trustee or administrator thereof, could be subject to either a
material civil penalty assessed pursuant to Section 409 or 502(i)
-23-
of ERISA or a material tax imposed pursuant to Section 4975 or
4976 of the Code or any other applicable law or regulation.
(e) No U.S. Plan or any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each
Plan ended prior to the Closing Date; and all contributions
required to be made with respect thereto on or prior to the
Closing Date have been timely made or will be timely made.
(f) No U.S. Plan is a "multiemployer pension plan," as
defined in Section 3(37) or ERISA, nor is any U.S. Plan a plan
described in Section 4063(a) of ERISA.
(g) Each Plan has been operated and administered in all
material respects in accordance with its terms and applicable
law, including but not limited to ERISA and the Code.
(h) Each U.S. Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and the
trusts maintained thereunder are exempt from taxation under
Section 501(a) of the Code.
(i) No Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect
to any U.S. Employee or Non-U.S. Employee beyond their retirement
or other termination of service (other than (i) coverage mandated
by applicable law, or (ii) death benefits or retirement benefits
under any "employee pension plan," as that term is defined in
Section 3(2) of ERISA) or any Non-U.S. Plan.
(j) Except as set forth in Schedule 2.26, the consummation
of the transactions contemplated by this Agreement will not (i)
entitle any U.S. Employee or Non-U.S. Employee to severance pay,
unemployment compensation or any other payment, except as
expressly provided in this Agreement or as it relates to Non-U.S.
Employees required by applicable law or (ii) accelerate the time
of payment or vesting, or increase the amount of compensation due
any such employee.
(k) There are no pending, anticipated, or to the knowledge
of any Employer, threatened claims by or on behalf of any Plan,
by any U.S. Employee or Non-U.S. Employee, or otherwise involving
any such Plan (other than routine claims for benefits).
(l) Each Non-U.S. Plan has at all times prior to the
Closing Date has been maintained and operated in all material
respects in accordance with its terms and applicable laws and
regulations of the jurisdiction governing such Non-U.S. Plans
including, but not limited to laws and regulations related to
funding, reporting, disclosure and the provision of benefits to
eligible participants.
-24-
(m) As used in this Section 2.26, the following terms have
the following meanings:
(i) "U.S. Employee" means each current or former employee
of an Employer who (A) is (or at the time of his employment by an
Employer was) a citizen or legal resident of the United States
and (B) worked for (or at the time of his employment with an
Employer, worked for) an Employer in the United States (and each
such employee's eligible beneficiaries under a Plan) and who is
eligible or receiving benefits under a U.S. Plan.
(ii) "Non-U.S. Employee" means each current or former
employee of an Employer who is not a U.S. Employee (and each such
employee's eligible beneficiaries under a Plan) and who is
eligible or receiving benefits under a Non-U.S. Plan.
(iii) "Employer" means Merisel, Europe, Latin America,
Mexico and any Subsidiary.
2.27 Brokerage. Except as described in Section 6.9, none of
Merisel, Europe, Latin America, Mexico or any Subsidiary has made
any agreement or taken any other action which might cause anyone
to become entitled to a broker's fee or commission as a result of
the transactions contemplated hereunder.
2.28 Questionable Payments. None of Merisel (with respect
to Europe, Latin America, Mexico or any Subsidiary), Europe,
Latin America, Mexico or any Subsidiary or any of the current or
former stockholders, directors, officers, agents, and/or
employees of Merisel, Europe, Latin America, Mexico or any
Subsidiary, has on behalf of such entity (a) used any corporate
funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (b) made any
direct or indirect unlawful payments to foreign or domestic
government officials or employees from corporate funds, (c)
violated any provision of the Foreign Corrupt Practices Act of
1977, (d) established or maintained any unlawful or unrecorded
fund of corporate monies or other assets, or (e) made any
unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment of any nature, (collectively, a
"Questionable Payment"). None of Merisel (with respect to
Europe, Latin America, Mexico or any Subsidiary), Europe, Latin
America, Mexico or any Subsidiary or any of their current or
former stockholders, directors, officers, agents, employees,
sales persons or other persons associated with or active on
behalf of any of them has on behalf of any of them or in connec
tion with their respective businesses made or received a Question
able Payment.
2.29 Disclosure. No representation or warranty by the
Sellers with respect to the Sellers, Latin America, Mexico or any
Subsidiary in this Agreement, and no exhibit, statement, certi
ficate or schedule furnished or to be furnished to Buyer pursuant
hereto, or in connection with the transactions contemplated
-25-
hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact
necessary to make the statements or facts contained herein or
therein not misleading or necessary to provide Buyer with
adequate and complete information as to Merisel, Europe, Latin
America, Mexico or any Subsidiary and their affairs, the Stock
and the Europe Assets.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
3.1 Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Florida.
3.2 Power and Authority. Buyer has full corporate power
and authority to make, execute, deliver and perform this
Agreement.
3.3 Authorization and Enforceability. This Agreement has
been, and each other agreement and instrument required to be exe
cuted and delivered by Buyer in connection with or pursuant
hereto will be, duly executed and delivered by Buyer and
constitutes and will constitute, as applicable, the legal, valid
and binding obligation of Buyer, enforceable in accordance with
their terms subject to the qualification that the enforcement of
the rights and remedies created hereby and thereby may be limited
by bankruptcy, insolvency, reorganization and other similar laws
of general application relating to or affecting the rights and
remedies of creditors and that the remedy of specific enforcement
or injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
3.4 Brokerage. Except as set forth in Section 6.9, Buyer
has not made any agreement or taken any other action which might
cause anyone to become entitled to a broker's fee or commission
as a result of the transactions contemplated hereunder.
3.5 Securities Act. The Stock purchased by Buyer pursuant
to this Agreement will be acquired without a view to any public
distribution thereof, and Buyer will not offer to sell or
otherwise dispose of any shares of the Stock so acquired by it in
violation of the registration requirements of the Securities Act
of 1933, as amended.
3.6 No Violation of Laws or Agreements. The execution and
delivery of this Agreement do not, and the performance of this
Agreement by Buyer, will not: (a) contravene any provision of the
Buyer's Articles of Incorporation or Bylaws; (b) conflict with or
result in a breach of or constitute a default (or an event which
could reasonably be expected to, with the passage of time or the
-26-
giving of notice or both, constitute a default) under the terms,
conditions or provisions of any material contract to which the
Buyer is a party or by which it or any of its assets may be bound
or affected or any judgment or any order of any court or
governmental department, commission, board, agency or
instrumentality, domestic or foreign, or any applicable law, rule
or regulation except in the case of such judgment, order, law,
rule or regulation as would not reasonably be expected to have a
Material Adverse Effect on Buyer; (c) result in the creation or
imposition of any lien, charge or encumbrance of any nature what
soever upon any of Buyer's assets or give to others any interests
or rights therein which lien, charge, encumbrance, interest or
right could reasonably be expected to have a Material Adverse
Effect; (d) result in the maturation or acceleration of any liabi
lity or obligation of Buyer (or give others the right to cause
such a maturation or acceleration); or (e) result in the termin
ation of or loss of any right (or give others the right to cause
such a termination or loss) under any Material Contract to which
Buyer is a party or by which it may be bound.
3.7 Consents. Except as set forth in Schedule 2.16 or
where the failure to obtain the same could not reasonably be
expected to have a Material Adverse Effect, no consent, approval,
or authorization of, or registration or filing with, any person,
including any governmental authority or other regulatory agency,
is required in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated
hereby.
3.8 Litigation. There are no actions, suits, claims, or
proceedings pending, or to the knowledge of Buyer, threatened
against or affecting Buyer or any of its assets or properties, at
law or in equity, by or before any court or governmental
department, agency or instrumentality (an "Authority") that
question the validity of this Agreement or seek to prohibit,
enjoin or otherwise challenge the consummation of the
transactions contemplated hereby and no party has manifested an
intention to commence such action, suit, investigation or
proceeding. There are presently no outstanding orders,
judgments, injunctions, stipulations, awards, decrees or orders
of any Authority against the Buyer or any of its assets or
properties which prohibit or enjoin the consummation of the
transactions contemplated hereby.
3.9 Financing. Buyer has obtained letters regarding xxxxx
xxxx from bona fide financial institutions in connection with the
transactions contemplated hereby, copies of which letters have
been delivered to Merisel.
3.10 Disclosure. No representation or warranty by Buyer in
this Agreement, and no exhibit, statement, certificate or
schedule furnished or to be furnished to Sellers pursuant hereto,
or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact,
or omits or will omit to state a fact necessary to make the
-27-
statements or facts contained herein or therein not misleading or
necessary to provide Sellers with adequate and complete
information as to Buyer and its affairs.
ARTICLE 4
CERTAIN OBLIGATIONS OF THE PARTIES
4.1 Conduct of Business Pending Closing. From and after
the date hereof and to and including the Closing Date, and unless
Buyer shall otherwise consent or agree in writing, Sellers
covenant and agree that:
(a) Ordinary Course. The businesses of Latin America,
Mexico and each of the Subsidiaries will be conducted only in the
ordinary course and consistent with past practice, including
billing, shipping and collection practices, inventory
transactions and payment of accounts payable except as indicated
in Sections 4.8 and 4.10 and except that Seller may sell
inventory and collect accounts receivable so as to minimize
adjustments to the Purchase Price.
(b) Preservation of Businesses. Except as set forth in
Schedule 4.1, Sellers, Latin America, Mexico and each of the
Subsidiaries will use all reasonable efforts to preserve the busi
ness organizations of Latin America, Mexico and each of the Sub
sidiaries intact, and except as may otherwise be required by this
Agreement, will not, without the prior consent of Buyer which con
sent will not be unreasonably withheld, terminate the services of
the present officers and key employees of Latin America, Mexico
or any of the Subsidiaries, and will use all reasonable efforts
to preserve for Buyer the good will of the suppliers, customers
and others having business relations with Latin America, Mexico
and each of the Subsidiaries.
(c) Material Transactions. Except as set forth on Schedule
4.1(c), Sellers will not permit Latin America, Mexico or any of
the Subsidiaries to:
(i) amend its articles of incorporation or bylaws;
(ii) change its authorized or issued equity interests or
issue any rights or options to acquire shares of its equity
interests;
(iii) enter into or commit to enter into any Material
Contract except in the ordinary course of business;
(iv) enter into any employment or consulting contract or
arrangement except in the ordinary course of business with any
-28-
person that is not terminable at will, without penalty or
continuing obligation to the Buyer;
(v) sell, transfer, lease or otherwise dispose of any of
its assets other than inventory, receivables and obsolete
equipment in the ordinary course of business and consistent with
past practice;
(vi) except as set forth in Schedule 4.1, incur, create or
assume any mortgage, pledge, lien, restriction, encumbrance,
tenancy, encroachment, covenant, condition, right-of-way,
easement, claim, security interest, charge or other matter affect
ing title on any of its assets or other property, except
Permitted Encumbrances;
(vii) except as set forth in Schedule 4.1, make,
change or revoke any tax election or make any agreement or
settlement with any taxing authority;
(viii) declare or pay any dividend or other dis
tribution (except in respect of the payment of any Taxes) in
respect of any of its equity interests, or make any payment to
redeem, purchase or otherwise acquire, or call for redemption,
any of such equity interests; provided, however, that this subsec
tion shall not apply to the European Subsidiaries;
(ix) except to the extent set forth in Schedule 4.1,
increase or otherwise change the compensation payable or to
become payable to any officer, employee or agent;
(x) make or authorize the making of any capital
expenditure in excess of $50,000 in the aggregate;
(xi) except as set forth in Schedule 4.1, incur any
debt or other obligation for money borrowed;
(xii) incur any other obligation or liability,
absolute or contingent except in the ordinary course of business
and consistent with past practice;
(xiii) cancel or permit the waiver of any right
material to the operation of the business of Latin America,
Mexico or any Subsidiary relating to any of its suppliers listed
on Exhibit D or any customers representing individually in excess
of 5% and in the aggregate more than 10% of sales in the 18
months ended June 30, 1996 of any of Europe, Latin America,
Mexico or any Subsidiary;
(xiv) guarantee or become a co-maker or accommodation
maker or otherwise become or remain contingently liable in
connection with any liability or obligation of any person other
than endorsement of checks received for deposit;
-29-
(xv) loan, advance funds or make an investment in or
capital contribution to any person, except advances made in the ordinary
course of business to employees in the ordinary course of
business consistent with past practices;
(xvi) increase any prepaid expenses or other in
tangible asset the full right, title, interest and benefit of
which will not be available to Latin America, Mexico or the
applicable Subsidiary after Closing (other than ordinary course
one-month prepayments in respect of rent and health insurance);
(xvii) take any action or omit to take any action which
will result in a violation of any applicable law and which could
reasonably be expected to have a Material Adverse Effect or cause
a breach of any Material Contracts;
(xviii) impose or collect any intercompany charge with
respect to Latin America or Mexico in excess of the average of
the amounts charged during the months of April, May and June of
1996 other than with respect to products saleable in the ordinary
course of business at normal markups at "arms length" prices; or
(xix) enter into any agreement to do any of the
foregoing.
(xx) Notwithstanding any of the foregoing, nothing in this
Agreement shall prohibit Merisel from engaging in intercompany
transactions with any of its subsidiaries other than Latin
America and Mexico, or Europe from engaging in any intercompany
transactions with any of the European Subsidiaries, provided
that, except with respect to Latin America, Mexico and the
Subsidiaries other than the European Subsidiaries, all such inter
company transactions shall be permitted so long as they are
settled or forgiven on or prior to the Closing Date and are in
accordance with Section 4.1(c)(xviii) above.
4.2 Insurance. Sellers shall cause Latin America, Mexico
and each of the Subsidiaries to maintain in full force and effect
the policies of insurance listed on Schedule 2.24, subject only
to variations required by the ordinary operations of its
business, or else will use its reasonable efforts to obtain,
prior to the lapse of any such policy, substantially similar
coverage with insurers of recognized standing and approved in
writing by the Buyer. Sellers shall promptly advise the Buyer in
writing of any change of insurer or type of coverage in respect
of the policies listed on Schedule 2.24.
4.3 Fulfillment of Agreements by Sellers. Sellers shall
use their reasonable efforts to cause all of the conditions to
the obligations of Buyer under Section 5.1 of this Agreement to
be satisfied on or prior to the Closing, including, but not
limited to, not permitting Latin America, Mexico or any of the
Subsidiaries to take any action, omit to take any action or
permit to occur any event that would make any of the representa
-30-
tions and warranties of Sellers contained herein untrue. Sellers
shall cause Latin America, Mexico and each Subsidiary to use
their reasonable efforts, to conduct their business in such a
manner that at the Closing the representations and warranties of
Sellers contained in this Agreement shall be true and correct as
though such representations and warranties were made on, as of,
and with reference to such date. Sellers will promptly notify
Buyer in writing of any event or fact which represents a breach
of any of its representations, warranties, covenants or
agreements. To the extent that the Sellers have Knowledge of the
same, Sellers shall promptly advise Buyer in writing of the
occurrence of any condition or development of a nature that is
materially adverse to the business, operations, properties,
assets or conditions (financial or otherwise) of Europe, Latin
America, Mexico or any of the Subsidiaries.
4.4 Access, Information and Documents. Sellers will cause
Latin America, Mexico and each of the Subsidiaries to give to
Buyer and to Buyer's counsel, accountants and other
representatives full access during normal business hours to all
of their respective properties, books, tax returns, contracts,
commitments, records, officers, personnel and accountants and
will furnish to Buyer all such documents and copies of documents
(certified to be true copies if requested) and all information
with respect to the affairs of Latin America, Mexico and each of
the Subsidiaries as Buyer may reasonably request. Sellers shall
further cause the counsel for each of Europe, Mexico, Latin
America and the Subsidiaries to cooperate with Buyer and hereby
waive any claim of confidentiality with respect to Buyer's access
pursuant this Section 4.4. Without limiting the generality of
the foregoing, the Buyer shall have the right to have a
reasonable number of its representatives present on-site and have
access, from time to time, to all facilities of Latin America,
Mexico and the Subsidiaries during business hours for the purpose
of monitoring the activities conducted.
4.5 Exclusivity. Sellers shall not and shall ensure that
none of Latin America, Mexico or any of the Subsidiaries or any
of their affiliates, officers, directors, employees and other
agents, directly or indirectly (x) take any action to encourage,
solicit or initiate any Acquisition Proposal (as hereinafter
defined), or (y) respond to, continue, initiate or engage in
discussions or negotiations concerning any Acquisition Proposal
with, or disclose any non-public information relating to Europe,
Latin America, Mexico or any of the Subsidiaries to or afford
access to their properties, books or records to, any person
(except Buyer and its representatives). Sellers shall provide
the Buyer with notice and copies of any Acquisition Proposal
received by Sellers not later than twenty-four (24) hours after
receipt. The term "Acquisition Proposal" as used herein means
any offer or proposal for, or indication of interest in, any
acquisition of Europe, Latin America, Mexico or any of the
Subsidiaries, whether by way of a merger, consolidation or other
business combination involving any equity interest in, or a
-31-
substantial portion of the assets of Europe, Latin America,
Mexico or any of the Subsidiaries.
4.6 Section 338(h)(10) Election. Merisel and Buyer shall,
at Buyer's request, make a joint election under section
338(h)(10) of the Code with respect to the purchase of the stock
of the companies listed on Schedule 4.6 (the "Consolidated
Group"). Buyer represents that it is qualified to make such elec
tion. Buyer and Sellers shall (i) negotiate in good faith and
agree to an allocation of the Purchase Price among the assets of
companies that are deemed to have been acquired pursuant to
section 338(h)(10) of the Code (the "Section 338 Asset Allocation
Schedule") on a basis consistent with the preliminary asset
allocation schedule set forth in Schedule 4.6 and (ii) on the
Closing Date, exchange completed and properly executed copies of
Internal Revenue Service Form 8023-A and required schedules
related thereto, all of which are to be prepared on a basis
consistent with the Section 338 Asset Allocation Schedule. If
any changes are required to be made to these forms or schedules
(including the Section 338 Asset Allocation Schedule) as a result
of information that first becomes available after the Closing
Date, the parties shall promptly and in good faith reach an
agreement as to the precise changes required to be made. The
parties shall use the Section 338 Asset Allocation Schedule for
purposes of preparing all reports and returns with respect to
Taxes, including, if necessary, Internal Revenue Service Form
8594.
4.7 Resignations. At the Closing, Sellers will deliver the
written resignation of each of Latin America's, Mexico's and each
of the Subsidiaries' directors, officers, trustees, plan adminis
trators and fiduciaries of the Benefit Plans. Each of Europe,
Latin America, Mexico and each of the Subsidiaries shall also
deliver to Buyer evidence satisfactory to Buyer, in its sole dis
cretion, of the revocation of any powers of attorney or any
authorization of any person to draw on the bank accounts set
forth on the list prepared pursuant to Schedule 5.1(xix) of this
Agreement.
4.8 Accounts Payable. With respect to each of Latin
America, Mexico and the Subsidiaries, Sellers shall use their
reasonable efforts to obtain the consent of the ten vendors and
suppliers listed on Exhibit D from which the Subsidiaries
purchased the greatest volume of products in the eighteen months
ended June 30, 1996, to the deferral of payment of accounts and
shall cause the Subsidiaries not to pay any accounts payables to
the extent that the respective vendor or supplier shall have
consented to such payment deferral; provided, however, that the
obtaining of such consents and the failure to pay accounts
payable to the vendors so consenting shall not constitute a
breach of any representation, warranty or covenant of Sellers
hereunder.
4.9 Fulfillment of Agreements by Buyer. Buyer shall use
its reasonable efforts to cause all of the conditions to the
obligations of Sellers under Section 5.2 of this Agreement to be
-32-
satisfied on or prior to the Closing. Buyer shall use its best
efforts to conduct its business in such a manner that at the
Closing the representations and warranties of Buyer contained in
this Agreement shall be true and correct as though such
representations and warranties were made on, as of, and with
reference to such date. Buyer will promptly notify Merisel in
writing of any event or fact which represents a breach of any of
its representations, warranties, covenants or agreements.
4.10 Elimination of 30-Day Automatic Return Policy.
Effective upon the signing of this Agreement, Europe (with
respect to the European Subsidiaries) and each Subsidiary shall
discontinue any existing 30-day automatic return policy;
provided, however, that the discontinuance of such return policy
shall not constitute a breach of any representation, warranty or
covenant of Sellers hereunder.
ARTICLE 5
CONDITIONS TO CLOSING; TERMINATION
5.1 Conditions Precedent to Obligations of Buyer. The
obligations of Buyer to proceed with the Closing under this
Agreement are subject to the fulfillment prior to or at Closing
of the following conditions (any one or more of which may be
waived in whole or in part by Buyer at Buyer's option):
(i) Bringdown of Representations and Warranties. The
representations and warranties of Sellers in this Agreement shall
be true and correct in all material respects on and as of the
time of Closing, with the same force and effect as though such
representations and warranties had been made on, as of and with
reference to such time and Buyer shall have received a certi
ficate to such effect, signed by Sellers.
(ii) Performance and Compliance. Sellers shall have
performed all of the covenants and complied with all of the
provisions required by this Agreement to be performed or complied
with by them on or before the Closing, and Buyer shall have
received a certificate to such effect, signed by Sellers.
(iii) Accounts Receivable Certificate. Buyer shall
have received a certificate from the Chief Executive Officer of
Merisel certifying as to a summary of the amount and an aging of
the accounts and notes receivable of Latin America, Mexico and
each of the Subsidiaries and a certificate of the Chief Executive
Officer of Europe certifying as to a summary of the amount and an
aging of the accounts and notes receivable of each of the
European Subsidiaries as of the close of business on the last day
of the month prior to the date of Closing.
-33-
(iv) Satisfactory Instruments. All instruments and
documents required on Sellers' part to effectuate and consummate
the transactions contemplated hereby shall be delivered to Buyer
and shall be in form and substance reasonably satisfactory to
Buyer and its counsel.
(v) Required Consents. All consents and approvals
of third parties, including consents of those vendors representing 90% of
purchases for the eighteen months ended June 30, 1996 by Europe,
Latin America, Mexico or the Subsidiaries from the vendors
identified on Exhibit D, but excluding all other vendors to Latin
America, Mexico or any Subsidiary to the transactions
contemplated hereby shall have been obtained, and all waiting
periods specified by law the passing of which is necessary for
the consummation of such transactions (including without
limitation any waiting periods under applicable governmental
laws) shall have passed or been terminated.
(vi) Litigation. No order of any court or
administrative agency shall be in effect which restrains or
prohibits the transactions contemplated hereby or which would
materially adversely affect Buyer's ownership or control of Latin America,
Mexico, or any of the Subsidiaries or their respective businesses
or the Europe Assets or seeking monetary relief by reason of the
consummation of such transactions, and there shall not have been
threatened, nor shall there be pending, any such action or
proceeding by or before any court or governmental agency or other
regulatory or administrative agency or commission.
(vii) Executive Management. Sellers shall have
terminated, without cost to any of Europe, Latin America, Mexico
or any of the Subsidiaries, and without liability to any of the
foregoing, all employment and other agreements with those
individuals listed on Schedule 5.1; provided, however, that if
Buyer or its affiliates rehire any individual listed on Schedule
5.1 prior to or on the date of Closing, or within one year
thereafter, Buyer will reimburse Sellers for any severance costs
paid by them to such individual.
(viii) Related Party Receivables and Payables. All
loans or payables by Europe, Latin America, Mexico, or any of the
Subsidiaries to, and any receivables of Europe, Latin America,
Mexico or any Subsidiary from, any Related Party shall have been
repaid or forgiven in full and there shall be no outstanding
debts or obligations (including, without limitation, amounts
outstanding under the Revolving Credit Agreement and any
intercompany tax accounts) between any Related Party on the one
hand, and Europe, Latin America, Mexico, or any of the
Subsidiaries on the other hand.
(ix) Escrow Agreement. Sellers and the Escrow Agent shall
have executed and delivered the Escrow Agreement to Buyer.
-34
(x) Material Changes. Since the date hereof, there shall
not have been any material adverse change in the financial
condition, assets, liabilities, net worth, earning power or
business of Latin America, Mexico, or any of the Subsidiaries,
and Buyer shall have received a certificate to such effect,
signed by Sellers and the chief executive officer of Sellers.
(xi) Permits and Licenses Required. Buyer shall have
received all licenses, permits and certificates and governmental
approvals listed on Schedule 2.16 applicable to it.
(xii) Lender Release. The European Assets and Latin
America, Mexico and each of the Subsidiaries and all of their
assets shall have been released from any liability under the
Revolving Credit Agreement and any liens arising under said agree
ment on any of their assets shall have been released.
(xiii) Use of Merisel Name. Merisel and/or Europe, as
may be required, shall have granted, for no additional con
sideration, to Buyer the right and license to the unrestricted
use of the "Merisel" name for a period of one year commencing on
the Closing Date in the countries located on the continents of
Europe (including Eastern Europe but excluding the Russian
Federation) and South America, in each country in Latin America
and in Mexico.
(xiv) CAMBAR System. Sellers shall have provided
Buyer with the use of the CAMBAR System for no longer than 90
days after the Closing Date; provided, however, that Sellers
shall not be responsible for the successful transmission
(uploading) of data from remote systems to CAMBAR. Use of the
CAMBAR System shall include use of the XxXxxxxxx & Dodge
financial software package, a license for the use of Sales net
for DOS and source code technical support for downloads, use of
the Dell EDI, network access to ISSC (from Los Angeles,
California to Boulder, Colorado) and utilization of two United
States based employees to support the system. Such license shall
(A) provide for the payment to Sellers of $100,000 per 30-day
month, (B) be terminable at any time by Buyer at its election
without the payment by Buyer of any additional consideration and
(C) include access to the source code but with no right to modify
the same. The operation of the CAMBAR system by Buyer for 90
days shall be in accordance with past practice.
(xv) TOLAS System. Sellers shall transfer to Buyer their
rights with respect to the use of the TOLAS System; provided that
Buyer shall have assumed all obligations with respect thereto.
Such use shall include access to the source code and the right to
modify the same. Sellers shall have no right to any improvements
or modifications of said system.
(xvi) SBT System and Site Licenses. Sellers shall
have transferred to Buyer their rights with respect to the use of
the SBT System; provided that Buyer shall have assumed all
-35-
obligations with respect thereto. Such use shall include access
to the respective source codes and the right to modify the same.
Sellers shall have no right to any improvements or modifications
of said system and uses by Buyer.
(xvii) SoftTeach Trademark and Program. Sellers shall
have allowed Buyer, without additional charge, the non-exclusive
right to use the SoftTeach trademark program in the countries
located on the continent of Europe (including Eastern Europe, but
excluding the Russian Federation) and South America, in each
country in Latin America and in Mexico for a period of one year
commencing on the Closing Date and shall execute any and all
assignment documents reasonably required by Buyer to permit the
registration of said xxxx in the name of Buyer or any of its
assignees in all jurisdictions in which the xxxx is registered.
(xviii) Estoppel Certificates. To the extent reasonably
available, Seller shall have delivered to Buyer an original land
lord estoppel certificate and consent in substantially the form
attached hereto and made a part hereof as Exhibit C
(collectively, the "Landlord Estoppel Certificates") from each
landlord and sub-landlord, if any, under each Lease of real
property.
(xix) Bank Accounts. Sellers shall have provided a
list setting forth the name of each bank in which Latin America,
Mexico and each Subsidiary has an account or safe deposit box,
the identifying numbers or symbols thereof and the names of all
persons authorized to draw thereon or to have access thereto.
(xx) Miami, Florida Lease. Sellers shall have delivered to
Buyer an assignment of the lease or a sublease and agreements set
forth on Schedule 5.1(xx) to the extent permitted by the terms of
such agreements; provided, in each case that Buyer assumes all
obligations thereunder.
(xxi) Financing. Financing necessary to fund the
Purchase Price shall have been obtained by Buyer in connection
with the transactions contemplated hereby on terms reasonably
satisfactory to Buyer.
5.2 Conditions Precedent to the Obligations of Sellers.
The obligation of Sellers to proceed with the Closing hereunder
is subject to the fulfillment prior to or at Closing of the
following conditions (any one or more of which may be waived in
whole or in part by Sellers at Sellers' option):
(i) Bringdown of Representations and Warranties. The
representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects on
and as of the time of the Closing, with the same force and effect
as though such representations and warranties had been made on,
as of and with reference to such time and Buyer shall have
delivered to Sellers a certificate to such effect.
-36-
(ii) Performance and Compliance. Buyer shall have performed
in all material respects all of the covenants and complied in all
material respects with all the provisions required by this
Agreement to be performed or complied with by it on or before the
Closing and Buyer shall have delivered to Sellers a certificate
to such effect.
(iii) Litigation. No order of any court or admin
istrative agency shall be in effect which restrains or prohibits
the transactions contemplated hereby and there shall not have
been threatened, nor shall there be pending, any action or
proceeding by or before any court or governmental agency or other
regulatory or administrative agency or commission, challenging
any of the transactions contemplated by this Agreement or seeking
monetary relief by reason of the consummation of such
transactions.
(iv) Satisfactory Instruments. All instruments and
documents required on the part of Buyer to effectuate and con
summate the transactions contemplated hereby shall be delivered
to Sellers and shall be in form and substance reasonably
satisfactory to Merisel and its counsel.
(v) Required Consents. All consents and approvals of all
governmental departments, agencies, authorities and commissions
required for the transactions contemplated hereby shall have been
obtained, and all waiting periods specified by law the passing of
which is necessary for the consummation of such transactions
(including without limitation any particular waiting periods)
shall have passed or been terminated.
(vi) Escrow Agent. Buyer and Escrow Agent shall have
executed and delivered the Escrow Agreement to Sellers.
(vii) DFS Release. Sellers and all of their assets
shall have been released from any liability under the Asset
Amortization Agreement and any liens arising under said agreement
on any of their assets shall have been released.
(viii) Lender Consents. All consents and approvals of
all lenders for borrowed money of either or both of Merisel or
Europe required for the transactions contemplated hereby shall
have been obtained on terms reasonably satisfactory to Sellers,
including without limitation, the rescheduling of amortization
payments and obtaining covenant amendments on terms reasonably
satisfactory to Sellers.
5.3 Termination.
(a) When Agreement May Be Terminated. This Agreement may
be terminated at any time prior to Closing:
(i) By mutual consent of Buyer and Sellers;
-37-
(ii) By Buyer if the representations and warranties of
Sellers contained in this Agreement shall not be true and correct
in all material respects as at any date prior to Closing, or if
Sellers shall have failed to perform all of the covenants and
comply with all of the provisions required by this Agreement to
be performed or complied with by them on or before the Closing
unless such are not material in the aggregate, or if any of the
conditions specified in Section 5.1 hereof shall not have been
fulfilled by the time required and shall not have been waived by
Buyer;
(iii) By Merisel if the representations and warranties
of Buyer contained in this Agreement shall not be true and
correct in all material respects as at any date prior to Closing,
or Buyer shall have failed to perform all of the covenants and
comply with all of the provisions required by this Agreement to
be performed or complied with by it on or before the Closing
unless such are not material in the aggregate or if any of the
conditions specified in Section 5.2 hereof shall not have been
fulfilled by the time required and shall not have been waived by
Seller; or
(iv) By Buyer or Merisel, if the Closing shall not have
occurred prior to November 29, 1996; provided, that Buyer or
Merisel may terminate this Agreement pursuant to this subpara
graph (iv) only if Closing shall not have occurred by such date
for a reason other than a failure by such party to satisfy the
conditions to Closing of the other party set forth in Section 5.1
or 5.2 hereof.
(v) Notwithstanding the provisions of (ii) or (iii)
above,in the event that Buyer does not proceed with the Closing on
September 27, 1996 as a result of its failure to obtain financing
pursuant to Section 5.1(xxi) or Sellers do not proceed with the
Closing on September 27, 1996 as a result of their failure to
obtain lender consents pursuant to Section 5.2(viii) hereof, then
the Closing shall be extended to such date as the financing or
consents are obtained, but in no event beyond November 29, 1996.
(b) Effect of Termination. In the event of termination of
this Agreement by either Merisel or Buyer, as provided above,
this Agreement shall forthwith terminate and there shall be no
liability on the part of the Sellers or Buyer, except for lia
bilities arising from a material breach of this Agreement prior
to such termination; provided, however, that the obligations of
the parties set forth in Section 6.4 and 6.5 hereof shall survive
such termination and further provided that if at any time prior
to December 7, 1996, Sellers accept an Acquisition Proposal and
at such time as this Agreement is terminated Buyer is not in
material breach of its obligations hereunder and Buyer had the
financial ability to consummate this transaction, then Sellers
shall pay Buyer a fee equal to Three Million Dollars
($3,000,000). Notwithstanding any of the foregoing, if Buyer
does not proceed with the Closing under this Agreement as a
result of its failure to obtain financing pursuant to Section
-38-
5.1(xxi) hereof, or if Sellers do not proceed with the Closing
under this Agreement as a result of their failure to obtain
lender consents pursuant to Section 5.2(viii) hereof, then the
party which failed to satisfy such condition shall reimburse the
other party's reasonable out-of-pocket expenses incurred in
connection with the negotiation of this Agreement and the
consummation of the transactions contemplated hereby up to a
maximum of $500,000. Sellers acknowledge that the agreements
contained in this Section are an integral part of the
transactions contemplated by this Agreement and that, without
these agreements, Buyer would not enter into this Agreement.
Accordingly, if Sellers fail to pay any amounts pursuant to this
Section and, in order to obtain such payment, legal action is
commenced which results in a judgment against Sellers therefor,
Sellers will pay the plaintiff's reasonable costs (including
reasonable attorneys' fees) in connection with such suit,
together with interest computed on any amounts determined pur
suant to this Section (computed from the date when such amounts
were due and payable pursuant to this Section) and such costs
(computed from the date or dates incurred) at the prime rate of
interest announced from time to time by Citibank, N.A. Sellers'
obligations pursuant to this Section will survive any termination
of this Agreement.
ARTICLE 6
CERTAIN ADDITIONAL COVENANTS
6.1 Costs and Expenses. Sellers will pay all costs and
expenses, including legal fees, in connection with the per
formance of and compliance with this Agreement by Sellers, Latin
America, Mexico and the Subsidiaries, and all transfer, documen
tary and similar taxes in connection with the delivery of the
shares of Stock to be made hereunder. Buyer will pay all costs
and expenses, including legal fees, of Buyer's performance of and
compliance with this Agreement, except for the fees paid to
Deloitte & Touche, L.L.P. pursuant to Section 1.2(c).
6.2 Covenant Not to Compete. For a period of three years
from and after the Closing, neither the Sellers nor any of their
affiliates, will, in any country located on the continent of
Europe (excluding the Russian Federation) or South America, any
country in Latin America or in Mexico, directly or indirectly,
own, manage, operate, join, control or participate in the
ownership, management, operation or control of, any business
conducting business under any name similar to the name of Latin
America, Mexico or any Subsidiary. For a period of three years
from and after the Closing, neither the Sellers nor any of their
affiliates will, directly or indirectly, own, manage, operate,
join, control or participate in the ownership, management, opera
tion or control of, any entity, person, firm, corporation or busi
ness that engages in the Business in, or sells to customers
either located in or sells to customers which sell to end users
located in any country located on the continent of Europe
-39-
(excluding the Russian Federation) or South America, any country
in Latin America or in Mexico; provided, however that any bona
fide third party acquiror of the stock or all or substantially
all of the assets of Merisel shall be subject to only the
provisions of the first sentence of this Section 6.2. For
purposes of this Agreement, the term "Business" includes
distribution of microcomputer products, networking products and
software. The restrictive covenant contained in this Section is
a covenant independent of any other provision of this Agreement
and the existence of any claim which Sellers may allege against
Buyer, whether based on this Agreement or otherwise, will not
prevent the enforcement of this covenant. Sellers agree that
Buyer's remedies at law for any breach or threat of breach by
Sellers of the provisions of this Section will be inadequate, and
that Buyer shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Section and to enforce
specifically the terms and provisions hereof, in addition to any
other remedy to which Buyer may be entitled at law or equity. In
the event of litigation regarding the covenant not to compete,
the prevailing party in such litigation shall, in addition to any
other remedies the prevailing party may obtain in such
litigation, be entitled to recover from the other party its rea
sonable legal fees and out of pocket costs incurred by such party
in enforcing or defending its rights hereunder. The length of
time for which this covenant not to compete shall be in force
shall not include any period of violation or any other period
required for litigation during which Buyer seeks to enforce this
covenant. Should any provision of this Section be adjudged to
any extent invalid by any competent tribunal, such provision will
be deemed modified to the extent necessary to make it
enforceable.
6.3 Confidential Information. Sellers acknowledge that for
a period of three years after the Closing, Buyer could be irrepar
ably damaged if Sellers' or any of their affiliates' confidential
knowledge of the operations of Latin America, Mexico and the Sub
sidiaries were disclosed to or utilized on behalf of any person,
firm, corporation or other business entity other than Buyer or
its affiliates, and Sellers covenant and agree that they will not
following the Closing, without the prior written consent of
Buyer, disclose (or permit to be disclosed) or use in any way any
such confidential information, unless (i) compelled to disclose
such confidential information by judicial or administrative
process or, in the opinion of its counsel, by other requirements
of law, or (ii) such confidential information is generally
available to the public through no fault of Sellers.
6.4 Indemnification By Sellers.
(a) Extent of Indemnity. Sellers hereby agree to
indemnify, defend and hold harmless Buyer and its affiliates from
and against:
-40-
(i) any and all claims, actions, proceedings, judgments,
damages, losses, costs, expenses or liabilities incurred or
suffered by, or brought or made against Buyer arising out of or
resulting from any misrepresentation, breach of warranty or non
fulfillment of any covenant or agreement on the part of Sellers
contained in this Agreement or in any statement or certificate
furnished or to be furnished to Buyer pursuant to this Agreement;
(ii) any actions, judgments, costs and expenses (including
reasonable attorneys' fees and all other expenses reasonably
incurred in investigating, preparing or defending any litigation
or proceeding, commenced or threatened) incident to any such
breach or nonfulfillment, including the enforcement of this
Section in connection therewith.
For purposes of this Agreement, the aggregate amount of such
losses, liabilities, claims, obligations, damages, costs,
expenses and fees shall be hereinafter referred to as "Damage" or
"Damages". In addition, the amount of any Damages for which
indemnification may be sought hereunder shall be determined on an
after-tax basis. Notwithstanding the foregoing, Sellers, with
respect to the European Subsidiaries, shall have no liability to
Buyer for a breach of Sections 2.11 and 2.12 unless and until the
value of any claims shall have exceeded the total of the
adjustments made pursuant to items (i) through (v) on Exhibit A
with respect to Section 2.11 and items (vi) through (ix) with
respect to Section 2.12, respectively. With respect to Latin
America and Mexico, Sellers shall have no liability unless and
until the value of any claims shall have exceeded the adjustments
made pursuant to Section 1.2(d)(ii) but in no event in excess of
$2,000,000.
(b) Time Limit on Certain Indemnification Claims. No
action or claim for Damages resulting from breaches of the repre
sentations and warranties of Sellers shall be brought or made
after the expiration of a one-year period from the Closing Date,
as the case may be, except that such time limitation shall not
apply to (i) claims for misrepresentations or breaches of
warranty relating to Section 2.10 (relating to Taxes), which may
be asserted until 60 days after the running of the applicable
statute of limitations with respect to the taxable period to
which the particular claims relate, (ii) claims for misrepresenta
tions or breaches of warranty relating to Sections 2.15 or 2.26,
which may be asserted until three years following the Closing,
(iii) any claims which have been the subject of a good faith
written notice from Buyer to Sellers prior to the expiration of
any of the foregoing periods, which notice specifies in
reasonable detail the nature of the claim and that Buyer requests
indemnity hereunder, or (iv) claims for misrepresentations or
breaches of warranty related to Sections 2.11 or 2.12, which may
not be asserted after the calculation of the post-closing
adjustment as finally determined by the Resolution Accountants
pursuant to Section 1.2 hereof and any claims based thereon shall
be resolved by such Resolution Accountants at or prior to the
determination of the post-closing adjustment.
-41-
(c) Limitations on Liability. Sellers shall not be liable
to Buyer for breaches of representations and warranties under
Section 6.4(a) unless the cumulative total of Damages for
breaches of representations and warranties under Section 6.4(a)
including any amounts that would not individually give rise to a
breach because they are not otherwise material, exceeds
$1,000,000 (less any amount that would have constituted an
adjustment to the Purchase Price but for the fact it was less
than $250,000 pursuant to Section 1.2(c)(i)), and then only to
the extent of such excess.
(d) Certain Matters Excluded. Notwithstanding anything to
the contrary in this Section 6.4, no limitation or condition of
liability provided in this Section shall apply to the breach of
any of the representations and warranties contained herein if
such representation or warranty was made in bad faith with the
intent that (i) it contain an untrue statement of a material fact
or (ii) omit to state a material fact necessary to make the state
ments or facts contained therein not misleading.
(e) Continuation of Indemnity. In the event of a merger,
consolidation or other business combination of Merisel with any
other entity (the "Transferee") or any other transaction which
results in the sale, lease, exchange, transfer or other
disposition of all or substantially all of the assets of Merisel
and its affiliates, provision shall be made for the Transferee to
specifically assume the indemnification obligations set forth in
this Agreement.
6.5 Indemnification by Buyer. Buyer hereby agrees to indem
nify and hold harmless Sellers from and against:
(a) any loss, liability, claim, obligation, damage or
deficiency arising out of or resulting from any
misrepresentation, breach of warranty or nonfulfillment of any
covenants, agreement on the part of Buyer contained in this
Agreement or in any statement or certificate furnished or to be
furnished to Sellers pursuant to this Agreement, and
(b) any actions, judgments, costs and expenses (including
reasonable attorneys' fees and all other expenses incurred in
investigating, preparing or defending any litigation or pro
ceeding, commenced or threatened) incident to any of the fore
going or the enforcement of this Section.
6.6 Indemnification Procedures.
(a) The provisions of this Section shall govern any claim
for indemnification by Sellers pursuant to Section 6.4, or by the
Buyer, pursuant to Section 6.5, (each such indemnified party, an
"Indemnitee") against the party or parties agreeing to provide
indemnification hereunder (each such indemnifying party, an
"Indemnitor") with respect to third party claims made against the
Indemnitee.
-42-
(b) The Indemnitee shall promptly give notice hereunder to
the Indemnitor, after obtaining notice of any claim as to which
recovery may be sought against the Indemnitor pursuant to
Sections 6.4 or 6.5, and, the Indemnitor shall have the right to
assume the defense of any such claim; provided, that (x) the
Indemnitee shall not be required to permit the Indemnitor to
assume the defense of any third party claim that seeks an
injunction, restraining order, declaratory relief or other non-
monetary relief that, if granted, is reasonably likely to have a
Material Adverse Effect on the Indemnitee (but Indemnitor shall
have the right to participate therein), and (y) the Indemnitee
shall have the right to participate in the defense of any third
party claim where the named parties to any such action include
both the Indemnitee and the Indemnitor and the Indemnitee shall
have been advised by counsel that there are one or more legal or
equitable defenses available to the Indemnitee which are differ
ent from those available to the Indemnitor. If the Indemnitor
assumes the defense of such claim or litigation resulting there
from, the obligations of the Indemnitor hereunder as to such
claim shall include taking all steps reasonably necessary in the
defense or settlement of such claim or litigation resulting
therefrom including the retention of counsel, which counsel must
be to the Indemnitee's reasonable satisfaction, and holding the
Indemnitee harmless from and against any and all Damage resulting
from, arising out of, or incurred with respect to any settlement
approved by the Indemnitor or any judgment in connection with
such claim or litigation resulting therefrom and so long as the
Indemnitor performs in accordance with this Section, the
Indemnitor shall not be liable to the Indemnitee for any legal or
other expenses subsequently incurred by the Indemnitee in con
nection with the defenses thereof other than reasonable costs of
investigation. The Indemnitor shall not, in the defense of such
claim or litigation, consent to the entry of any judgment or
enter into any settlement involving equitable or non-monetary
damages or claims which in the reasonable judgment of the
Indemnitee would have a continuing Material Adverse Effect on the
Indemnitee's business (including any material impairment of its
relationships with customers and suppliers) except with the
written consent of the Indemnitee, which consent shall not be
unreasonably withheld, unless the Indemnitee is released and held
harmless from and against any and all Damages resulting from,
arising out of or incurred with respect to such judgment or
settlement.
(c) If the Indemnitor shall not assume the defense of any
such claim by a third party or litigation resulting therefrom,
the Indemnitee may defend against such claim or litigation in
such manner as it deems appropriate, provided that the Indemnitee
may not settle such claim or litigation without the consent of
the Indemnitor, which consent shall not be unreasonably withheld
and the Indemnitor shall promptly reimburse the Indemnitee for
the amount of any such settlement and for all Damages incurred by
the Indemnitee in connection with the defense against or
settlement of such claim or litigation.
-43-
(d) The parties hereto shall cooperate in the defense of
any such claims and shall furnish records, information and
testimony, and attend such conferences, discovery, proceedings,
hearings, trials and appeals in each case as may be reasonably
required in connection therewith.
6.7 Claims Against Latin America, Mexico or any Subsidiary.
Notwithstanding any provision in this Agreement to the contrary,
Sellers agree that they shall not be entitled to any indemnifica
tion from, or to make or receive any amount for any claim
against, Latin America, Mexico or any Subsidiary in respect of
any Damage or Damages arising out of or resulting from this
Agreement or the transactions contemplated by this Agreement.
6.8 European Anti-Competition Legislation. Buyer and
Sellers have caused to be filed or will promptly cause to be
filed the required notifications with the applicable European
governmental authorities concerning the nature, terms and
conditions of this Agreement. The parties hereto shall not
intentionally or negligently delay submission of information
requested by any such applicable governmental authority and shall
use their respective reasonable efforts promptly to supply, or
cause to be supplied, such information and shall use their best
efforts to obtain early termination of any applicable waiting
period.
6.9 Brokers. Sellers have engaged Xxxxxxx Xxxxx & Co.,
Inc. as a broker in connection with this transaction, and any
fee, commission or other amount payable to such broker will be
paid by Sellers. Buyer has engaged Xxxxxxx Xxxxx & Associates,
Inc. as a broker in connection with this transaction, and any
fee, commission or other amount payable to such broker will be
paid by Buyer.
6.10 Access. Until the date which is seven years after the
Closing Date, Buyer will give, and will cause Latin America,
Mexico and the Subsidiaries to give, to the Sellers reasonable
access to (and the right to make copies at the expense of the
Sellers) the books, files, records and tax returns of Europe,
Latin America, Mexico and the Subsidiaries to the extent that
such relate to the respective businesses and operations of
Europe, Latin America, Mexico and the Subsidiaries on or prior to
the Closing Date. Any access pursuant to this Section 6.10 will
be conducted by the Sellers in good faith, with a reasonable
purpose and in such manner as not to interfere unreasonably with
the operations of Buyer, Latin America, Mexico or any of the
Subsidiaries following the Closing. None of Buyer, Latin
America, Mexico or any of the Subsidiaries will destroy or
dispose of any such books, files, records or tax returns prior to
the expiration of such seven-year period or such longer period as
may be required by applicable laws.
-44-
6.11 Cooperation With Respect to Tax Matters.
(a) Sellers and Buyers recognize that the entities listed
on Schedule 6.11 (the "Cooperation Group") have joined with
Merisel in filing unitary, consolidated, or combined Tax Returns.
After the Closing Date (i) Merisel shall include (to the extent
required by law) the taxable income or loss, and all other items,
of the Cooperation Group for periods ending before or on the
Closing Date, in its unitary, consolidated or combined Tax
Returns, and (ii) with respect to any other Tax Returns of the
Cooperation Group for any taxable period that includes but does
not end on the Closing Date (the "Straddle Tax Returns"), Sellers
shall prepare a schedule apportioning, on a basis consistent with
the preparation of Sellers' consolidated Federal income tax
return for the taxable period ending on the Closing Date, the
taxable income or loss, and all other items, of the Cooperation
Group allocable to the period up to and including the Closing
Date (the "Pre-Closing Period") and the period after the Closing
Date (the "Post-Closing Period") by an interim closing of the
books as of the end of the day on the Closing Date.
(b) Sellers shall be responsible for, and shall have
ultimate discretion with respect to, (i) all Tax Returns required
or permitted by applicable law to be filed by Latin America with
respect to periods that end on or before the Closing Date, (ii)
any elections related to such Tax Returns, provided, that, any
such election shall be subject to the review of Buyer prior to
the filing of any Tax Returns, and (iii) any Audit (including the
execution of any waiver of limitation with respect to any Audit)
relating to any such Tax Returns; further, Buyer and the
Cooperation Group shall cooperate with Sellers for the purpose of
making any election under applicable law. Sellers shall consult
in good faith with Buyer in respect to the issues set forth in
this Section 6.11(b).
(c) Buyer and the Cooperation Group shall be responsible
for, and shall have ultimate discretion with respect to, (i) all
Tax Returns required to be filed by the Cooperation Group with
respect to periods that begin after the Closing Date and (ii) the
Straddle Tax Returns, if any, and (iii) any Audit (including the
execution of any waiver of limitation with respect to any Audit)
relating to any such Tax Returns; provided, however, that (x) in
the case of any Straddle Tax Return, the preparation and filing
of such Return shall be subject to review and approval of
Sellers, and (y) in the event that any Audit for which Buyer or
the Cooperation Group is responsible pursuant to this Section
6.11(c) could reasonably be expected to result in a material
increase in Tax liability for which the Sellers would be liable,
Buyer shall consult in good faith with Sellers in respect of the
specific issues that could give rise to such increased Tax
liability.
(d) After the Closing Date, each of Buyer and the members
of the Cooperation Group on the one hand, and Sellers, on the
-45-
other, shall (i) provide, or cause to be provided, to each
other's respective subsidiaries, officers, employees, representa
tives and affiliates, such assistance as may reasonably be
requested by any of them in connection with the preparation of
any Tax Return or any Audit of the companies in respect of which
Buyer, the members of Cooperation Group or Sellers, as the case
may be, is responsible pursuant to Section 6.11(b) or (c) hereof
and (ii) retain, or cause to be retained, for so long as any such
taxable years or Audits shall remain open for adjustments, any
records or information which may be relevant to any such Tax
Returns or Audits. The assistance provided for in this Section
6.11 shall include without limitation each of Buyer, the members
of the Cooperation Group and Sellers (x) making their agents and
employees and the agents and employees of their respective
subsidiaries and affiliates available to each other on a mutually
convenient basis to provide such assistance as might reasonably
be expected to be of use in connection with any such Tax Returns
or Audits and (y) providing, or causing to be provided, such
information as might be reasonably expected to be of use in
connection with any such Tax Returns or Audits, including without
limitation records, returns, schedules, documents, work papers,
opinions, letters or memoranda, or other relevant materials
relating thereto.
(e) Each of Buyer, the members of the Cooperation Group and
Sellers, shall promptly inform, keep regularly apprised of the
progress with respect to, and notify the other party in writing
not later than (i) ten business days after the receipt of any
notice of any Audit, or (ii) fifteen business days prior to the
settlement or final determination of any Audit for which it was
responsible pursuant to Section 6.11(b) or (c) hereof which could
affect the Tax liability of such other party for any taxable
year.
6.12 Released Obligations. Buyer will indemnify Sellers
from and against any and all claims, actions, proceedings,
judgments, damages, losses, costs, expenses or liabilities
incurred or suffered by, or brought or made against Sellers with
respect to any accounts payable reflected on the Europe and
Latin/Mexico Closing Balance Sheet and any accounts payable of
Latin America or Mexico guaranteed by Sellers in existence at the
Closing and the leases and agreements being transferred or
assigned through the transfer of stock or otherwise under this
Agreement to the extent that the existence of any of the
foregoing does not constitute a breach of any representation or
warranty contained in this Agreement and will enter into an
agreement reasonably satisfactory to Sellers with respect to such
guarantees set forth on Schedule 6.12.
6.13 Employee Obligations. Seller agrees to indemnify Buyer
against all claims and liabilities arising from any Plan (as
defined in Section 2.26(a)) or any obligations thereunder or
liabilities relating thereto (the "Employee Benefits") arising
prior to the Closing Date to the extent that such claims or
liabilities are not reflected as a liability on the Europe and
Latin/Mexico Closing Balance Sheet; and Buyer agrees to indemnify
-46-
Seller and its affiliates against all claims and liabilities
arising from any Employee Benefits arising on or after the
Closing Date or reflected as a liability on the Europe and
Latin/Mexico Closing Balance Sheet.
6.14 Reduction of Intercompany Balances. Sellers shall
cause Latin America, Mexico and the Subsidiaries to use all cash
and marketable securities held by them to repay outstanding bal
ances to the maximum extent practicable as of the Closing Date.
6.15 Fulfillment Agreement. Latin America and Merisel
Americas, Inc. shall enter into a Fulfillment Agreement on sub
stantially the terms set forth on Schedule 6.15 for a period of
up to one year.
6.16 Audits of Purchased Entities. Sellers shall engage
Deloitte & Touche, LLP to perform audits of the combined
financial statements of the Europe, Latin America, Mexico and the
Subsidiaries for the three years ended December 31, 1993, 1994
and 1995. Buyer shall be responsible for the cost of the same.
ARTICLE 7
MISCELLANEOUS
7.1 Nature and Survival of Representations. The representa
tions, warranties, covenants and agreements of Buyer and Sellers
contained in this Agreement, and all statements contained in this
Agreement or any exhibit or schedule hereto or any certificate,
financial statement or report or other document delivered
pursuant to this Agreement, shall be deemed to constitute
representations, warranties, covenants and agreements of the
respective party delivering the same. All such representations,
warranties, covenants and agreements shall survive the Closing
for the period set forth in Section 6.4(b) of this Agreement.
Sellers acknowledge that their representations and warranties in
this Agreement shall not be affected or mitigated by any
investigation conducted by Buyer or its representatives prior to
Closing or any Knowledge of Buyer.
7.2 Certain Definitions. For the purpose of this
Agreement, the following terms are defined in the Sections
indicated:
Term Section
"1995 Balance Sheets" 2.7
"Accounting Principles" 1.2(c)
"Acquisition Proposal" 4.5
"Amounts Due to or From
Related Parties" 1.2(a)
"Asset Amortization Agreement" 1.2(b)
"Authority" 3.8
-47-
"Balance Sheet Date" 2.7
"Business" 6.2
"Buyer" First Paragraph
"Closing Date" 1.3(a)
"Closing" 1.3
"Code" 2.10(a)
"Consolidated Group" 4.6
"Cooperation Group" 6.11
"Damage" or "Damages" 6.4(a)(ii)
"ERISA Affiliate" 2.26(a)
"ERISA" 2.26(a)
"Escrow Agent" 1.2(b)
"Escrow Agreement" 1.2(b)
"Escrow Payment" 1.2(b)
"Estimated Purchase Payment
Amount" 1.2(b)
"Europe Assets" Page 1
"Europe Cash Payment" 1.2(b)
"Europe and Latin/Mexico
Closing Balance Sheet" 1.2(c)(i)
"Europe Stock" Page 1
"Financial Statements" 2.7
"Governmental Body" 2.10(a)
"Hazardous Substances" 2.15
"Indemnitee" 6.6(a)
"Indemnitor" 6.6(a)
"Intellectual Property" 2.25
"Interim Statements" 2.7(b)
"June Balance Sheet" 2.7
"Latin American Accounting Principles" 1.2(c)(ii)
"Latin/Mexico Stock" Page 1
"Latin/Mexico Cash Payment" 1.2(b)
"Lease" 2.6(j)
"Liens" 2.5
"Material Contract" 2.6
"Minimum Latin/Mexico
Equity Value 1.2(d)(ii)
"Net Assets" 1.2(a)
"Permitted Encumbrances" 2.17
"Purchase Price" 1.2(a)
"Questionable Payment" 2.28
"Regulations" 2.10(a)
"Related Party" 2.19(b)
"Resolution Accountants" Page 1
"Revolving Credit Agreement" 1.2(a)
"Seller" First Paragraph
"Stock" Background
"Tax Return" 2.10(a)
"Tax" or "Taxes" 2.10(a)
"Total Adjusted Capital of
the European Subsidiaries" 1.2(a)
"U.S. GAAP" 1.2(c)
-48-
7.3 Notices. All notices, requests, demands and other com
munications hereunder shall be in writing and shall be deemed to
have been duly given if personally delivered or, if sent by recog
nized overnight courier (in which case they shall be deemed
received on the business day following the day of delivery to
said courier if delivered pursuant to such courier's next day
delivery service) at the following addresses (or at such other
address as shall be given in writing by any party to the other):
If to Buyer, to:
CHS ELECTRONICS, INC.
0000 X.X. 00xx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxxx, President
With a required copy to:
Greenberg, Traurig, Hoffman,
Lipoff, Xxxxx & Xxxxxxx, P.A.
0000 Xxxxxxxx Xxxxxx
Xxxxx, XX 00000
Attention: Xxxx Xxxxxxxxx, Esq.
If to Sellers, to:
Merisel, Inc.
000 Xxxxxxxxxxx Xxxxxxxxx
Xx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx,Esq.
With a required copy to:
Xxxxxxx Xxxx Slate Xxxxxxx & Xxxx
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxx, Esq.
7.4 Successors and Assigns. This Agreement, and all rights
and powers granted and obligations created hereby, will bind and
inure to the benefit of and bind the parties hereto and their
respective successors and assigns. Buyer shall have the right to
assign its rights, but not delegate its obligations, under this
Agreement, to an affiliate of Buyer.
7.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
Florida, without giving effect to principles of conflicts of
laws.
7.6 Headings. The headings preceding the text of the sec
tions and subsections hereof are inserted solely for convenience
-49-
of reference, and shall not constitute a part of this Agreement,
nor shall they affect its meaning, construction or effect.
7.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
which together shall constitute one and the same instrument.
7.8 Further Assurances. Each party shall cooperate and
take such action as may be reasonably requested by another party
in order to carry out the provisions and purposes of this
Agreement and the transactions contemplated hereby.
7.9 Amendment and Waiver. The parties may by mutual agree
ment amend this Agreement in any respect, and any party, as to
such party, may (a) extend the time for the performance of any of
the obligations of any other party, (b) waive any inaccuracies in
representations or warranties by any other party, (c) waive
compliance by any other party with any of the agreements
contained herein and performance of any obligations by such other
party, and (d) waive the fulfillment of any condition that is
precedent to the performance by such party of any of its
obligations under this Agreement. To be effective, any such
amendment or waiver must be in writing and be signed by the party
against whom enforcement of the same is sought.
7.10 Entire Agreement. This Agreement and the Schedules and
Exhibits hereto, each of which is hereby incorporated herein, and
the Confidentiality Agreement between Merisel and Buyer dated
February 29, 1996 (which Sellers and Buyer hereby agree to abide
by and as to which Sellers waive any alleged breaches based on
any allegations raised to date raised by either Sellers or their
affiliates) set forth all of the promises, covenants, agreements,
conditions and undertakings between the parties hereto with
respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understandings, inducements or
conditions, express or implied, oral or written.
7.11 Interpretations. Neither this Agreement nor any uncer
tainty or ambiguity herein shall be construed or resolved against
any party hereto, whether under any rule of construction or other
wise. No party to this Agreement shall be considered the drafts
man. On the contrary, this Agreement has been reviewed,
negotiated and accepted by all parties and their attorneys and
shall be construed and interpreted according to the ordinary
commercial meaning of the words used so as fairly to accomplish
the purposes and intentions of all parties hereto.
7.12 Attorney's Fees. If Buyer on the one hand or Sellers
on the other hand initiates any action or proceeding to enforce
or interpret any provision hereof, the prevailing party in such
action or proceeding shall be entitled to recover from the other
party, in addition to any damages or other relief granted as a
result of or in connection with such action or proceeding, all
-50-
costs and expenses of such suit (including any appeals
proceedings), including, without limitation, reasonable
attorneys' fees and the cost of investigation and discovery
related to such action or proceeding.
7.13 Public Announcement. No party to this Agreement shall
make or issue, or cause to be made or issued, any public announce
ment (whether oral or written) or written statement concerning
this Agreement or the transactions contemplated hereby (except as
may be required by applicable law or legal process and except to
the respective directors, officers, agents and creditors of each
party and, with respect to Buyer, parties from which financing
for the transactions contemplated herein is sought) without the
prior written consent of all other parties or as may be otherwise
required by law or the rules of any stock exchange or market on
which the equity securities of such party are listed or traded.
7.14 Knowledge of Sellers and Buyer. For the purposes
hereof, the term "Knowledge of Sellers" shall mean the knowledge
of each of the individuals listed on Schedule 7.14. For the
purposes hereof, the term "Knowledge of Buyer" shall mean
knowledge of the President or Chief Financial Officer of Buyer.
7.15 Material Adverse Effect. For the purposes hereof, the
term "Material Adverse Effect" or a variation thereof shall mean
any change or effect that, individually or when taken together
with all other such changes or effects, is, or could reasonably
be, or is reasonably likely to be, materially adverse to the
business, condition (financial or otherwise), results of
operations, properties, assets or liabilities of (i) with respect
to Buyer, Buyer and its subsidiaries taken as a whole, and
(ii) with respect to Sellers, Latin America, Mexico or the
Subsidiaries (A) Merisel (U.K.) Limited and Merisel-UK Swiss
Branch, together taken as a whole, (B) Merisel France, Inc. taken
as a whole, (C) Merisel GESmbh, Merisel GmbH and Merisel
Netherlands B.V., together taken as a whole and (D) Mexico and
Latin America and their subsidiaries, together taken as a whole.
-51-
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date set forth above.
CHS ELECTRONICS, INC.
By: /s/ Xxxxxxx Xxxxxx
Xxxxxxx Xxxxxx, President
MERISEL, INC.
By: /s/ Xxxxxx Xxxxxxxxxx
MERISEL EUROPE, INC.
By: /s/ Xxxxxx Xxxxxxxxxx
-52-
EXHIBIT A
The following adjustments shall be in lieu of reserves for inventory
and trade and vendor receivables reflected on the Europe Closing Balance
Sheet. The inventory and receivables aging will be based on the inventory
and receivables reports prepared as of the Closing Dated by the Company in
the ordinary course of business on the same basis as the reports were prepared
for May 1996 and as ajusted by the physical inventory taken at the Closing.
(i) The value of inventory (prior to reserves will be reduced
by 0.3% of the recorded value of all inventory in stock for less than 90
days.
(ii) The value of inventory (prior to reserves) will be
reduced by the indicated percentages of the recorded value of all inven
tory in stock for over 90 days: (A) 0% for all Microsoft products; (b) 50%
for all products of vendors listed on Exhibit D attached hereto; and (c) 70%
for all products of all other vendors;
(iii) The value of inventory (prior to reserves) will be reduced
by 70% of the recorded value of all defective or under repair inventory;
(iv) The value of inventory (prior to reserves) will be
reduced by 75% of the recorded value of inventory classified as "non-received"
(v) The value of inventory (prior to reserves) less than 90
days which is in excess of 12 weeks' anticipated sales based on the rate of
actual sales recorded during the prior four weeks ("excess under 90 days"),
except for such inventory held by Merisel GmbH that is comprised of Sun Micro
systems products, shall be reduced by 50% unless such inventory is reasonably
determined by Buyer to be saleable at book value;
(vi) The vaule of trade accounts receivable (prior to reserves)
shall be reduced by 0.6% of the recorded valued of any receivables outstanding
less than 60 days (45 days in Germany);
(vii) The value of trade accounts receivable (prior to reserves)
shall be reduced by 50% of the recorded value of any receivables outstanding
in exess of 60 days (45 days in Germand);
(viii) The value of trade accounts receivalbe (prior to reserves)
placed for collection ("PFC") will be reduced by 50% or the recorded value;
and
(ix) The value of receivables from vendors including, without
limitation, those arising from returns, rebates and marketing allowances
shall be reduced to that amount which the applicable vendor confirms to
the reasonable satisfaction of Buyer will be paid uncontionally provided that
Sellers shall have the right to pursue for their own accout, claims agians the
Unites States representatives of vendors which refused to grant such confir
mations.
A-1
EXHIBIT D
Vendors
Hewlett Packard
IBM
Compaq
Epson
3 Com
Canon
NEC
Sun Micro
Digital
Intel
