STOCK SALE AGREEMENT
by and among
MERISEL, INC.,
MERISEL AMERICAS, INC.
and
ARROW ELECTRONICS, INC.
dated as of
September 15, 2000
Table of Contents
ARTICLE IPURCHASE AND SALE OF SHARES 1
Section 1.1 Sale and Transfer of Shares 1
Section 1.2 The Purchase Price 1
Section 1.3 Closing and Post-Closing Adjustments 2
Section 1.4 Payment of Deferred Purchase Price and
Additional Purchase Price. 3
Section 1.5 Further Assurances. 5
ARTICLE II
THE CLOSING 5
Section 2.1 The Closing 5
Section 2.2 Deliveries by Seller 6
Section 2.3 Deliveries by Purchaser 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER 7
Section 3.1 Organization. 7
Section 3.2 Authorization. 7
Section 3.3 Execution; Validity of Agreement. 7
Section 3.4 Consents and Approvals; No Violations 8
Section 3.5 Ownership and Possession of Shares 8
Section 3.6 Good Title Conveyed 9
Section 3.7 Capitalization 9
Section 3.8 Organization; Qualification of Company 9
Section 3.9 Subsidiaries 9
Section 3.10 Financial Statements 10
Section 3.11 No Undisclosed Liabilities 10
Section 3.12 Absence of Certain Changes 10
Section 3.13 Title to Properties; Encumbrances 13
Section 3.14 Real Property; Leases 13
Section 3.15 Contracts and Commitments 13
Section 3.16 Insurance 14
Section 3.17 Casualties 14
Section 3.18 Litigation 14
Section 3.19 Environmental Matters 15
Section 3.20 Compliance with Laws 15
Section 3.21 Employee Benefit Plans 15
Section 3.22 Tax Matters 16
Section 3.23 Intellectual Property 17
Section 3.24 Labor Matters 18
Section 3.25 Value-Added Business. 19
Section 3.26 No Powers of Attorney. 19
Section 3.27 Licenses. 19
Section 3.28 Affiliate Transactions. 19
Section 3.29 Substantial Customers 20
Section 3.30 Inventory; Accounts Receivable 20
Section 3.31 Rights of Return 20
Section 3.32 Trading Practices; Ethical Standards. 21
Section 3.33 Bank and Brokerage Accounts; Investment Assets 21
Section 3.34 Solvency; Liquidity 21
Section 3.35 Brokers or Finders 22
Section 3.36 No Other Representations 22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES F PURCHASER 22
Section 4.1 Organization 22
Section 4.2 Authorization; Validity of Agreement 23
Section 4.3 Consents and Approvals; No Violations 23
Section 4.4 Acquisition of Shares for Investment;
Accredited Investor 24
Section 4.5 Availability of Funds 24
Section 4.6 Litigation 24
Section 4.7 Investigation by Purchaser 24
Section 4.8 Brokers or Finders 24
ARTICLE V
COVENANTS 25
Section 5.1 Interim Operations of the Company 25
Section 5.2 Access; Confidentiality 25
Section 5.3 Efforts and Actions to Cause Closing to Occur 26
Section 5.4 Tax Matters 28
Section 5.5 Publicity 34
Section 5.6 Employees; Employee Benefits 35
Section 5.7 Transition Services Agreement; Lease Agreement 36
Section 5.8 Intercompany Arrangements; Accounts Receivable 36
Section 5.9 Maintenance of Books and Records 37
Section 5.10 Seller's Trademarks and Logos 37
Section 5.11 Insurance Policies 38
Section 5.12 No Solicitation 39
Section 5.13 Noncompetition; No Raid 40
Section 5.14 Employment Agreements 41
Section 5.15 Removal as Guarantor 41
Section 5.16 Use of Proceeds 41
Section 5.17 Additional License 41
Section 5.18 Cooperation 42
Section 5.19 Seller's Lease 42
ARTICLE VI
CONDITIONS 42
Section 6.1 Conditions to Each Party's Obligation to
Effect the Closing 42
Section 6.2 Conditions to Obligations of Purchaser
to Effect the Closing 43
Section 6.3 Conditions to Obligations of Parent and
Seller to Effect the Closing 44
ARTICLE VII
TERMINATION 45
Section 7.1 Survival of Representations and Warranties 45
Section 7.2 Termination 45
Section 7.3 Effect of Termination 46
Section 7.4 Termination Fee 47
ARTICLE VIII
INDEMNIFICATION 47
Section 8.1 Indemnification; Remedies 47
Section 8.2 Notice of Claim; Defense 50
Section 8.3 Resolution of All Tax-Related Disputes 52
Section 8.4 Tax Effect of Indemnification Payments 52
Section 8.5 No Duplication; Sole Remedy Procedures 52
Section 8.6 No Right of Off-set/Set-off 53
ARTICLE IX
DEFINITIONS AND INTERPRETATION 53
Section 9.1 Definitions 53
Section 9.2 Interpretation 62
ARTICLE X
MISCELLANEOUS 63
Section 10.1 Fees and Expenses 63
Section 10.2 Amendment and Modification 63
Section 10.3 Notices 64
Section 10.4 Counterparts 65
Section 10.5 Entire Agreement; No Third Party Beneficiaries 65
Section 10.6 Severability 65
Section 10.7 Governing Law 66
Section 10.8 Venue 66
Section 10.9 Time of Essence 66
Section 10.10 Extension; Waiver 66
Section 10.11 Assignment 66
EXHIBITS
Exhibit A Transition Services Term Sheet
Exhibit B Lease Agreement
STOCK SALE AGREEMENT
Stock Sale Agreement, dated as of September 15, 2000, by and among Arrow
Electronics, Inc., a New York corporation, Merisel, Inc., a Delaware corpora-
tion, and Merisel Americas, Inc., a Delaware corporation and a wholly owned
subsidiary of Merisel, Inc. and the holder of all the capital stock of
Merisel Open Computing Alliance, Inc., a Delaware corporation. Certain
capitalized terms used in this Agreement have the meanings assigned to them
in Article IX.
WHEREAS, Seller owns all of the issued and outstanding Shares of the
Company; and
WHEREAS, each of the Boards of Directors of Purchaser, Parent and Seller
has approved the acquisition of the Company by Purchaser, which acquisition
is to be effected by the purchase of all the outstanding capital stock of the
Company by Purchaser upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein,
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES tc \l1 " ARTICLE I
PURCHASE AND SALE OF SHARES
Section 1.1 Sale and Transfer of Shares tc \l2 "Sale and Transfer of
Shares . Subject to the terms and conditions of this Agreement, at the
Closing Seller shall sell, convey, assign, transfer and deliver to Purchaser
all of Seller's right, title and interest in and to the issued and
outstanding Shares, free and clear of all Encumbrances, except for any
Encumbrance arising under the Securities Act or any applicable state
securities laws.
Section 1.2 The Purchase Price tc \l2 "The Purchase Price. Subject to
the terms and conditions of this Agreement, in consideration of the aforesaid
sale, conveyance, assignment, transfer and delivery to Purchaser of the
Shares, at the Closing Purchaser shall pay to Seller an amount of cash equal
to $110,000,000, subject to any adjustments pursuant to Sections 1.3 and 1.4
(the "Purchase Price").
Section 1.3 Closing and Post-Closing Adjustments tc \l2 "Closing and
Post-Closing Adjustments .
(1) No later than two (2) days before the Closing Date, Seller shall
prepare, or cause to be prepared, and deliver to Purchaser a Preliminary
Closing Balance Sheet and its calculation of the Preliminary Working Capital.
The value of the inventory to be included in Preliminary Working Capital
shall be determined as follows. Promptly after the date hereof, Purchaser
and Seller shall work together in good faith to determine the value of the
inventory based upon saleability, returnability and reserves taken in
accordance with past practices. In the event that Purchaser and Seller
cannot agree upon the value of the inventory, the disputed amount shall not
be included in the inventory reflected on the Preliminary Closing Balance
Sheet, and Seller shall reserve all rights to dispute such valuation pursuant
to Section 1.3(d).
(2) The amount by which the Preliminary Working Capital is greater or
lesser than the Balance Sheet Working Capital shall be added to or subtracted
from, as the case may be, the Purchase Price to be paid by Purchaser to
Seller at the Closing. For purposes of illustration, an example of the
calculation of Preliminary Working Capital and the adjustment to the Purchase
Price is set forth in Section 1.3(b) of the Disclosure Schedule.
(3) No later than sixty (60) days after the Closing Date, Seller shall
prepare, or cause to be prepared, and deliver to Purchaser the Closing
Balance Sheet and its calculation of Closing Working Capital. The Company
shall, and Purchaser shall cause the Company to, make available to Seller
such employees and records of the Company as may be necessary for the
preparation of the Closing Balance Sheet. The value of the inventory
reflected on the Closing Balance Sheet shall be determined based upon its
saleability, returnability and reserves taken in accordance with past
practice.
(4) Within fifteen (15) days following receipt of the Closing Balance
Sheet, Purchaser shall inform Seller in writing of any objections to the
calculations on the Closing Balance Sheet (the "Objections"), setting forth
written explanations of the Objections and the adjustments which Purchaser
believes should be made, including, without limitation, any adjustments to
inventory consistent with the inventory valuation methodology set forth in
Sections 1.3(a) and (c). Following notice of the Objections, Seller shall
have fifteen (15) days to review and respond in writing to the Objections
setting forth written explanations in those areas where it disagrees with the
Objections. Purchaser and Seller will then have an additional fifteen (15)
days at the end of such period to attempt to resolve in good faith the
Objections.
(5) If Purchaser and Seller are unable to resolve all of their
disagreements with respect to the Objections within the time periods
specified in Section 1.3(d), above, they shall refer any unresolved
Objections to a nationally recognized firm of independent certified public
accountants as to which the parties mutually agree (the "Arbitrator"), who
shall determine, based on the information submitted by Purchaser and Seller
(and not by independent review), and only with respect to the remaining
differences so submitted, whether and to what extent Closing Working Capital,
as shown on the Closing Balance Sheet, requires adjustment. The Arbitrator's
determination, which shall be given to Purchaser and Seller within thirty
(30) days of referral to the Arbitrator, shall be final and binding upon the
parties hereto. The fees and expenses of such Arbitrator shall be paid one-
half by Buyer and one-half by Sellers.
(6) If the Closing Working Capital is greater than the Preliminary
Working Capital, then the difference shall be paid by Purchaser to Seller
within five (5) business days of the final determination of the amount of
such adjustment, which shall be payable in cash by wire transfer or delivery
of immediately available funds. If the Closing Working Capital is less than
the Preliminary Working Capital, then the difference shall be paid by Parent
or Seller to Purchaser within five business days of the final determination
of the amount of such adjustment, which shall be payable in cash by wire
transfer or delivery of immediately available funds.
(7) For all Tax purposes, any post-Closing Purchase Price adjustment
pursuant to Sections 1.3(f) and 1.4(d) shall be treated as an adjustment to
the Purchase Price.
Section 1.4 Payment of Deferred Purchase Price and Additional Purchase
Price. tc \l2 "Payment of Deferred Purchase Price and Additional Purchase
Price.
(1) Within ten (10) business days after February 28, 2001, Purchaser
shall prepare and deliver to Seller a worksheet ("Renewal Worksheet"), which
shall set forth in reasonable detail the following information concerning the
selection by resellers or service providers authorized by Sun ("Sun
Resellers") of the distributors from which they will purchase Sun products
("Designated Distributor"):
(1) names of Sun Resellers who at such date had changed from the
Company as their most recent Designated Distributor to another party as their
Designated Distributor ("Lost Resellers");
(2) names of Sun Resellers who at such date had changed from another
party as their most recent Designated Distributor to the Company as their
Designated Distributor or who are new Sun Resellers ("Gained Resellers"); and
(3) the revenue to the Designated Distributors of each Lost Reseller and
Gained Reseller from sales of Sun products during the prior 12 months
(the"Revenue Amount").
(2) The Company shall, and Purchaser shall cause the Company to, make
available to Seller such employees and records of the Company as may be
necessary for Seller's review of the Renewal Worksheet. Within ten (10) days
following receipt of the Renewal Worksheet, Seller shall inform Purchaser in
writing of any objections to the calculations on the Renewal Worksheet (the
"Renewal Worksheet Objections"), setting forth written explanations of the
Renewal Worksheet Objections and the adjustments which Seller believes should
be made. Following notice of the Renewal Worksheet Objections, Purchaser
shall have five (5) days to review and respond in writing to the Renewal
Worksheet Objections setting forth written explanations in those areas where
it disagrees with the Renewal Worksheet Objections. Purchaser and Seller
will then have an additional ten (10) days at the end of such period to
attempt to resolve in good faith the Renewal Worksheet Objections.
(3) If Purchaser and Seller are unable to resolve all of their
disagreements with respect to the Renewal Worksheet Objections within the
time periods specified in Section 1.4(b), they shall refer any unresolved
Renewal Worksheet Objections to a nationally recognized firm of independent
certified public accountants as to which the parties mutually agree (the
"Renewal Worksheet Arbitrator"), who shall determine, based on the
information submitted by Purchaser and Seller (and not by independent
review), and only with respect to the remaining differences so submitted,
whether and to what extent the Renewal Worksheet requires adjustment. The
Renewal Worksheet Arbitrator's determination, which shall be given to
Purchaser and Seller within thirty (30) days of referral to the Renewal
Worksheet Arbitrator, shall be final and binding upon the parties hereto.
The fees and expenses of such Renewal Worksheet Arbitrator shall be paid one-
half by Purchaser and one-half by Seller.
(4) If the aggregate Revenue Amount from Gained Resellers equals or
exceeds the aggregate Revenue Amount from Lost Resellers ("Net Revenue
Gain"), Seller shall be entitled to be paid (1) $25,000,000 ("Deferred
Purchase Price") plus (2) in an amount equal to $1.00 for each $8.00 of Net
Revenue Gain up to an additional $12,500,000 (the "Additional Purchase
Price"). If the aggregate Revenue Amount from Lost Resellers exceeds the
aggregate Revenue Amount from Gained Resellers ("Net Revenue Loss"), Seller
shall be entitled to be paid the Deferred Purchase Price reduced by $1.00 for
each $8.00 of Net Revenue Loss (up to a maximum deduction equal to the
Deferred Purchase Price). Any amounts payable to Seller pursuant to this
Section 1.4 (d) shall be paid by Purchaser to Seller within two business days
of the final determination of such amount, in cash by wire transfer or
delivery of immediately available funds.
Section 1.5 Further Assurances. tc \l2 "Further Assurances.
(1) At any time or from time to time after the Closing, Parent and
Seller shall execute and deliver to Purchaser such other documents and
instruments, provide such materials and information and take such other
actions as Purchaser may reasonably request more effectively to vest title to
the Shares in Purchaser and, to the full extent permitted by law, to put
Purchaser in actual possession and operating control of the Company and its
properties and assets and books and records, and otherwise to cause Seller to
fulfill its obligations under this Agreement.
(2) Notwithstanding anything to the contrary contained in this Section
1.5, if the parties are in an adversarial relationship in litigation or
arbitration, the furnishing of information, documents or records in
accordance with any provision of this Section 1.5 shall be subject to
applicable rules relating to discovery.
ARTICLE II
THE CLOSING tc \l1 " ARTICLE II THE CLOSING
Section 1.6 The Closing tc \l2 "The Closing . The sale and transfer
of the Shares by Seller to Purchaser shall take place at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, 300 South Grand Avenue, Los
Angeles, California 90071, at 10:00 a.m., local time, on the later of (a)
September 29, 2000 or (b) the first Friday at least four business days after
the satisfaction and/or waiver of all conditions to close set forth in
Article VI (other than conditions which can be satisfied only by the delivery
of certificates or other documents at the Closing), unless another date or
place is agreed in writing by each of the parties hereto.
Section 1.7 Deliveries by Seller tc \l2 "Deliveries by Seller . At the
Closing, Seller shall deliver to Purchaser:
(1) one or more certificates representing all of Seller's right, title
and interest in and to the issued and outstanding Shares, each such
certificate to be duly and validly endorsed in favor of Purchaser or
accompanied by a separate stock power duly and validly executed by Seller
with requisite stock transfer stamps, if any, and otherwise sufficient to
vest in Purchaser good and valid title to such Shares;
(2) resignations of each director of the Company;
(3) executed copies of the consents referred to in Section 6.1(c);
(d) all of the minute books and stock ledgers for the Company;
(4) a certification of non-foreign status for Seller in the form and
manner which complies with the requirements of Section 1445 of the Code and
the regulations promulgated thereunder; and
(5) all other previously undelivered documents required to be delivered
by Parent or Seller to Purchaser at or prior to the Closing in connection
with the Transactions.
Section 1.8 Deliveries by Purchaser tc \l2 "Deliveries by Purchaser .
Simultaneously with the Closing, Purchaser shall:
(1) transfer the amount set forth in Section 1.2 to an account
designated by Seller prior to the Closing by wire transfer in immediately
available funds; and
(2) deliver to Seller such other documents as are required to be
delivered by Purchaser to Seller pursuant hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER tc \l1 "
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
Except as set forth in the Disclosure Schedule delivered to Purchaser by
Seller simultaneously with the execution hereof or as expressly disclosed in
the Financial Statements, Parent and Seller each represents and warrants to
Purchaser as follows:
Section 1.9 Organization. tc \l2 "Organization. Each of Parent and
Seller is a corporation duly organized, validly existing and in good standing
under the laws of Delaware and has all requisite corporate or other power and
authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as now being conducted, except
where the failure to be so organized, existing and in good standing or to
have such power, authority, and governmental approvals would not have,
individually or in the aggregate, a material adverse effect on Parent's or
Seller's ability to consummate the Transactions.
Section 1.10 Authorization. tc \l2 "Authorization. Each of Parent
and Seller has full corporate power and authority to execute and deliver this
Agreement and to consummate the Transactions. The execution, delivery and
performance by each of Parent and Seller of this Agreement and the
consummation of the Transactions have been duly authorized by the respective
Boards of Directors of Parent and Seller, and no other corporate action on
the part of Parent or Seller is necessary to authorize the execution and
delivery by each of Parent and Seller of this Agreement or the consummation
of the Transactions. No vote of, or consent by, the holders of any class or
series of stock issued by Parent is necessary to authorize the execution and
delivery by Parent of this Agreement or the consummation by it of the
Transactions.
Section 1.11 Execution; Validity of Agreement. tc \l2 "Execution;
Validity of Agreement. This Agreement has been duly executed and delivered
by each of Parent and Seller, and, assuming due and valid authorization,
execution and delivery hereof by Purchaser, is a valid and binding obligation
of each of Parent and Seller, enforceable against each of Parent and Seller
in accordance with its terms except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other
similar laws of general application affecting enforcement of creditors'
rights generally and (b) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject
to equitable defenses and would be subject to the discretion of the court
before which any proceeding therefor may be brought.
Section 1.12 Consents and Approvals; No Violations tc \l2 "Consents
and Approvals; No Violations . Except for the filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the HSR Act or as set forth in Section 3.4 of the
Disclosure Schedule, none of the execution, delivery or performance of this
Agreement by each of Parent and Seller, the consummation of the Transactions
or compliance by each of Parent and Seller with any of the provisions hereof
will (a) conflict with or result in any breach of any provision of the
certificate of incorporation or by-laws of the Company, Parent or Seller, (b)
require any filing with, or permit, authorization, consent or approval of,
any Governmental Entity (including with respect to the Company), (c) (i)
result in a violation or breach of, (ii) constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, (iii) require Seller or the
Company to obtain any consent, approval or action of, make any filing with or
give any notice to any Person as a result or under the terms of, (iv) result
in or give to any Person any right of termination, cancellation, acceleration
or modification in or with respect to, (v) result in or give to any Person
any additional rights or entitlement to increased, additional, accelerated or
guaranteed payments under, or (vi) result in the creation or imposition of
any Encumbrance upon Seller or the Company or any of their respective
properties and assets under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which Parent, Seller or any of their
respective Subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound, or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent, Seller,
any of their respective Subsidiaries or any of their respective properties or
assets, excluding from the foregoing clauses (b), (c) and (d) such
violations, breaches or defaults which (A) would not, individually or in the
aggregate, have a material adverse effect on Parent's or Seller's ability to
consummate the Transactions or (B) would become applicable as a result of the
business or activities in which Purchaser is or proposes to be engaged or as
a result of any acts or omissions by, or the status of any facts pertaining
to, Purchaser.
Section 1.13 Ownership and Possession of Shares tc \l2 "Ownership and
Possession of Shares . Seller is the record and beneficial owner of all the
issued and outstanding Shares. The certificates representing the Shares are
now and at all times from the date hereof through the Closing shall be held
of record by Seller free and clear of all Encumbrances whatsoever, except for
any Encumbrances created by this Agreement and Encumbrances arising under the
Securities Act or any applicable state securities laws.
Section 1.14 Good Title Conveyed tc \l2 "Good Title Conveyed The stock
certificates, stock powers, endorsements, assignments and other instruments
to be executed and delivered by Seller to Purchaser at the Closing will be
valid and binding obligations of Seller, enforceable in accordance with their
respective terms, and will effectively vest in Purchaser good and valid
title to all the Shares, free and clear of all Encumbrances, except
restrictions on transfer imposed by the Securities Act and any applicable
state securities laws.
Section 1.15 Capitalization tc \l2 "Capitalization . The authorized
capital stock of the Company consists of 1,000 Shares. As of the date
hereof, (a) 100 Shares are issued and outstanding, (b) no Shares are owned by
any Person other than Seller, and (c) no Shares are issued and held in the
treasury of the Company. All the outstanding Shares are duly authorized,
validly issued, fully paid and non-assessable. Except as set forth above, as
of the date hereof, (x) there are no shares of capital stock of the Company
authorized, issued or outstanding, and (y) there are no existing options,
warrants, calls, pre-emptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character, relating to the
issued or unissued capital stock of the Company, obligating the Company to
issue, transfer or sell or cause to be issued, transferred or sold any shares
of capital stock of the Company.
Section 1.16 Organization; Qualification of Company tc \l2
"Organization; Qualification of Company . The Company (a) is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware; (b) has full corporate power and authority to carry on its
business as it is now being conducted and to own, lease and operate its
properties and assets; and (c) is duly qualified or licensed to do business
as a foreign corporation in good standing in every jurisdiction in which such
qualification is required, except for those jurisdictions in which the
failure to be so qualified would not reasonably be expected to have a Company
Material Adverse Effect. The name of each director and officer of the
Company on the date hereof, and the position with the Company held by each,
are listed in Section 3.8 of the Disclosure Schedule. Seller has heretofore
delivered to Purchaser complete and correct copies of the certificate of
incorporation and by-laws of the Company as presently in effect.
Section 1.17 Subsidiaries tc \l2 "Subsidiaries. The Company does not
own, directly or indirectly, any of the capital stock or other equities of
any Person.
Section 1.18 Financial Statements tc \l2 "Financial Statements. True
and complete copies of the Financial Statements, together with the related
auditors reports, are included in Section 3.10 of the Disclosure Schedule.
The Financial Statements have been prepared from, are in accordance with and
accurately reflect the books and records of the Company, comply in all
material respects with applicable accounting requirements, have been prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except as may be stated in the notes thereto) and fairly present
the consolidated financial position and the consolidated results of
operations and cash flows (and changes in financial position, if any) of the
Company as a division of Parent as of the times and for the periods referred
to therein (subject, in the case of unaudited statements, to normally
recurring year-end audit adjustments which are not material).
Section 1.19 No Undisclosed Liabilities tc \l2 "No Undisclosed
Liabilities. Except (a) as disclosed in the Financial Statements and (b) for
liabilities and obligations incurred in the ordinary course of business since
the Balance Sheet Date, the Company has not incurred any liability or
obligation of any nature, whether or not accrued, contingent or otherwise,
that has had or constitutes or would reasonably be expected to have a Company
Material Adverse Effect.
Section 1.20 Absence of Certain Changes tc \l2 "Absence of Certain
Changes. Except as set forth in Section 3.12 of the Disclosure Schedule or
as otherwise provided in this Agreement, during the period since the Balance
Sheet Date through the date hereof, the Company has conducted its business
only in the ordinary course consistent with past practice, and the Company
has not:
(1) suffered any change in its working capital, financial condition,
results of operations, assets or liabilities or any other event or
development which constitutes or would reasonably be expected to have a
Company Material Adverse Effect;
(2) paid, discharged or satisfied any claim, liability or obligation
(whether absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business and consistent
with past practice of liabilities and obligations reflected or reserved
against in the Balance Sheet or incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date;
(3) (i) incurred or cancelled any debts, other than trade payables or
intercompany accounts to be converted or terminated pursuant to Section 5.8,
or (ii) waived any claims or rights of substantial value, in the case of
clauses (i) or (ii) except in the ordinary course of business consistent with
past practice;
(4) acquired any properties and assets, or sold, transferred, or
otherwise disposed (including the incurrence of an Encumbrance on) of any of
its properties or assets (real, personal or mixed, tangible or intangible),
except in the ordinary course of business consistent with past practice;
(5) disposed of or permitted to lapse any rights to the use of any
Intellectual Property, or disposed of or disclosed to any Person other than
representatives of Purchaser any material trade secret, formula, process,
know-how or other Intellectual Property not theretofore a matter of public
knowledge;
(6) granted any general increase in the compensation of officers or
employees (including any such increase pursuant to any bonus, pension,
profitsharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any officer or employee, other
than normal recurring increases in the ordinary course of business or
pursuant to plans or agreements listed in the Disclosure Schedule;
(7) split, combined or reclassified any shares of any capital stock of
the Company; or directly or indirectly redeemed, purchased or otherwise
acquired any such capital stock of or any option, warrant, call, pre-emptive
right, subscription or other such right with respect to the capital stock of
the Company;
(8) authorized, issued, sold or otherwise disposed of or pledged or
otherwise encumbered any shares of capital stock of, or option, warrant,
call, preemptive right, subscription or other such right with respect to the
capital stock of, the Company, or modified or amended of any right of any
holder of any such security;
(9) made any write-off or write-down or determined to write-off or
write-down any of the properties and assets of the Company individually or in
the aggregate in a material amount;
(10) acquired or disposed of, or incurred any Encumbrance on, any
properties or assets of the Company, other than in the ordinary course of
business consistent with past practice;
(11) (i) amended the certificate of incorporation or by-laws (or other
comparable corporate charter documents) of the Company, (ii) recapitalized,
restructuring, reorganized, liquidated, dissolved, merged or consolidated the
Company with any other Person, or (iii) changed the fiscal year of the
Company;
(12) entered into, amended, modified or terminated (partially or
completely) in any material way, granted a material waiver under or gave any
material consent with respect to any material contract of or any material
License held by the Company;
(13) made any material capital expenditures or commitments for additions
to property, plant or equipment of the Company;
(14) commenced or terminated any line of business of the Company;
(15) entered into any transactions with Parent, Seller or any officer,
director or Affiliate (other than the Company) of Parent or Seller (i)
outside the ordinary course of business consistent with past practice or (ii)
other than on an arm's-length basis, other than pursuant to any contract in
effect on the Balance Sheet Date and disclosed pursuant to Section 3.28 of
the Disclosure Schedule;
(16) permitted any insurance policy naming it as a beneficiary or a loss
payable payee to be cancelled or terminated;
(17) materially changed (x) any accounting, tax or financial reporting
practice or policy or (y) other than in the ordinary course of business
consistent with past practice, any pricing, inventory, credit, bad debt or
reserve practice or policy;
(18) agreed to or committed to take any action that would result in any
of the conditions to the Closing set forth in Article VI not being satisfied,
or would make any representation or warranty of Purchaser contained herein
inaccurate in any material respect at, or as of any time prior to, the
Closing Date, or that would materially impair the ability of Purchaser,
Parent or Seller to consummate the Closing in accordance with the terms
hereof or materially delay such consummation; or
(19) agreed, whether in writing or otherwise, to take any action
described in this section.
Section 1.21 Title to Properties; Encumbrances tc \l2 "Title to
Properties; Encumbrances. Except for property and assets sold since the
Balance Sheet Date in the ordinary course of business or as otherwise
provided in this Agreement, the Company has good and valid title to each of
the properties and assets reflected on the Balance Sheet, free and clear of
all material Encumbrances not disclosed on the Balance Sheet or on Section
3.13 of the Disclosure Schedule, and those properties and assets, including
any acquired since the Balance Sheet Date, are all of the properties and
assets reasonably necessary for the conduct of the business of the Company as
currently conducted, except as set forth on Section 3.13 of the Disclosure
Schedule.
Section 1.22 Real Property; Leases tc \l2 "Real Property; Leases. The
Company owns no real property. Section 3.14 of the Disclosure Schedule
contains a list of all Leases and a true and complete copy of each such Lease
has heretofore been delivered to Purchaser. Each Lease is legal, valid,
binding and enforceable in accordance with its terms and is in full force and
effect. There is no existing, and neither Parent, Seller nor the Company has
received notice of any, default by the Company under any of the Leases which
constitutes or would reasonably be expected to constitute a Company Material
Adverse Effect.
Section 1.23 Contracts and Commitments tc \l2 "Contracts and
Commitments.
(1) All of the contracts and other agreements of the Company were
entered into in bona fide transactions in the ordinary course of business.
Section 3.15(a) of the Disclosure Schedule sets forth a complete and correct
list of all contracts and other agreements to which the Company is a party,
except for (i) contracts involving obligations not exceeding $150,000
individually or $1,000,000 for any one kind of related contract in the
aggregate, (ii) purchase orders with the Company's customers or suppliers in
the ordinary course of business consistent with past practice and (iii)
contracts that are no longer in effect. Except as set forth on Section
3.15(a) of the Disclosure Schedule, to the Knowledge of Parent and Seller,
there is not under any such contract any existing default by the Company, or
any event or circumstance which, after notice or lapse of time or both, would
constitute a default by the Company, or to the knowledge of Parent and
Seller, by the other party, or result in a right to accelerate or loss of
rights as against the Company which would reasonably be expected to result in
Losses in excess of $25,000 individually or $100,000 in the aggregate for all
kinds of contracts. There are no contracts or agreements which are required
under GAAP to be provided for or disclosed in the Financial Statements which
have not been so provided for or disclosed.
(2) The Company does not have outstanding any agreement to acquire any
debt obligations of others.
(c) Section 3.15(c) of the Disclosure Schedule contains a list of
all written employment, severance and change of control agreements or
arrangements.
(3) Section 3.15(d) of the Disclosure Schedule contains a list of all
contracts with any Person containing any provision or covenant prohibiting or
limiting the ability of the Company to engage in any business activity or
compete with any person, or prohibiting or limiting the ability of any Person
to compete with the Company.
Section 1.24 Insurance tc \l2 "Insurance. Section 3.16 of the
Disclosure Schedule sets forth a true and complete list and description of
all material insurance policies in effect as of the date hereof material with
respect to the business, property or assets of the Company.
Section 1.25 Casualties tc \l2 "Casualties. Since the Balance Sheet
Date, the Company has not been affected as a result of flood, fire or
explosion which constitutes a Company Material Adverse Effect.
Section 1.26 Litigation tc \l2 "Litigation. Except as set forth in
Section 3.18 of the Disclosure Schedule, there is no action, suit, inquiry,
proceeding or investigation by or before any court or Governmental Entity
pending or, to the Knowledge of Parent and Seller, threatened against or
involving the Company which (i) questions or challenges the validity of this
Agreement or any action taken or to be taken by the Company pursuant to this
Agreement or in connection with the Transactions, or (ii) individually or in
the aggregate, if determined adversely to Parent, Seller or the Company,
would reasonably be expected to result in (x) any injunction or other
equitable relief against the Company that would interfere in any material
respect with its business or operations or (y) any material Losses suffered
or incurred by the Company. Prior to the execution of this Agreement, Seller
has delivered to Purchaser all responses of counsel for the Company to
auditors' requests for information delivered in connection with the audited
Financial Statements (together with any updates provided by such counsel)
regarding any actions or proceedings pending or threatened against, relating
to or affecting the Company.
Section 1.27 Environmental Matters tc \l2 "Environmental Matters.
Except as would not reasonably be expected to have a Company Material Adverse
Effect, to the Knowledge of Parent and Seller, (a) the Company is in material
compliance with all applicable Environmental Laws, (b) the Company has not
received any written notice with respect to the business of, or any property
owned or leased by, the Company from any governmental entity or third party
alleging that the Company is not in material compliance with any
Environmental Law, and (c) there has been no "release" of a "hazardous
substance," as those terms are defined in the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. 9601 et seq.
("CERCLA"), for which the Company would be responsible for removal, response
or remedial costs as defined under CERCLA.
Section 1.28 Compliance with Laws tc \l2 "Compliance with Laws. To the
Knowledge of Parent and Seller, the Company has complied in a timely manner
and in all respects with all laws, rules and regulations, ordinances,
judgments, decrees, orders, writs and injunctions of all United States
federal, state, local, foreign governments and agencies thereof that apply to
the business, properties or assets of the Company, except for violations that
would not reasonably be expected to constitute a Company Material Adverse
Effect.
Section 1.29 Employee Benefit Plans tc \l2 "Employee Benefit Plans.
(1) Section 3.21 of the Disclosure Schedule contains a true and complete
list of all Plans. The Company has heretofore made available to Purchaser a
true and complete copy of each written Plan and any amendments thereto and
each agreement creating or modifying any related trust or other funding
vehicle. Except as provided in Section 3.21 of the Disclosure Schedule, none
of the plans is sponsored by the Company.
(2) No liability under Title IV or Section 302 of ERISA has been
incurred by the Company or any ERISA Affiliate that has not been satisfied in
full and none of the Plans is subject to Section 412 of the Code, Section 302
of ERISA or Title IV of ERISA.
(3) The PBGC has not instituted proceedings to terminate any Title IV
Plan and no condition exists that presents a material risk that such
proceedings will be instituted.
(4) No Title IV Plan is a "multi-employer pension plan," as defined in
Section 3(37) of ERISA, nor is any Title IV Plan a plan described in Section
4063(a) of ERISA.
(5) Each Plan has been operated and administered in all material
respects in accordance with its terms and applicable law, including ERISA
and the Code.
(6) Each Plan intended to be "qualified" within the meaning of Section
401(a) of the Code is so qualified.
(7) Except as provided in Section 3.21 of the Disclosure Schedule, none
of the Plans could result in the payment to any employee of the Company of
any money or other property or accelerate or provide any other rights or
benefits to any employee of the Company as a result of the transactions
contemplated by this Agreement, whether or not such payment would constitute
a parachute payment within the meaning of Code Section 280G.
(8) Except as set forth in Section 5.6(a)(ii) of the Disclosure
Schedule, Section 5.6(a)(i) of the Disclosure Schedule is a true and complete
list of each person who is actively employed and working primarily for the
Company on the date hereof, and all such persons are all of the persons
reasonably required to conduct the business of the Company.
Section 1.30 Tax Matters tc \l2 "Tax Matters.
(1) The Company has filed (or there has been filed on its behalf) with
appropriate Taxing Authorities all Tax Returns required to be filed by the
Company on or prior to the date hereof, and such Tax Returns are true,
correct and complete in all material respects. The Company has paid all
Taxes that are shown as due on all such Tax Returns.
(2) There are no liens for Taxes upon any property or assets of the
Company, except for liens for Taxes not yet due.
(3) To the Knowledge of Parent and Seller, no federal, state, local or
foreign audits, examinations, investigations or other administrative
proceedings or court proceedings are presently pending or proposed in writing
with regard to any Taxes or Tax Returns filed by or on behalf of the Company.
(4) There are no outstanding requests, agreements, consents or waivers
to extend the statutory period of limitations applicable to the assessment of
any Taxes or deficiencies against the Company.
(5) No consent under Section 341(f) of the Code has been filed with
respect to the Company.
(6) No deficiency for any Taxes has been assessed or proposed in writing
(and is currently pending) by any Taxing Authority in connection with the Tax
Returns described in Section 3.22(a).
(7) The Company was incorporated in December 1999 and commenced
operations in April 2000. The Company has not filed a United States federal
income tax return. No statutes of limitation have expired with respect to
Taxes of the Company.
(8) The Company has never been a member of an affiliated group of
corporations (within the meaning of Code Section 1504(a) filing consolidated
Tax Returns, other than the affiliated group of which Parent is the common
parent. The Company is not a party to, is not bound by, and does not have
any obligation under, any agreement relating to the allocation or sharing of
Taxes. The Company does not have any liability for the Taxes of any person
other than the Company and any member of the affiliated group of which Parent
is the common parent, as a transferee, or successor or otherwise (including,
without limitation, any liability under Treasury Regulations Section 1.1502-6
or any similar provision of state, local or foreign law).
(9) Section 3.22 of the Disclosure Schedule contains a complete list of
all jurisdictions in which Tax Returns are filed or required to be filed by
or on behalf of the Company.
Section 1.31 Intellectual Property tc \l2 "Intellectual
Property.Except as set forth in Section 3.23 of the Disclosure Schedule:
(1) As of the Closing Date, the Company will own free and clear of all
Encumbrances, the trademark "MOCA." The Company owns free and clear of
all Encumbrances, or is licensed or otherwise possesses legally enforceable
rights to use, the other Company Intellectual Property, and is not obligated
to grant any material contractual rights to any third party with respect
thereto. As of the Closing Date, Parent and Seller shall have assigned all
of their right, title and interest in the trademark "MOCA" to the Company.
(2) There are no current ongoing, or to the Knowledge of Parent and
Seller threatened, legal proceedings against the Company with respect to the
Company Intellectual Property that would reasonably be expected to have a
Company Material Adverse Effect.
(3) To the Knowledge of Parent and Seller, the Company's use of Company
Intellectual Property in the conduct of the business of the Company as
currently conducted does not infringe any Intellectual Property rights of any
Person.
(4) The Company has not received any written notice from any other
Person pertaining to or challenging the right of the Company to use any of
the Company Intellectual Property, and to the Knowledge of Parent and Seller,
no such claim has been threatened by any Person that would reasonably be
expected to have a Company Material Adverse Effect.
Section 1.32 Labor Matters tc \l2 "Labor Matters
(1) There is no labor strike, dispute, slowdown, stoppage or lockout
actually pending or, to the Knowledge of Parent and Seller, threatened
against the Company.
(2) Neither Parent, Seller nor the Company is a party to or bound by any
collective bargaining agreement with, and no employees of the Company are
members of or, to the Knowledge of Parent and Seller, have threatened to
become members of, any labor organization representing employees of the
Company.
(3) No labor union has been certified by the National Labor Relations
Board as bargaining agent for any of the employees of the Company.
(4) The Company has not experienced any material work stoppage or other
material labor difficulty during the two-year period ending on the date
hereof, and during such period the Company has complied with all laws
relating to the employment, including without limitation those relating to
wages, hours and collective bargaining.
(5) There is no unfair labor practice charge or complaint against the
Company pending or threatened before the National Labor Relations Board, the
Equal Employment Opportunity Commission or any other Governmental Entity, and
no such charge or complaint has been brought before any such entity during
the past two (2) years.
(6) Since the enactment of the WARN Act, the Company has not effectuated
a "plant closing" (as defined in the WARN Act) affecting any site of
employment or one or more facilities or operating units within any site of
employment or facility of the Company, and there has not occurred a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or
facility of the Company.
Section 1.33 Value-Added Business. tc \l2 "Value-Added Business. The
products assembled and sold by or on behalf of the Company under its value-
added business (i) are first quality merchandise, useable and saleable in the
ordinary course of business within a period of not more than twelve (12)
months, (ii) were assembled in conformity in all material respects with
applicable specifications and quality control standards of customers and
suppliers and in conformity with all applicable laws, rules and regulations
and (iii) are not obsolete, damaged, defective or shopworn.
Section 1.34 No Powers of Attorney. tc \l2 "No Powers of Attorney.
The Company does not have any powers of attorney or comparable delegations of
authority outstanding.
Section 1.35 Licenses. tc \l2 "Licenses. The Company owns or validly
holds all Licenses that are material, individually or in the aggregate, to
its business or operations, a true and complete list and description of which
(including all pending applications for any such Licenses) is set forth in
Section 3.27 of the Disclosure Schedule. Each License listed in Section 3.27
of the Disclosure Schedule is valid, binding and in full force and effect,
and the Company is not, nor has it received any notice that it is, in default
(or with the giving of notice or lapse of time or both, would be in default)
under any such License.
Section 1.36 Affiliate Transactions. tc \l2 "Affiliate Transactions.
Each contract, agreement or arrangement between Parent or Seller or any
officer, director or Affiliate (other than the Company) of Parent or Seller,
on the one hand, and the Company, on the other hand, existing as of the date
of this Agreement is listed and described on Section 3.28 of the Disclosure
Schedule, and all such contracts, agreements and arrangements will be
terminated effective as of the close of business on the Closing Date except
as set forth on Section 3.28 of the Disclosure Schedule.
Section 1.37 Substantial Customers tc \l2 "Substantial Customers.
Section 3.29 of the Disclosure Schedule lists the twenty (20) largest
customers of the Company, on the basis of revenues for goods sold or services
provided for the fiscal quarter ended June 30, 2000. Except as disclosed in
Section 3.29 of the Disclosure Schedule, no such customer or supplier has
ceased or materially reduced its purchases from, use of the services of, or
sales or provision of services to the Company since the Balance Sheet Date,
or to the Knowledge of Parent and Seller, has threatened to cease or
materially reduce such purchases, use, sales or provision of services after
the date hereof.
Section 1.38 Inventory; Accounts Receivable tc \l2 "Inventory; Accounts
Receivable. (a) Except as disclosed in Section 3.30 of the Disclosure
Schedule, none of the items of the inventory of the Company was purchased
from a source other than the manufacturer thereof and all such items of
inventory are held at Seller's warehouses identified on Section 3.30 of the
Disclosure Schedule. Except as disclosed in Section 3.30 of the Disclosure
Schedule, all such items of inventory meet the requirements for return to the
manufacturer under the applicable authorized distribution agreement other
than as a result of quantity limitations with respect to such return rights.
(b) Except as set forth on Section 3.30 of the Disclosure Schedule, the
accounts and notes receivable net of any applicable reserves included in the
Closing Balance Sheet of the Company (i) arose from bona fide sales
transactions in the ordinary course of business and are payable consistent
with past practice, (ii) are legal, valid and binding obligations of the
respective debtors enforceable in accordance with their terms, (iii) are not
subject to any valid set-off or counterclaim except as may be required by law
and (iv) are not the subject of any action, suit or proceeding brought by or
on behalf of the Company. Section 3.30 of the Disclosure Schedule sets forth
a description of any security arrangements and collateral securing the
repayment or other satisfaction of such accounts and notes receivable.
Section 1.39 Rights of Return tc \l2 "Rights of Return . Except as set
forth on Section 3.31 of the Disclosure Schedule, the Company has not sold
any inventory which the purchaser thereof has the right to return to the
Company or cause the Company to repurchase for any reason except (i) pursuant
to the customary express warranties of the Company for product quality or
mistake in shipment or implied warranties at law for title and against
infringement, (ii) to the extent the same will be reflected in reserves on
the Balance Sheet or (iii) for inventory having a value not exceeding $50,000
individually or $250,000 in the aggregate. Except as disclosed in Section
3.31 of the Disclosure Schedule, the Company does not provide any express
warranties to its customers other than warranties provided by the
manufacturer.
Section 1.40 Trading Practices; Ethical Standards. tc \l2 "Trading
Practices; Ethical Standards. The directors, employees and independent
commission agents of the Company are in compliance with ethical standards and
other trading practices mandated by applicable laws and contractual
arrangements and have not made payments to any third parties other than in
the ordinary course of business or pursuant to contracts.
Section 1.41 Bank and Brokerage Accounts; Investment Assets tc \l2
"Bank and Brokerage Accounts; Investment Assets . Section 3.33 of the
Disclosure Schedule sets forth (a) a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other
financial institutions at which the Company has an account or safe deposit
box or maintains a banking, custodial, trading or other similar relationship
and (b) a true and complete list and description of each such account, box
and relationship, indicating in each case the account number and the names of
the respective officers, employees, agents or other similar representatives
of the Company having signatory power with respect thereto.
Section 1.42 Solvency; Liquidity tc \l2 "Solvency; Liquidity. Neither
Parent nor Seller is entering into this Agreement, nor does either of Parent
or Seller intend to consummate the Transactions, with actual intent to
hinder, delay or defraud either present or future creditors. On and as of
the Closing Date on a pro forma basis after giving effect to the
Transactions:
(1) the present fair salable value (on a going concern basis) of Seller
will exceed the probable liability of Seller on its Debts and the present
fair salable value (on a going concern basis) of Parent will exceed the
probable liability of Parent on its Debts.
(2) neither Parent nor Seller has incurred, nor does either of Parent or
Seller intend or believe that it will incur, Debts beyond its ability to pay
as such Debts mature (taking into account the timing and amounts of cash to
be received from any source including any refinancing of, and of amounts to
be payable on or in respect of, Debts);
(3) the property of each of Parent and Seller does not constitute
unreasonably small capital with which to conduct its present or proposed
business; and
(4) except as disclosed in Section 3.34(d) of the Disclosure Schedule,
there is not under any contract relating to indebtedness any existing default
by Parent or Seller, or any event or circumstance which, after notice or
lapse of time or both, would constitute a default by Parent or Seller, which
default gives rise to a right to accelerate the right to receive payment
thereunder.
Section 1.43 Brokers or Finders tc \l2 "Brokers or Finders. Neither
Parent, Seller nor the Company has entered into any agreement or arrangement
entitling any agent, broker, investment banker, financial advisor or other
firm or Person to any broker's or finder's fee or any other commission or
similar fee in connection with any of the Transactions, except Donaldson,
Lufkin & Jenrette Securities Corporation, whose fees and expenses will be
paid by Parent in accordance with Parent's agreement with such firm.
Section 1.44 No Other Representations tc \l2 " No Other
Representations. Except for the representations and warranties contained in
this Article III, neither Parent nor Seller nor any other person or entity
acting on behalf of Parent or Seller makes any representation or warranty,
express or implied.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER tc \l1 " ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrant to Parent and Seller that:
Section 1.45 Organization tc \l2 "Organization. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of New York and has all requisite corporate or other power and authority
and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as now being conducted, except where
the failure to be so organized, existing and in good standing or to have such
power, authority, and governmental approvals would not have, individually or
in the aggregate, a material adverse effect on Purchaser's ability to
consummate the Transactions.
Section 1.46 Authorization; Validity of Agreement. tc \l2
"Authorization; Validity of Agreement. Purchaser has full corporate power
and authority to execute and deliver this Agreement and to consummate the
Transactions. The execution, delivery and performance by Purchaser of this
Agreement and the consummation of the Transactions have been duly authorized
by the Board of Directors of Purchaser, and no other corporate action on the
part of Purchaser is necessary to authorize the execution and delivery by
Purchaser of this Agreement or the consummation of the Transactions. No vote
of, or consent by, the holders of any class or series of stock issued by
Purchaser is necessary to authorize the execution and delivery by Purchaser
of this Agreement or the consummation by it of the Transactions. This
Agreement has been duly executed and delivered by Purchaser, and, assuming
due and valid authorization, execution and delivery hereof by Parent and
Seller, is a valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws of general application affecting enforcement of creditors'
rights generally and (b) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject
to equitable defenses and would be subject to the discretion of the court
before which any proceeding therefor may be brought.
Section 1.47 Consents and Approvals; No Violations tc \l2 "Consents and
Approvals; No Violations. Except for the filings, permits, authorizations,
consents and approvals as may be required under, and other applicable
requirements of, the HSR Act, none of the execution, delivery or performance
of this Agreement by Purchaser, the consummation by Purchaser of the
Transactions or compliance by Purchaser with any of the provisions hereof
will (a) conflict with or result in any breach of any provision of the
certificate of incorporation or by-laws of Purchaser, (b) require any filing
with, or permit, authorization, consent or approval of, any Governmental
Entity (including with respect to the Company), (c) (i) result in a violation
or breach of, (ii) constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, or (iii) require Purchaser to obtain any consent,
approval or action of, make any filing with or give any notice to any Person
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which Purchaser or any of its Subsidiaries is a party or by
which any of them or any of their respective properties or assets may be
bound, or (d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Purchaser, any of its Subsidiaries or any of their
properties or assets, excluding from the foregoing clauses (b), (c) and (d)
such violations, breaches or defaults which would not, individually or in the
aggregate, have a material adverse effect on Purchaser's ability to
consummate the Transactions.
Section 1.48 Acquisition of Shares for Investment; Accredited Investor
tc \l2 "Acquisition of Shares for Investment; Accredited Investor.
(1) The Shares will be acquired by Purchaser (or, if applicable, its
assignee pursuant to Section 10.11) for its own account for the purpose of
investment, it being understood that the right to dispose of such Shares
shall be entirely within the discretion of Purchaser (or such assignee, as
the case may be). Purchaser (or such assignee, as the case may be) will
refrain from transferring or otherwise disposing of any of the Shares, or any
interest therein, in such manner as to cause Seller to be in violation of the
registration requirements of the Securities Act or applicable state
securities laws.
(2) Purchaser is an "accredited investor" as defined in Rule 501 of
Registration D under the Securities Act.
Section 1.49 Availability of Funds tc \l2 "Availability of Funds.
Purchaser will have at the Closing sufficient immediately available funds, in
cash, to pay the Purchase Price and to pay any other amounts payable pursuant
to this Agreement and to effect the Transactions.
Section 1.50 Litigation tc \l2 "Litigation. There is no claim,
action, suit, proceeding or, to the Knowledge of Purchaser, governmental
investigation pending or, to the Knowledge of Purchaser, threatened against
Purchaser or any of its Subsidiaries by or before any court or Governmental
Entity that, individually or in the aggregate, would have or would reasonably
be expected to impede materially the ability of Purchaser to complete the
Closing in all respects.
Section 1.51 Investigation by Purchaser tc \l2 "Investigation by
Purchaser. Purchaser has conducted its own independent investigation of the
Company, and has relied solely upon the aforementioned investigation and not
on any factual representations of Parent, Seller or any of their
representatives except the specific representations and warranties of Parent
and Seller set forth in Article III of this Agreement.
Section 1.52 Brokers or Finders tc \l2 "Brokers or Finders. Neither
Purchaser nor any of its Subsidiaries or its Affiliates has entered into any
agreement or arrangement entitling any agent, broker, investment banker,
financial advisor or other firm or Person to any broker's or finder's fee or
any other commission or similar fee in connection with any of the
Transactions.
ARTICLE V
COVENANTS tc \l1 " ARTICLE V
COVENANTS
Section 1.53 Interim Operations of the Company tc \l2 "Interim
Operations of the Company. Except as expressly provided in this Agreement
and except as set forth in the Disclosure Schedule and except as may be
consented to in writing by Purchaser (such consent not to be unreasonably
withheld or delayed) Seller shall use commercially reasonable efforts to
procure that, after the date hereof and prior to the Closing Date, the
business of the Company shall be conducted in the same manner as heretofore
conducted and only in the ordinary course consistent with past practice
(including with respect to the collections of accounts and notes receivable
and replenishment of inventory) and it will not take any action, and will
cause the Company not to take any action, that if taken between the Balance
Sheet Date through the date hereof, would have had to have been disclosed
pursuant to Section 3.12.
Section 1.54 Access; Confidentiality. tc \l2 "Access; Confidentiality.
(1) Seller shall cause the Company prior to the Closing to (i) give
Purchaser and its authorized representatives reasonable access to all books,
records, personnel, offices and other facilities and properties of the
Company, (ii) permit Purchaser to make inspections thereof as Purchaser may
reasonably request and (iii) cause the officers of the Company to furnish
Purchaser with such financial and operating data and other information with
respect to the business and properties of the Company as Purchaser may from
time to time reasonably request; provided, however, that any such access
shall be conducted at Purchaser's expense, at a reasonable time, under the
supervision of Seller's or the Company's personnel and in such a manner as
reasonably necessary not to interfere substantially with the normal operation
of the business of Seller or the Company. Subject to the provisions of
Section 5.4(h), notwithstanding anything contained in this or any other
agreement between Purchaser and Parent and/or Seller executed prior to the
date hereof, none of the Company, Parent, Seller or any of their respective
Affiliates shall have any obligation to make available to Purchaser or its
representatives, or provide Purchaser or its representatives with, any
consolidated, combined or unitary Tax Return filed by Parent or any of its
Affiliates or predecessors, or any related material (except as any such
material may relate solely to the Company) and nothing herein shall require
Parent, Seller or the Company to disclose any information to Purchaser if
such disclosure would (i) jeopardize any attorney-client or other legal
privilege or (ii) contravene any applicable laws, fiduciary duty or binding
agreement entered into prior to the date of this Agreement (including any
confidentiality agreement to which Parent, Seller, the Company or any of
their respective Affiliates is a party).
(bi The provisions of the Confidentiality Agreement shall remain binding and
in full force and effect until the Closing. The information contained
herein, in the Disclosure Schedule or delivered to Purchaser or its
authorized representatives pursuant hereto shall be subject to the
Confidentiality Agree-ment as Evaluation Material (as defined and subject to
the exceptions contained therein) until the Closing and, for that purpose and
to that extent, the terms of the Confidentiality Agreement are incorporated
herein by reference. Except as otherwise provided in Section 5.5, Purchaser
shall cause its consultants, advisors and representatives to treat the terms
of this Agreement after the date hereof as strictly confidential (unless
compelled to disclose by judicial or administrative process or, in the
opinion of legal counsel, by other requirements of law).
Section 1.55 Efforts and Actions to Cause Closing to Occur tc \l2
"Efforts and Actions to Cause Closing to Occur.
(1) Prior to the Closing, upon the terms and subject to the conditions
of this Agreement, Purchaser, Parent and Seller shall use their respective
reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done and cooperate with each other in order to do, all
things reasonably necessary, proper or advisable (subject to any applicable
laws) to consummate the Closing and the other Transactions as promptly as
practicable, including the preparation and filing of all forms, registrations
and notices required to be filed to consummate the Closing and the other
Transactions and the taking of such actions as are necessary to obtain any
requisite approvals, authorizations, consents, orders, licenses, permits,
qualifications, exemptions or waivers by any third party or Governmental
Entity. In addition, no party hereto shall take any action after the date
hereof that would reasonably be expected to materially delay the obtaining
of, or result in not obtaining, any permission, approval or consent from any
Governmental Entity or other Person required to be obtained prior to Closing.
Nothing contained in this Agreement shall require Parent, Seller or the
Company to pay any consideration to any other Person from whom any such
approvals, authorizations, consents, orders, licenses, permits,
qualifications, exemptions or waiver is requested.
(2) Prior to the Closing, each party shall promptly consult with the
other party hereto with respect to, provide any necessary information with
respect to, and provide the other parties (or their respective counsel) with
copies of, all filings made by such party with any Governmental Entity or any
other information supplied by such party to a Governmental Entity in
connection with this Agreement and the Transactions. Each party hereto shall
promptly inform the other party of any communication received by such party
from any Governmental Entity regarding any of the Transactions. If any party
hereto or Affiliate thereof receives a request for information or documentary
material from any such Governmental Entity with respect to any of the
Transactions, then such party shall endeavor in good faith to make, or cause
to be made, as soon as reasonably practicable and after consultation with the
other parties, an appropriate response in compliance with such request.
(3) In addition to and without limiting the agreements of the parties
contained above, Purchaser and Seller shall
(1) take promptly all actions reasonably necessary to make the filings
required of them or any of their Affiliates under the HSR Act,
(2) comply at the earliest practicable date with any request for
additional information or documentary material received by the Company,
Purchaser, Seller or any of their Affiliates from the FTC or the DOJ pursuant
to the HSR Act or from any state Attorney General or other Governmental
Entity in connection with antitrust matters,
(3) cooperate with each other in connection with any filing under the
HSR Act and in connection with resolving any investigation or other inquiry
concerning the Transactions commenced by the FTC, DOJ, any state Attorney
General or any other Governmental Entity,
(4) use their commercially reasonable efforts to resolve such
objections, if any, as may be asserted with respect to the Transactions under
any antitrust law, and
(5) advise the other parties promptly of any communication received by
such party from the FTC, DOJ, any state Attorney General or any other
Governmental Entity regarding any of the Transactions, and of any
understandings, undertakings or agreements (oral or written) such party
proposes to make or enter into with the FTC, DOJ, any state Attorney General
or any other Governmental Entity in connection with the Transactions.
Concurrently with the filing of notifications under the HSR Act or as soon
thereafter as practicable, Seller and Purchaser shall each request early
termination of the HSR Act waiting period.
Section 1.56 Tax Matters. tc \l2 "Tax Matters.
(1) Tax Returns. Except as provided in Section 5.4(c),
(1) Parent shall file or cause to be filed when due all Tax Returns that
are required to be filed by or with respect to the Company for taxable years
or periods ending on or before the Closing Date, and Parent shall remit (or
cause to be remitted), subject to Section 8.1(b), any Taxes due in respect of
such Tax Returns.
(2) Purchaser shall file or cause to be filed when due all Tax Returns
that are required to be filed by or with respect to the Company for taxable
years or periods ending after the Closing Date, and Purchaser shall remit (or
cause to be remitted) any Taxes due in respect of such Tax Returns.
(3) Any Tax Return required to be filed by Purchaser relating to any
Straddle Period shall be submitted (with copies of any relevant schedules,
work papers and other documentation then available) to Parent for Parent's
approval not less than 30 days prior to the Due Date for the filing of such
Tax Return, which approval shall not be unreasonably withheld. Purchaser
shall prepare or have the Company prepare such returns in accordance with
past practice, if any, to the extent permissible under applicable law.
(4) Upon the written request of Purchaser setting forth in reasonable
detail the computation of the amount owed, Parent shall pay to Purchaser, no
later than two (2) Business Days prior to the Due Date for the applicable Tax
Return, the Taxes for which Parent is liable pursuant to Section 8.1(b)(ii)
but which are payable with any Tax Return to be filed by Purchaser with
respect to any Straddle Period.
(5) Within 120 days after the Closing Date, Purchaser shall cause the
Company to prepare and provide to Parent a package of Tax information
materials, including schedules and work papers, requested in writing by
Parent to enable Parent to prepare and file all Tax Returns required to be
prepared and filed by it pursuant to Section 5.4(a)(i). Purchaser shall
prepare such package in good faith in a manner consistent with Parent's past
practice to the extent permissible under applicable law.
(6) Parent may, in its sole and absolute discretion, amend any Tax
Return filed or required to be filed for any taxable years or periods ending
on or before the Closing Date, provided Parent indemnifies Purchaser and the
Company against any Taxes attributable to any taxable year or period that
results from such amendment and provided that any amendment shall not
increase the Incremental Tax Cost as defined in Section 5.4(j).
(2) Computation of Tax Liabilities.
(1) To the extent permitted or required by law or administrative
practice, (A) the taxable year of the Company which includes the Closing Date
shall be treated as closing on (and including) the Closing Date and,
notwithstanding the foregoing, (B) all transactions of the Company not in the
ordinary course of business occurring after the Closing, other than those
pursuant to plans adopted by the Company before the Closing, shall be
reported on Purchaser's consolidated United States federal income Tax Return
to the extent permitted by Treasury Regulation Section 1.1502-76(b)(1)(ii)(B)
and shall be similarly reported on other Tax Returns of Purchaser or its
Affiliates to the extent permitted by law. For purposes of Sections
5.4(a)(i) and (a)(ii), where it is necessary to apportion between Parent and
Purchaser the Tax liability of the Company for a Straddle Period (which is
not treated under the immediately preceding sentence as closing on the
Closing Date), such liability shall be apportioned between the period deemed
to end at the close of the Closing Date, subject to Sections 8.1(b)(i) and
8.1(e)(i), and the period deemed to begin at the beginning of the day
following the Closing Date on the basis of an interim closing of the books,
except that Taxes (such as real property Taxes) imposed on a periodic basis
shall be allocated pro rata per diem.
(2) In determining Parent's liability for a particular Tax pursuant to
this Agreement, Parent shall be credited with the amount of estimated Taxes
paid by or on behalf of the Company prior to the Closing with respect to that
particular Tax to the extent such Tax is credited by a Taxing Authority to
the relevant Tax period of the Company. To the extent that Parent's
liability for a particular Tax for a taxable year or period is less than the
amount of any estimated Taxes paid prior to Closing by or on behalf of the
Company with respect to all or a portion of such taxable year or period,
Purchaser shall pay Parent the difference within two days of filing the Tax
Return relating to such Taxes, provided, however, that Purchaser's and the
Company's obligations shall be governed by Section 5.4(d)(i) to the extent
such estimated Taxes paid prior to Closing entitle Purchaser or the Company
to a refund of Taxes.
(3) Transfer Taxes. All Transfer Taxes resulting directly from the
Transactions shall be borne equally by Purchaser and Seller. Notwithstanding
the provisions of Section 5.4(a), which shall not apply to Tax Returns
relating to Transfer Taxes, any Tax Returns that must be filed in connection
with Transfer Taxes shall be prepared and filed when due by the party
primarily or customarily responsible under the applicable local law for
filing such Tax Returns, and such party will use its reasonable efforts to
provide such Tax Returns to the other party at least 10 days prior to the Due
Date for such Tax Returns.
(4) Refunds.
(1) Any Tax refund (including any interest in respect thereof)
received by Purchaser or the Company, and any amounts credited against Tax to
which Purchaser or the Company becomes entitled (including by way of any
amended Tax Returns or any carryback filing), that relate to any taxable
period, or portion thereof, ending on or before the Closing Date shall be for
the account of Parent, and Purchaser shall pay over to Parent any such refund
or the amount of any such credit within five days after receipt or
entitlement thereto. For purposes of this Section 5.4(d), where it is
necessary to apportion a refund or credit between Purchaser and Parent for a
Straddle Period, such refund or credit shall be apportioned between the
period deemed to end at the close of the Closing Date and the period deemed
to begin at the beginning of the day following the Closing Date on the basis
of an interim closing of the Company's books, except that refunds or credits
of Taxes (e.g., real property Taxes) imposed on a periodic basis shall be
allocated pro rata per diem.
(2) Purchaser shall cooperate, and cause the Company to cooperate, in
obtaining any Tax refund of Taxes of the Company for a period prior to the
Closing Date that Parent reasonably believes should be available, including,
without limitation, through filing appropriate forms with the applicable
Taxing Authorities, provided that such Tax refund request does not cause a
Tax detriment to the Company or Purchaser.
(5) Certain Post-Closing Settlement Payments.
(1) If the examination of any federal, state, local or other Tax
Return of Parent for any taxable period ending on or before the Closing Date
shall result (by settlement or otherwise) in any adjustment which permits
Purchaser or the Company to increase deductions, losses or tax credits or
decrease the income, gains or recapture of tax credits which would otherwise
(but for such adjustments) have been reported or taken into account
(including by way of any increase in basis) by Purchaser or the Company for
one or more periods ending after the Closing Date, Parent shall notify
Purchaser and provide it with adequate information so that Purchaser can
reflect on its or the Company's Tax Returns such increases in deductions,
losses or tax credits or decreases in income, gains or recapture of tax
credits within 30 days of such adjustment. Purchaser shall pay to Parent,
within 30 days of the receipt of the amount of any Tax Benefits Actually
Realized to the extent of any additional Taxes and decrease in Tax Benefits
resulting from the adjustments to Parent's Tax Return.
(2) If the examination of any federal, state, local or other Tax
Return of Purchaser or the Company for any taxable period ending after the
Closing Date shall result (by settlement or otherwise) in any adjustment
which permits Parent to increase deductions, losses or tax credits or
decrease the income, gains or recapture of tax credits which would otherwise
(but for such adjustments) have been reported or taken into account
(including by way of any increase in basis) by Parent for one or more periods
ending on or before the Closing Date, Purchaser shall notify Parent and
provide it with adequate information so that Parent can reflect on its Tax
Returns such increases in deductions, losses or tax credits or decreases in
income, gains or recapture of tax credits within 30 days of such adjustment.
Parent or Seller shall pay to Purchaser, within 30 days of the receipt of the
amount of any Tax Benefits Actually Realized to the extent of any additional
Taxes and decrease in Tax Benefits resulting from the adjustments to
Purchaser's or the Company's Tax Return.
(6) Post-Closing Actions which Affect Parent's or Seller's Liability for
Taxes.
(1) Purchaser shall not permit the Company to take any action with
respect to any Tax authority except for any actions contemplated or governed
by this Agreement (including the settlement of a Tax claim in accordance with
Section 8.2(b) and the actions contemplated by this Section 5.4) which could
increase Parent's or Seller's liability for Taxes (including any liability of
Parent or Seller to indemnify Purchaser for Taxes pursuant to this
Agreement).
(2) None of Purchaser or any Affiliate of Purchaser shall (or shall
cause or permit the Company to) amend, refile or otherwise modify any Tax
Return relating in whole or in part to the Company with respect to any
taxable year or period ending on or before the Closing Date (or with respect
to any Straddle Period) without the prior written consent of Parent, which
consent may not be unreasonably withheld.
(3) None of Purchaser or any Affiliate of Purchaser shall (or shall
cause or permit the Company to) carryback for Federal, state, local or
foreign tax purposes to any taxable period, or portion thereof, of the
Company, Parent, Seller or any of their Affiliates ending before, or which
includes, the Closing Date any operating losses, net operating losses,
capital losses, tax credits or similar items arising in, resulting from, or
generated in connection with a taxable year of Purchaser or any Affiliate of
Purchaser, or portion thereof, ending on or after the Closing Date.
(7) Termination of Existing Tax Sharing Agreements. Any and all
existing Tax sharing agreements or arrangements, written or oral, between
Parent and the Company, shall terminate as of the Closing.
(8) Assistance and Cooperation. After the Closing Date, each of Parent
and Purchaser shall (and shall cause their respective Affiliates to):
(1) timely sign and deliver such certificates or forms as may be
necessary or appropriate to establish an exemption from (or otherwise
reduce), or file Tax Returns or other reports with respect to, Transfer
Taxes;
(2) assist the other party in preparing any Tax Returns which such
other party is responsible for preparing and filing in accordance with
Section 5.4(a);
(3) cooperate fully in preparing for any audits of, or disputes with
Taxing Authorities regarding, any Tax Returns of the Company;
(4) make available to the other and to any Taxing Authority as
reasonably requested in connection with any Tax Return described in Section
5.4(a) or any proceeding described in Section 8.2(b), all information
relating to any Taxes or Tax Returns of the Company; and
(5) furnish the other with copies of all correspondence received from
any Taxing Authority in connection with any Tax audit or information request
with respect to any such taxable period.
Notwithstanding the foregoing or any other provision in this Agreement, none
of Purchaser, Parent nor Seller, nor any of their Affiliates, shall have the
right to receive or obtain any information relating to Taxes of Purchaser,
Parent or Seller, any of their Affiliates, or any of their predecessors other
than information relating to the Company.
(9) Interest. All amounts due and payable by one party to this
Agreement to another party to this Agreement pursuant to any provision of
this Section 5.4 shall bear interest at the rate described under Section
6621(a)(1) of the Code, compounded daily, if not paid when due.
(10) Section 338(h)(10). (i) At the request of Purchaser, Parent and
Seller agree to cooperate with Purchaser in making or causing to be made (and
in determining the cost of making or causing to be made) a timely election
(the "Section 338(h)(10) Election") under Section 338(h)(10) of the Code
with respect to the purchase by Purchaser of the Shares and to file such
Section 338(h)(10) Election in the manner required by applicable U.S.
Treasury Regulations. Parent, Seller and Purchaser will make, at Purchaser's
request, such other similar elections as may be necessary for state income
tax purposes, and for purposes of this Agreement, the term "Section
338(h)(10) Election" shall be deemed to include any such state income tax
elections. If any Section 338(h)(10) Election is made by Parent, Seller and
Purchaser, Purchaser shall pay to Seller any Incremental Tax Cost of the
Section 338(h)(10) Election. For purposes of this Agreement, "Incremental
Tax Cost" shall mean (A) any fees, expenses or costs incurred by Parent,
Seller, and the Company in connection with the Section 338(h)(10) Election;
(B) the excess, if any, of (I) the actual combined U.S. federal, state and
local income Tax liability of Parent, Seller and the Company attributable to
the Section 338(h)(10) Election over (II) the actual combined U.S. federal,
state and local income Tax liability that Parent and Seller would have
incurred as a result of the sale of the Shares if no Section 338(h)(10))
Election had been made; and (C) any additional Taxes imposed on Parent or
Seller attributable to the receipt of payments pursuant to this Section
5.4(j). (ii) Purchaser shall not make any election under Section 338 of the
Code (or any comparable provision of state, local or foreign law) other than
the Section 338(h)(10) Election, except for any such election deemed to be
made in any jurisdiction by reason of the making of the Section 338(h)(10)
Election. (iii) After the Closing, if Purchaser notifies or has notified
Parent in writing that it intends to make the Section 338(h)(10) Election,
Parent and Purchaser shall use commercially reasonable efforts to agree to an
allocation of the Modified Aggregate Deemed Sale Price (as defined under
applicable Treasury Regulations) among the assets of the Company within 60
days after the Closing Date; provided, however, that if Parent and Purchaser
shall not have agreed on such allocation by the sixtieth day following the
Closing Date, such allocation shall be made in accordance with the appraisal
of a recognized appraisal firm chosen and retained by mutual agreement of
Purchaser and Parent, the fees and expenses of which shall be paid one-half
by Parent and one-half by Purchaser. Parent, Purchaser and the Company shall
reflect such allocation in all applicable Tax Returns filed by any of them.
None of Parent, Purchaser nor the Company shall take a position before any
Taxing Authority or otherwise (including in any Tax Return) inconsistent with
such allocation.
(11) Section 1.1502-20(g). None of Parent, Seller or any affiliate
of either shall make any elections under U.S. Treasury Regulations section
1.1502-20(g).
Section 1.57 Publicity tc \l2 "Publicity . Purchaser and Parent shall
each issue an initial press release with respect to the execution of this
Agreement after prior consultation with the parties hereto. Thereafter,
until the Closing, or the date the Transactions are terminated or abandoned
pursuant to Article VII, none of Parent, Seller, the Company, Purchaser or
any of their respective Affiliates shall issue or cause the publication of
any press release or other public announcement with respect to this Agreement
or the Transactions without prior consultation with the other party, except
as may be required by law or by any listing agreement with a national
securities exchange or trading market.
Section 1.58 Employees; Employee Benefits tc \l2 " Employees; Employee
Benefits.
(1) Immediately prior to the Closing, Parent and Seller shall, and
shall cause any of their Affiliates if necessary to, transfer to the Company
each person who was actively employed and working primarily for the Company
immediately prior to the Closing (the "Employees"). Section 5.6(a) of the
Disclosure Schedule lists each such Employee as of the date hereof. Prior to
Closing, Seller shall cause all account balances and other interests of
Employees under Parent's 401K plan to be fully vested as of the Closing Date.
The Company shall assume all liabilities and obligations relating to or
arising out of the Employees' employment prior to the Closing; provided,
however, that (i) the Company shall not assume any liabilities or obligations
pursuant to any employee benefit plan (as defined in Section 3(3) of ERISA),
compensation or incentive plan sponsored, maintained or contributed to by any
entity other than the Company; and (ii) the Company shall not assume any
liabilities or obligations related to the Employees which have not been
accrued on the Closing Balance Sheet, set forth in Section 5.6(a)(i)(4) of
the Disclosure Schedule or any employment, severance or change of control
agreements or arrangement not listed on Section 3.15(c) of the Disclosure
Schedule. Except as expressly assumed in the previous sentence, Seller and
Parent shall remain liable and indemnify Purchaser and/or the Company, for
all liabilities and obligations relating to or arising out of Employee's
employment prior to the Closing. Without limiting the foregoing, Purchaser
hereby assumes and agrees to perform each of the agreements set forth in
Section 3.15(c) of the Disclosure Schedule in the same manner and to the same
extent that Parent, Seller or the Company would be required to perform it
whether or not the Transactions occurred, such assumption to be effective as
of the Closing.
(2) On and after the Closing, until at least the first anniversary of
the Closing, Purchaser shall cause the Company to provide the Employees with
salaries, incentive opportunities and benefit plans, programs and
arrangements no less favorable in the aggregate than those provided as of the
date hereof by Seller and the Company or, at Purchaser's option, no less
favorable in the aggregate than those provided to similarly situated
employees of Purchaser.
(3) If any Employee becomes a participant in any employee benefit plan,
practice or policy of Purchaser or any of its Affiliates, such Employee shall
be given credit, for purposes of determining eligibility and vesting, under
such plan for all service prior to the Closing Date with the Company or any
predecessor employer (to the extent such credit was given by Seller, the
Company or any predecessor employer), and all service with the Company or
Purchaser following the Closing Date but prior to the time such employee
becomes such a participant; provided, however, such service need not be
credited to the extent it would result in a duplication of benefits,
including benefit accrual under defined benefit plans, or would constitute a
violation of the terms of any of Purchaser's plans. Such service also shall
apply for purposes of satisfying any waiting periods, evidence of
insurability requirements, or the application of any preexisting condition
limitations. Employees shall be given credit for amounts paid under a
corresponding benefit plan during the same period for purposes of applying
deductibles, copayments and out-of-pocket maximums as though such amounts had
been paid in accordance with the terms and conditions of the comparable
Purchaser employee benefit plan.
(4) If any Employee is discharged by the Company after the Closing,
then Purchaser shall be responsible for all severance costs, if any, for such
Employee incurred by the Purchaser under the Company's severance plan.
Purchaser shall be responsible and assume all liability for all notices or
payments due to any Employees, and all notices, payments, fines or
assessments due to any Governmental Entity, pursuant to any applicable
foreign, federal, state or local law, common law, statute, rule or regulation
with respect to the discharge or layoff of Employees by the Company as of the
Closing, including the WARN Act and any rules or regulations as have been
issued in connection with the foregoing. Purchaser acknowledges and agrees
that any employment loss within the meaning of the WARN Act suffered by any
Employee on or within the 90 day period following the Closing shall have been
caused by Purchaser's decision not to continue the employment of such
Employee, and shall not have been caused as a result of the sale of the
Shares of the Company pursuant to this Agreement. For purposes of this
Agreement, the Closing Date is and shall be the same as the "effective date"
within the meaning of the WARN Act.
Section 1.59 Transition Services Agreement; Lease Agreement tc \l2
"Transition Services Agreement; Lease Agreement . Purchaser and Seller agree
(a) to negotiate in good faith a Transition Services Agreement containing the
terms set forth on Exhibit A, and (b) to execute and deliver such Transition
Services Agreement and the Lease Agreement (substantially in the form
attached hereto as Exhibit B) at Closing.
Section 1.60 Intercompany Arrangements; Accounts Receivable tc \l2
"Intercompany Arrangements; Accounts Receivable.
(1) On or prior to the Closing Date, all intercompany accounts owing by
the Company, on the one hand, to the Seller and its Affiliates (excluding the
Company), on the other hand, shall be converted into equity without any
payment of funds in connection therewith. Notwithstanding the foregoing,
prior to the Closing any existing cash balance on the Company's books will be
transferred to Seller and the MCF Note will be cancelled. In addition,
except as otherwise ex-pressly contemplated by this Agreement or as set forth
in Section 5.8 of the Disclosure Schedule, all agreements and commitments,
whether written, oral or otherwise, which are solely between the Company, on
the one hand, and Seller and its Affiliates (excluding the Company), on the
other hand, including, without limitation, any intercompany notes to Seller,
shall be terminated and of no further effect, simultaneously with the Closing
without any further action or liability on the part of the parties thereto.
(2) Prior to the Closing, the Company shall repurchase all outstanding
accounts receivable previously sold to MCF (the "MCF Receivables"), which
shall be reflected on the Preliminary Closing Balance Sheet and the Closing
Balance Sheet at a price equal to their face amount net of reserves, and the
MCF Note will be cancelled. The receivables shall be included in all
calculations of Working Capital pursuant to Section 1.3.
Section 1.61 Maintenance of Books and Records tc \l2 "Maintenance of
Books and Records. Each of the parties hereto shall preserve, until at
least the third anniversary of the Closing Date, all pre-Closing Date records
possessed or to be possessed by such party relating to the Company. After
the Closing Date and up until at least the third anniversary of the Closing
Date, upon any reasonable request from a party hereto or its representatives,
the party holding such records shall (a) provide to the requesting party or
its representatives reasonable access to such records during normal business
hours and (b) permit the requesting party or its representatives to make
copies of such records, in each case at no cost to the requesting party or
its representatives (other than for reasonable out-of-pocket expenses);
provided, however, that nothing herein shall require either party to disclose
any information to the other if such disclosure would jeopardize any
attorney-client or other legal privilege or contravene any applicable law.
Such records may be sought under this Section for any reasonable purpose,
including to the extent reasonably required in connection with the audit,
accounting, tax, litigation, federal securities disclosure or other similar
needs of the party seeking such records.
Section 1.62 Seller's Trademarks and Logos tc \l2 "Seller's Trademarks
and Logos. Notwithstanding anything to the contrary contained in this
Agreement, it is expressly agreed that (a) with the exception of (i) all of
Parent's and Seller's Intellectual Property Rights in "MOCA", (ii) any right
of the Company to use third party Intellectual Property, where such right is
primarily used and reasonably necessary to conduct the business of the
Company as presently conducted or as currently proposed to be conducted,
other than as set forth in Section 3.23 or 5.10 of the Disclosure Schedule,
and (iii) any Copyright that is exclusively used, and any Masks and Trade
Secrets to the extent currently used, in the business of the Company, other
than as set forth in Section 5.10 of the Disclosure Schedule, Parent and
Seller retain all rights, title and interest in all Company Intellectual
Property, (b) Purchaser is not purchasing, acquiring or otherwise obtaining,
and the Company will not be entitled to retain following the Closing Date,
any right, title or interest in any Trademarks employing Parent's or Seller's
name or any part or variation of such names or anything confusingly similar
thereto and (c) neither the Company nor Purchaser or its Affiliates shall
make any use of or display Parent's or Seller's Trademarks from and after the
Closing, in each case, other than in connection with (i) advertising
materials, forms and similar materials in existence or on order on the
Closing Date bearing such names or Trademarks and (ii) branding and marketing
the Company's new name, Trademarks and other Intellectual Property; provided,
however, Purchaser agrees to and agrees to cause the Company to discontinue
such use as soon as practicable but in no event later than 120 days after the
Closing Date. In addition, Purchaser will do all things reasonably necessary
including, without limitation, signing any documentation to perfect Parent's
or Seller's exclusive ownership rights in their Trademarks at any time after
the Closing. Purchaser shall change the name of the Company at the Closing
to a name which shall not include "Merisel." On and after the Closing,
Parent, Seller and their Subsidiaries shall not use the name "Open Computing
Alliance" as a trademark, service mark, trade name or corporate name in
connection with their businesses.
Section 1.63 Insurance Policies tc \l2 "Insurance Policies.
(1) Except as provided in subsection (b), Purchaser shall not, and shall
cause Purchaser's Affiliates (including the Company after the Closing) not
to, assert, by way of claim, action, litigation or otherwise, any right to
any Insurance Policy or any benefit under any such Insurance Policy. Seller
and its Affiliates (other than the Company) shall retain all right, title and
interest in and to the Insurance Policies, including the right to any credit
or return premiums due, paid or payable in connection with the termination
thereof.
(b) The Company shall retain all rights under any state workers'
compensation policy the premiums of which were paid directly by the Company
prior to the Closing.
Section 1.64 No Solicitation tc \l2 "No Solicitation.
(1) Parent and Seller will, and will use their reasonable efforts to cause
their respective Affiliates to, immediately cease any existing discussions
and negotiations with any parties conducted up to the date of this Agreement
with respect to any proposal relating to an Acquisition Transaction (as
defined below). Parent and Seller agree that, before the Closing, they will
not, and will not authorize or knowingly permit any of their respective
subsidiaries or any of their or their subsidiaries' directors, officers or
employees to, and will use their reasonable best efforts to cause their
respective agents and representatives not to, solicit, initiate, facilitate
or encourage (including by way of furnishing or disclosing non-public
information) any inquiries or the making of any proposal with respect to any
acquisition of all or a significant portion of the Company by means of a
merger, consolidation or other business combination involving the Company or
acquisition of all or a significant portion of the assets or capital stock of
the Company (an "Acquisition Transaction") or negotiate, explore or otherwise
engage in substantive communications with any person (other than Purchaser or
its directors, officers, employees, agents and representatives) with respect
to any Acquisition Transaction, or enter into any agreement, arrangement or
understanding requiring Seller to abandon, terminate or fail to consummate
the Transactions.
(2) Notwithstanding the foregoing, nothing contained in this Agreement
will prohibit Parent or Seller from (i) soliciting, providing information
with respect to or agreeing to or engaging in any transactions involving
Parent, Seller or any of their respective subsidiaries other than the Company
(a "Parent Transaction"), provided, however, that a Parent Transaction shall
not include any stock of the Company or any assets of the Company, or (ii)
furnishing information to, or entering into discussions or negotiations with,
any person or entity in connection with any inquiries or the making of an
unsolicited bona fide proposal with respect to any acquisition of all or
substantially all of Parent by means of a merger, consolidation or other
business combination involving Parent or an acquisition of all or a
substantially all of the assets or capital stock of Parent, which may include
the stock or assets of the Company (an "Entire Parent Transaction"), from any
person or entity; provided, however, that Seller will promptly communicate to
Purchaser the terms of any such proposal related to an Entire Parent
Transaction (including the maker thereof) which it may receive and keep
Purchaser informed of the status and material information with respect to
such discussions or negotiations. Nothing in this Section 5.12(b) shall (x)
permit Parent or Seller to terminate this Agreement (except as specifically
provided in Section 7.2), (y) permit Parent or Seller to enter into any
agreement with respect to an Entire Parent Transaction for so long as this
Agreement remains in effect (it being agreed that for so long as this
Agreement remains in effect, Seller shall not enter into any agreement with
any Person or group that provides for, or in any way facilitates, an Entire
Parent Transaction (other than a confidentiality agreement under the
circumstances described above)), or (z) affect any other obligation of Parent
and Seller under this Agreement.
Section 1.65 Noncompetition; No Raid tc \l2 "Noncompetition; No Raid.
(1) Parent and Seller will, for a period of one (1) year from the
Closing Date, refrain from, either alone or in conjunction with any other
Person, or directly or indirectly through its present or future Subsidiaries,
employing, engaging or seeking to employ or engage any Person employed on or
after the date hereof and who, to the knowledge of Parent or Seller, within
the prior six (6) months of any employment by Parent or Seller had been an
officer or employee of the Company or otherwise was actively employed and
working primarily for the Company at any time during such period.
(2) Except as contemplated by this Agreement, the Company will, for a
period of one (1) year from the Closing Date, refrain from, either alone or
in conjunction with any other Person, or directly or indirectly through its
present or future Subsidiaries, employing, engaging or seeking to employ or
engage any Person employed on or after the date hereof and who, to the
knowledge of Purchaser within the prior six (6) months of any employment by
the Company had been an officer or employee of the Parent or Seller or
otherwise was actively employed and working primarily for Parent or Seller at
any time during such period.
(3) Neither Parent, Seller nor any of their Subsidiaries will, for a
period of two (2) years from the Closing Date, (i) cause or attempt to cause
Sun to terminate or reduce its business with the Company, (ii) sell or
distribute any product bearing any Trademark of Sun where Sun requires the
reseller to be an authorized Sun reseller or (iii) acquire an interest in any
entity engaged in the sale or distribution of any such product, including as
a partner, stockholder, officer, director, principal, agent, trustee or
consultant, other than through the ownership of five percent or less of any
class of securities registered under the Exchange Act.
(4) The parties hereto recognize that the laws and public policies of
the various states of the United States may differ as to the validity and
enforceability of covenants similar to those set forth in this Section 5.13.
It is the intention of the parties that the provisions of this Section 5.13
be enforced to the fullest extent permissible under the laws and policies of
each jurisdiction in which enforcement may be sought, and that the
unenforceability (or the modification to conform to such laws or policies) of
any provisions of this Section 5.13 shall not render unenforceable, or
impair, the remainder of the provisions of this Section 5.13. Accordingly,
if any provision of this Section 5.13 shall be determined to be invalid or
unenforceable, such invalidity or unenforceability shall be deemed to apply
only with respect to the operation of such provision in the particular
jurisdiction in which such determination is made and not with respect to any
other provision or jurisdiction.
(5) The parties hereto acknowledge and agree that any remedy at law for
any breach of the provisions of this Section 5.13 would be inadequate, and
Seller hereby consents to the granting by any court of an injunction or other
equitable relief, without the necessity of actual monetary loss being proved,
in order that the breach or threatened breach of such provisions may be
effectively restrained.
Section 1.66 Employment Agreements. tc \l2 "Employment Agreements.
Prior to Closing, Purchaser shall offer to those employees identified in
Section 5.14 of the Disclosure Schedule employment agreements with the
Company on terms no less favorable, in the aggregate, than, and with
substantially the same job description and at the same job location as, their
current employment arrangements.
Section 1.67 Removal as Guarantor. tc \l2 "Removal as Guarantor.
Parent and Seller shall take all necessary actions to have the Company
removed as a guarantor under all agreements, including the agreement listed
in Section 3.28 of the Disclosure Schedule in favor of Bank of America, N.A.
Section 1.68 Use of Proceeds tc \l2 "Use of Proceeds. For a period of
6 months after the Closing, neither Seller nor Parent will use the proceeds
of the Purchase Price to pay dividends on or repurchase any Parent common
stock.
Section 1.69 Additional License. tc \l2 "Additional License. As of
the Closing Date, Seller and the Company shall grant the other the rent-free
right, license and privilege for the Persons listed on Section 5.17 of the
Disclosure Schedule to use and occupy the space listed thereon.
Section 1.70 Cooperation tc \l2 "Cooperation. Promptly after the
date hereof, Purchaser and Seller shall work together to restore the
Company's credit line with Sun.
Section V.19 tc \l2 " Section V.19 Seller's Lease. During the term
of the Lease Agreement, Seller shall pay all rent that is due pursuant to
that certain lease between Seller and Raytheon Company (as described in the
Lease Agreement) and Seller shall not violate any terms or conditions under
such lease which would permit Raytheon Company to terminate such lease
pursuant to its terms; provided, however, that Purchaser is not in default
under the terms of the Lease Agreement.
ARTICLE VI
CONDITIONS tc \l1 " ARTICLE VI
CONDITIONS
Section 1.71 Conditions to Each Party's Obligation to Effect the
Closing tc \l2 "Conditions to Each Party's Obligation to Effect the Closing .
The respective obligation of each party to effect the Closing shall be
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions:
(1) Statutes; Court Orders. No statute, rule or regulation shall have
been enacted or promulgated by any Governmental Entity which prohibits the
consummation of the Closing; and there shall be no order or injunction of a
court of competent jurisdiction in effect precluding consummation of the
Closing, provided, however, that the parties shall use their reasonable
efforts to have any such order or injunction vacated or lifted;
(2) HSR Approval. The applicable waiting period under the HSR Act shall
have expired or been terminated;
(3) Consents Obtained. All material consents of any Person necessary to
the consummation of the Closing and the other Transactions, including
consents from parties to loans, contracts, leases or other agreements,
consents from Governmental Entities, and consents set forth in Section 6.1(c)
of the Disclosure Schedule shall (i) have been obtained, (ii) be in form and
substance reasonably satisfactory to Purchaser and Seller and (iii) be in
full force and effect; and
(4) Transition Services Agreement; Lease Agreement. Purchaser and
Seller shall have executed (i) a Transition Services Agreement in form and
substance reasonably acceptable to Seller and Purchaser and (ii) the Lease
Agreement substantially in the form attached as Exhibit B.
Section 1.72 Conditions to Obligations of Purchaser to Effect the
Closing tc \l2 "Conditions to Obligations of Purchaser to Effect the Closing.
The obligations of Purchaser to consummate the Closing shall be subject to
the satisfaction on or prior to the Closing Date of each of the following
conditions:
(1) Government Action. There shall not be threatened or pending any
suit, action or proceeding by any Governmental Entity
(1) seeking to restrain or prohibit the consummation of the Closing or
the performance of any of the other Transactions, or seeking to obtain from
Seller or Purchaser any damages that are material in relation to the Company,
or
(2) seeking to impose limitations on the ability of Purchaser
effectively to exercise full rights of ownership of the Shares, including the
right to vote the Shares.
(2) Representations and Warranties. All of the representations and
warranties of Parent and Seller set forth in this Agreement that are
qualified as to materiality shall be true and complete and any such
representations and warranties that are not so qualified shall be true and
complete in all material respects, in each case as of the date of this
Agreement and as of the Closing Date (or if made as of a specified date, only
as of such date), and Purchaser shall have received a certificate signed by
an authorized officer of Parent and Seller to such effect.
(3) Parent or Seller Breach. Parent and Seller shall not have failed to
perform in any material respect any obligation or to comply in any material
respect with any covenant of Parent or Seller to be performed or complied
with by it under this Agreement, and Purchaser shall have received a
certificate signed by an authorized officer of Parent and Seller to such
effect.
(4) Termination. This Agreement shall not have been terminated in
accordance with its terms.
(5) Receivables. Evidence reasonably satisfactory to Purchaser that
the Company has repurchased the MCF Receivables free and clear of all
Encumbrances shall have been provided to Purchaser.
(6) Employment Agreements. Purchaser shall have entered into
employment agreements with the employees identified on Section 5.14 of the
Disclosure Schedule on terms consistent with Section 5.14.
(7) Sun. The Company's status and business relationship with Sun shall
not have been terminated or materially changed and Parent or Seller shall not
have received notice of termination thereof.
(8) Company as Guarantor. The Company shall not be a guarantor under
any agreement, including the agreement listed in Section 3.28 of the
Disclosure Schedule in favor of Bank of America, N.A.
Section 1.73 Conditions to Obligations of Parent and Seller to Effect
the Closing tc \l2 "Conditions to Obligations of Parent and Seller to Effect
the Closing . The obligations of Parent and Seller to consummate the Closing
shall be subject to the satisfaction on or prior to the Closing Date of each
of the following conditions:
(1) Government Action. There shall not be threatened or pending any
suit, action or proceeding seeking to restrain or prohibit the consummation
of the Closing or the performance of any of the other Transactions, or
seeking to obtain from Seller any damages that are material in relation to
the Company.
(2) Representations and Warranties. All of the representations and
warranties of Purchaser set forth in this Agreement that are qualified as to
materiality shall be true and complete and any such representations and
warranties that are not so qualified shall be true and complete in all
material respects, in each case as of the date of this Agreement and as of
the Closing Date (or if made as of a specified date, as of such date), and
Seller shall have received a certificate signed by an authorized officer of
Purchaser to such effect.
(3) Purchaser Breach. Purchaser shall not have failed to perform in any
material respect any obligation or to comply in any material respect with any
covenant of Purchaser to be performed or complied with by it under this
Agreement, and Seller shall have received a certificate signed by an
authorized officer of Purchaser to such effect.
(4) Termination. This Agreement shall not have been terminated in
accordance with its terms.
(5) Receivables. The Company shall have repurchased the MCF
Receivables.
ARTICLE VII
TERMINATION tc \l1 " ARTICLE VII
TERMINATION
Section 1.74 Survival of Representations and Warranties tc \l2
"Survival of Representations and Warranties . The representations and
warranties contained in this Agreement and in any certificate or other
writing delivered pursuant hereto shall survive until (but not beyond) the
fifteen month anniversary of the Closing Date, except that the
representations and warranties contained in Sections 3.1, 3.2, 3.3, 3.5, 3.6,
3.7, 3.19, 3.21, 3.22, 3.35, 4.1, 4.2, 4.4, 4.7 and 4.8 shall survive until
the expiration of the applicable statute of limitations (including all
periods of extension, whether automatic or permissive). This Section 7.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Closing.
Section 1.75 Termination tc \l2 "Termination. The Transactions may
be terminated or abandoned at any time prior to the Closing Date:
(1) By the mutual written consent of Purchaser, Parent and Seller;
(2) By Purchaser, Parent or Seller if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action (which
order, decree, ruling or other action the parties hereto shall use their
commercially reasonable efforts to lift) which permanently restrains, enjoins
or otherwise prohibits the acquisition by Purchaser of the Shares and such
order, decree, ruling or other action shall have become final and non-
appealable;
(3) By any party if the Closing shall not have occurred on or prior to
December 31, 2000 (or such later date as is agreed to by Seller and
Purchaser), and such party is not in breach of this Agreement at the time
such party terminates this Agreement;
(4) By Parent or Seller if Purchaser shall have breached any of its
representations, warranties, covenants or other agreements contained in this
Agreement that are qualified as to materiality or breached in any material
respect any of its representations, warranties, covenants or other agreements
contained in this Agreement that are not so qualified, which breach cannot be
or has not been cured within 30 days after the giving of written notice by
Parent or Seller to Purchaser specifying such breach or would give rise to
the failure of a condition set forth in Article VI;
(5) By Purchaser if Parent or Seller shall have breached any of their
respective representations, warranties, covenants or other agreements
contained in this Agreement that are qualified as to materiality or breached
in any material respect any of their respective representations, warranties,
covenants or other agreements contained in this Agreement that are not so
qualified, which breach cannot be or has not been cured within 30 days after
the giving of written notice by Purchaser to the breaching party specifying
such breach or would give rise to the failure of a condition set forth in
Article VI; or
(6) By Parent, if the Board of Directors of Parent shall concurrently
approve, and Parent shall concurrently enter into, a definitive agreement
providing for an Entire Parent Transaction provided, however, that prior to
any such termination (i) Seller shall have complied with the provisions of
Section 5.12(b) and shall have promptly notified Purchaser of its intention
to terminate this Agreement and enter into a definitive agreement providing
for an Entire Parent Transaction at least forty-eight (48) hours prior to
Parent's or Seller's public announcement of Parent's termination of this
Agreement, (ii) the Board of Directors of Parent shall have determined in
good faith that approving and entering into an agreement in connection with
and consummating such Entire Parent Transaction is in the best interests of
Parent's stockholders, and (iii) Parent shall have made (or simultaneously
with such termination shall make) the payment required by Section 7.4.
Section 1.76 Effect of Termination tc \l2 "Effect of Termination . In
the event of the termination or abandonment of the Transactions by any party
hereto pursuant to the terms of this Agreement, written notice thereof shall
forthwith be given to the other party or parties specifying the provision
hereof pursuant to which such termination or abandonment of the Transactions
is made, and there shall be no liability or obligation thereafter on the part
of Purchaser or Seller except (a) for fraud or for willful breach of this
Agreement prior to such termination or abandonment of the Transactions and
(b) as set forth in Sections 7.4 and 10.1.
Section 1.77 Termination Fee tc \l2 "Termination Fee. If Parent
terminates this Agreement pursuant to Section 7.2(f) and if Parent or Seller
is not at that time entitled to terminate this Agreement pursuant to Section
7.2(b), (c) or (d), Parent shall have paid or simultaneously with such
termination shall pay to Purchaser a termination fee of $5,500,000.
ARTICLE VIII
INDEMNIFICATION tc \l1 " ARTICLE VIII
INDEMNIFICATION
Section 1.78 Indemnification; Remedies tc \l2 "Indemnification;
Remedies.
(1) Parent and Seller, jointly and severally, shall indemnify, defend
and hold harmless Purchaser from and against and in respect of all Purchaser
Losses (net of the amount of any Tax Benefits Actually Realized by Purchaser
or the Company as a result of the payment or accrual of Purchaser Losses to
the extent such amount exceeds the amount of any decrease in Tax Benefits
Actually Realized as a result of the payment or accrual of such Purchaser
Losses).
(2) Parent and Seller, jointly and severally, shall indemnify and hold
Purchaser harmless from and against the following (net of the amount of any
Tax Benefits Actually Realized by Purchaser or the Company as a result of the
payment or accrual of (i) or (ii) below to the extent such amount exceeds the
amount of any decrease in Tax Benefits Actually Realized as a result of the
payment or accrual of (i) or (ii) below):
(1) any liability for income Taxes imposed on the Company for any
period ending on or before the Closing Date as a member of the "affiliated
group" (within the meaning of Section 1504(a) of the Code) of which Parent
(or any predecessor or successor) is the common parent that arises under
Treasury Regulation Section 1.1502-6(a) or comparable provisions of foreign,
state or local law;
(2) any liability for Taxes imposed on the Company, or for which the
Company may otherwise be liable, for any taxable year or period that ends on
or before the Closing Date and, with respect to any Straddle Period, the
portion of such Straddle Period deemed to end on and include the Closing
Date; and
(3) reasonable attorney's fees and expenses and reasonable accountants'
fees and expenses incurred in the investigation or defense of any claim for
indemnification or defense arising out of this Section 8.1(b) or in
asserting, preserving or enforcing any of the rights of Purchaser arising
under this Section 8.1(b). Provided, however, that notwithstanding anything
to the contrary in this Agreement, Parent and Seller shall not be liable for
and shall not indemnify Purchaser (or its Subsidiaries and Affiliates) for
any Excluded Taxes or any amounts described in Section 8.1(b)(iii) that are
attributable to Excluded Taxes.
(3) Parent and Seller, jointly and severally, shall indemnify, defend
and hold harmless Purchaser from and against and in respect of all Losses
arising out of or relating to any violation by the Company of, or any
liability arising from any act or omission by the Company under, any
Environmental Law with respect to facts, circumstances, conditions, omissions
or events occurring or existing in whole or in part before the Closing Date
(net of the amount of any Tax Benefit Actual Realized by Purchaser or the
Company as a result of the payment or accrual of such Losses to the extent
such amount exceeds the amount of any decrease in Tax Benefits Actually
Realized as a result of the payment or accrual of such Losses).
(4) Purchaser shall indemnify, defend and hold harmless Parent and
Seller from and against and in respect of all Seller Losses (net of the
amount of any Tax Benefits Actually Realized by Parent or Seller as a result
of the payment or accrual of Parent or Seller Losses to the extent such
amount exceeds the amount of any decrease in Tax Benefits Actually Realized
as a result of the payment or accrual of such Losses).
(5) Purchaser shall indemnify and hold Parent, Seller and their
respective Subsidiaries and Affiliates harmless from and against (net of the
amount of any Tax Benefits Actually Realized by Seller as a result of the
payment or accrual of (i)-(iv) below to the extent such amount exceeds the
amount of any decrease in Tax Benefits Actually Realized as a result of the
payment or accrual of such Losses):
(1) Taxes imposed on the Company for any taxable year or period that
begins after the Closing Date and, with respect to any Straddle Period, the
portion of such Straddle Period deemed to begin after the Closing Date;
(2) Excluded Taxes;
(3) any Incremental Tax Cost; and
(iv) reasonable attorney's fees and expenses and reasonable
accountants' fees and expenses incurred in the investigation or defense of
any claim for indemnification or defense arising out of this Section 8.1(e)
or in asserting, preserving or enforcing any of the rights of Parent or
Seller arising under this Section 8.1(e).
(6) Parent's and Seller's indemnification obligations under Sections
8.1(a), 8.1(b) and 8.1(c) shall be subject to each of the following limita-
tions:
(1) Parent's and Seller's indemnification obligations relating to (A)
Purchaser Losses based on a breach of a representation or warranty shall
survive until the expiration of the applicable period set forth in Section
7.1 and (B) Tax claims and Environmental Claims shall survive until the
expiration of the applicable statute of limitations (including all periods of
extension, whether automatic or permissive). No claim for the recovery of
any such claims may be asserted by any Purchaser Indemnified Person after the
expiration of the applicable indemnification period; provided, however, that
claims first asserted in writing by any Purchaser Indemnified Person with
reasonable specificity prior to the expiration of the applicable
indemnification period shall not thereafter be barred by the expiration of
the applicable indemnification period. This Section 8.1 shall not limit any
covenant or agreement of the parties that contemplates performance after the
Closing.
(2) In no event shall Parent's and Seller's combined aggregate
liability to Purchaser under this Agreement for breaches of representations
or warranties, whether pursuant to this Article VIII or otherwise, exceed the
Purchase Price.
(3) Parent and Seller shall not be required to make any payment to
Purchaser pursuant to Section 8.1(a) with respect to indemnification obliga-
tions for breaches of representations or warranties until Purchaser's Losses
pursuant to such sections shall exceed $250,000 in the aggregate.
(4) In no event shall Parent or Seller have any indemnification
obligations pursuant to this Article VIII for breach of any representations,
warranties, covenants or agreements in this Agreement if written notice of
such breach is given to Purchaser prior to or at the Closing.
(7) Purchaser's indemnification obligations relating to Seller Losses
based on a breach of a representation or warranty shall survive until the
expiration of the applicable period set forth in Section 7.1. No claim for
the recovery of any such claims may be asserted by any Seller Indemnified
Person after the expiration of the applicable indemnification period;
provided, however, that claims first asserted in writing by any Seller
Indemnified Person with reasonable specificity prior to the expiration of the
applicable indemnification period shall not thereafter be barred by the
expiration of the applicable indemnification period. This Section 8.1 shall
not limit any covenant or agreement of the parties that contemplates
performance after the Closing.
(8) Any payment required to be made pursuant to Sections 8.1(a)- (e)
shall be made within 30 days after written request therefor is received. All
amounts due under any provision of Sections 8.1(a)-(e) shall bear interest at
the rate described under Section 6621(a)(1) of the Code, compounded daily if
not paid when due.
Section 1.79 Notice of Claim; Defense tc \l2 "Notice of Claim; Defense.
(1) Purchaser shall give Parent and Seller prompt notice of any third-
party claim (other than claims arising out of any pending or threatened
audit, notice of deficiency, proposed adjustment, assessment, examination or
other admin-istrative or court proceeding, suit, dispute or other claim which
could affect the liability for Taxes of Parent or Seller) that may give rise
to any indemnification obligation under this Article VIII, together with the
estimated amount of such claim, and Parent and Seller shall have the right to
assume the defense (at their expense) of any such claim through counsel of
their own choosing by so notifying Purchaser within 30 days of the receipt by
Parent and Seller of such notice from Purchaser; provided, however, that any
such counsel shall be reasonably satisfactory to Purchaser. Parent and
Seller shall be liable for the fees and expenses of counsel employed by
Purchaser for any period during which neither Parent nor Seller has assumed
the defense of any such third-party claim (other than during any period in
which Purchaser will have failed to give notice of the third-party claim as
provided above). If Parent or Seller assumes such defense, Purchaser shall
have the right to participate in the defense thereof and to employ counsel,
at its own expense, separate from the counsel employed by Parent or Seller,
it being understood that Parent or Seller shall control such defense. If
Parent or Seller chooses to defend or prosecute a third-party claim,
Purchaser shall cooperate at Parent's or Seller's expense (other than
Purchaser's expenses for counsel which shall be employed at Purchaser's own
expense and Purchaser's internal costs) in the defense or prosecution
thereof, which cooperation shall include, to the extent reasonably requested
by Parent or Seller, the retention, and the provision to Parent or Seller, of
records and information reasonably relevant to such third-party claim, and
making employees of the Company available on a mutually convenient basis to
provide additional information and explanation of any materials provided
hereunder. If Parent or Seller chooses to defend or prosecute any third-
party claim, Purchaser shall agree to any settlement, compromise or discharge
of such third-party claim that Parent or Seller may recommend and that, by
its terms, discharges Purchaser from the full amount of liability in
connection with such third-party claim. None of Purchaser, any of its
Affiliates or the Company may settle or otherwise dispose of any Claim for
which Parent or Seller may have a liability under this Agreement without the
prior written consent of Parent or Seller, as the case may be, which consent
may be withheld in the sole discretion of such party, unless Purchaser fully
indemnifies such party in writing with respect to such liability in a manner
satisfactory to such party. Neither Parent nor Seller shall be liable under
this Section 8.2(a) for any settlement, compromise or discharge effected
without its consent which may not be unreasonably withheld in respect of any
claim for which indemnity may be sought hereunder. No indemnified party
shall take any action the purpose of which is to prejudice the defense of any
claim subject to indemnification hereunder or to induce a third party to
assert a claim subject to indemnification hereunder.
(b)(i) Each party hereto shall notify the chief tax officer of the other
party in writing within 15 days following receipt by such party of written
notice of any pending or threatened audits, notice of deficiency, proposed
adjustment, assessment, examination or other administrative or court
proceeding, suit, dispute or other claim which could affect the liability for
Taxes of such other party. If the party required to give such notice fails
to give such notice to the other party promptly, it shall not be entitled to
indemnification for any Taxes arising in connection with such Tax claim if
and to the extent that such failure to give notice materially and adversely
affects the other party's right to participate in or defend the Tax claim.
(ii) Parent shall have the sole right to represent the Company's
interests in any Tax claim relating to taxable periods ending on or before
the Closing Date and to employ counsel of its choice at its expense. In the
case of a Straddle Period, Parent shall be entitled to participate at its
expense in any Tax claim relating in any part to Taxes attributable to the
portion of such Straddle Period deemed to end on or before the Closing Date
and, with the written consent of Purchaser, at Parent's sole expense, may
assume the control of such Tax claim. None of Purchaser, any of its
Affiliates or the Company may settle or otherwise dispose of any Tax claim
for which it is reasonably likely that Parent will have a liability under
this Agreement without the prior written consent of Parent, which consent may
not be unreasonably withheld or delayed.
Section 1.80 Resolution of All Tax-Related Disputes tc \l2 "Resolution
of All Tax-Related Disputes. If Parent and Purchaser cannot agree on the
calculation of any amount relating to Taxes or the interpretation or
application of any provision of this Agreement relating to Taxes, such
dispute shall be resolved by a nationally recognized accounting firm mutually
acceptable to each of Parent and Purchaser, whose decision shall be final and
binding upon all persons involved and whose expenses shall be shared equally
by Parent and Purchaser.
Section 1.81 Tax Effect of Indemnification Payments tc \l2 "Tax Effect
of Indemnification Payments. All indemnity payments made pursuant to this
Agreement shall be treated for all Tax purposes as adjustments to the
consideration paid with respect to the Shares.
Section 1.82 No Duplication; Sole Remedy Procedures tc \l2 "No
Duplication; Sole Remedy Procedures.
(1) Any liability for indemnification hereunder shall be determined
without duplication of recovery by reason of the state of facts giving rise
to such liability constituting a breach of more than one representation,
warranty, covenant or agreement or the collection of insurance proceeds.
(2) Purchaser's rights to indemnification as provided for in Section
8.1 for a breach of Parent's or Seller's representations or warranties
contained in this Agreement shall constitute Purchaser's sole remedy for such
a breach, and neither Parent nor Seller shall have any other liability or
damages to Purchaser resulting from the breach.
(3) The indemnification and other provisions of this Article VIII shall
govern the procedure for all indemnification matters under this Agreement,
except to the extent otherwise expressly provided herein.
Section 1.83 No Right of Off-set/Set-off tc \l2 "No Right of Off-
set/Set-off. Neither Purchaser, Parent nor Seller shall have any right to
off-set or set-off any payment due pursuant to Sections 1.2 or 1.3 of this
Agreement against any other payment to be made pursuant to this Agreement or
otherwise (including against indemnification payments).
ARTICLE IX
DEFINITIONS AND INTERPRETATION tc \l1 "
ARTICLE IX DEFINITIONS AND INTERPRETATION
Section 1.84 Definitions tc \l2 "Definitions. For all purposes of
this Agreement, except as otherwise expressly provided or unless the context
clearly requires otherwise:
"Acquisition Transaction" shall have the meaning set forth in Section
5.12(a).
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the Exchange
Act.
"Agreement" or "this Agreement" shall mean this Stock Sale Agreement,
together with the Exhibits hereto and the Disclosure Schedule.
"Arbitrator" shall have the meaning set forth in Section 1.3(e).
"Balance Sheet" shall mean the unaudited balance sheet of MOCA as of June 30,
2000.
"Balance Sheet Date" shall mean the date of the Balance Sheet.
"Balance Sheet Working Capital" shall mean Working Capital of the Company as
of March 31, 2000, as calculated in accordance with the Pricing Balance
Sheet.
"Closing" shall mean the closing referred to in Section 2.1.
"Closing Balance Sheet" shall mean the combined statement of financial
position of the Company at the Closing prepared subsequent to the Closing,
without giving effect to the Transactions except for the repurchase of
accounts receivable by the Company pursuant to Section 5.8(b) which shall be
reflected in the Preliminary Closing Balance Sheet, in accordance with GAAP
(as adjusted consis-tent with the reconciliations reflected in Section 1.3(b)
of the Disclosure Schedule), consistently applied, and in a manner consistent
with the Balance Sheet.
"Closing Date" shall mean the date on which the Closing occurs.
"Closing Working Capital" shall mean Working Capital of the Company, as
calculated in accordance with the Closing Balance Sheet and the provisions of
Section 5.8(b).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean Merisel Open Computing Alliance, Inc., a Delaware
corporation.
"Company Intellectual Property" shall mean all Intellectual Property that is
currently used in the business of the Company or that is reasonably necessary
to conduct the business of the Company as presently conducted or as currently
proposed to be conducted, including the trademark "MOCA."
"Company Material Adverse Effect" shall mean any material adverse change in,
or material adverse effect on, the business, financial condition, assets or
liabilities or results of operations of the Company; provided, however, that
the effects of changes that are caused by conditions generally affecting (a)
the industries and markets in which the Company operates or (b) the United
States economy as a whole shall be excluded from the determination of Company
Material Adverse Effect; and provided, further, that any such material
adverse effect on the Company resulting from (x) the execution of this
Agreement, (y) any public announcement relating to this Agreement or the
Transactions or (z) events which trigger any adjustments to the Purchase
Price pursuant to Sections 1.3 and 1.4 shall also be excluded from the
determination of Company Material Adverse Effect.
"Computer Software" shall mean all computer software and data contained
therein and all documentation related thereto.
"Confidentiality Agreement" shall mean a letter agreement dated May 5, 2000
between Parent and Purchaser.
"Copyrights" shall mean all U.S. and foreign registered and unregistered
copyrights (including those in Computer Software and databases), all
copyrightable works, and all registrations, renewals and applications to
register the same.
"Debt" shall mean any liability on (i) a right to payment whether or not such
a right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured; or (ii) a right to an equitable remedy for breach of performance
if such breach gives rise to a payment, whether or not such a right to an
equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured.
"Disclosure Schedule" shall mean the disclosure schedule of even date
herewith delivered to Purchaser by Parent and Seller simultaneously with the
execution hereof.
"DOJ" shall mean the Antitrust Division of the United States Department of
Justice.
"Due Date" shall mean, with respect to any Tax Return, the date such return
is due to be filed (taking into account any valid extensions).
"Employee" shall have the meaning set forth in Section 5.6(a).
"Encumbrances" shall mean any and all liens, charges, security interests,
options, claims, mortgages, pledges, proxies, voting trusts or agreements,
obligations, understandings or arrangements or other restrictions on title or
transfer of any nature whatsoever.
"Entire Parent Transaction" shall have the meaning set forth in Section
5.12(b).
"Environmental Claim" shall mean a claim for indemnification or defense
arising out of Section 8.1(c), including reasonable attorneys' fees and
expenses and reasonable accountants' fees and expenses incurred in the
investigation or defense of any of the same or in asserting, preserving or
enforcing any of the rights of Purchaser arising under Section 8.1(c).
"Environmental Law" shall mean all federal, state or local laws governing
pollution or the protection of the environment in effect on the date hereof
and on the Closing Date.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean any trade or business, whether or not
incorporated, that together with the Company would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Excluded Taxes" shall mean (a) any Taxes attributable to or arising out of
any breach of Section 5.4(j)(ii), (b) any Taxes allocated under Section
5.4(b)(i) to a Tax period (or portion thereof) beginning after the Closing
but excluding any Taxes resulting from a breach of a representation contained
in Section 3.21(g) or 3.22(e) and (c) any Transfer Taxes for which Purchaser
is liable pursuant to Section 5.4(c).
"Financial Statements" shall mean the following financial statements
presenting the financial condition of Merisel Open Computing Alliance (a
division of Merisel, Inc.): (a) the divisional balance sheets of MOCA as of
December 31, 1998 and 1999, and the related statements of divisional
operations, changes in equity, and cash flows for each of the three years
ended December 31, 1999, all certified by Deloitte & Touche LLP, independent
certified public accountants, whose reports thereon are included therein, and
(b) an unaudited divisional balance sheet of MOCA as of June 30, 2000 and the
related statements of divisional operations, changes in equity, and cash
flows for the quarterly period then ended.
"FTC" shall mean the United States Federal Trade Commission.
"GAAP" shall mean United States generally accepted accounting
principles.
"Governmental Entity" shall mean a court, arbitral tribunal, administrative
agency or commission or other governmental or other regulatory authority or
agency.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Incremental Tax Cost" shall have the meaning ascribed to it in Section
5.4(j).
"Insurance Policy" shall mean any insurance policy maintained by Parent or
any of its Affiliates.
"Intellectual Property" shall mean all of the following: Trademarks,
Patents, Computer Software, Copyrights, Masks, Intellectual Property Licenses
and Trade Secrets.
"Intellectual Property Licenses" shall mean all licenses, sublicenses and
agreements pursuant to which the Company has acquired rights in or to any
Intellectual Property.
"Knowledge of Parent and Seller" shall mean the knowledge after due inquiry,
of any person listed in Section 9.1 of the Disclosure Schedule of Parent,
Seller and the Company, respectively.
"Knowledge of Purchaser" shall mean the knowledge after due inquiry, of any
executive officer of Purchaser.
"Lease" shall mean each lease pursuant to which the Company leases any real
or personal property (excluding leases relating solely to personal property
calling for rental or similar periodic payments not exceeding $10,000 per
annum).
"Lease Agreement" shall mean the lease or sublease between Seller, Parent,
any of its Affiliates and the Company on the terms set forth on Exhibit B.
"Licenses" shall mean all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental Entity.
"Losses" shall mean any and all losses, costs, liabilities, damages, claims,
demands, judgments, orders, settlements and expenses (including interest and
penalties recovered by a third party with respect thereto and reasonable
professional fees and expenses).
"Masks" shall mean all mask works and all applications, registrations and
renewals in connection therewith.
"MCF" shall mean Merisel Capital Funding, Inc., a Delaware corporation.
"MCF Note" shall mean the note owing from MCF to the Company.
"MCF Receivables" shall have the meaning set forth in Section 5.9(b).
"MOCA" shall mean Merisel Open Computing Alliance, a division of Merisel,
Inc.
"Objections" shall have the meaning set forth in Section 1.3(d).
"Parent" shall mean Merisel, Inc., a Delaware corporation.
"Parent Transaction" shall have the meaning set forth in Section 5.14(a).
"Patents" shall mean all issued U.S. and foreign patents and pending patent
applications, patent disclosures, and any and all divisions, continuations,
continuations-in-part, reissues, reexaminations, and extensions thereof, any
counterparts claiming priority therefrom, utility models, patents of
importation/confirmation, certificates of invention and similar statutory
rights and all inventions (whether patentable or unpatentable and whether or
not reduced to practice) and all inventions thereon.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Person" shall mean a natural person, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Entity or other entity or
organization.
"Plan" shall mean each deferred compensation and each incentive compensation,
stock purchase, stock option and other equity compensation plan, program,
agreement or arrangement; each severance or termination pay, medical,
surgical, hospitalization, life insurance and other "welfare" plan, fund or
program (within the meaning of Section 3(1) of ERISA); each profit-sharing,
stock bonus or other "pension" plan, fund or program (within the meaning of
Section 3(2) of ERISA); each employment, termination, change of control or
severance agreement; and each other employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to by the Company or by any
ERISA Affiliate, or to which the Company or an ERISA Affiliate is party,
whether written or oral, for the benefit of any director, employee or former
employee of the Company.
"Preliminary Closing Balance Sheet" shall mean the preliminary combined
statement of financial position of the Company at the Closing prepared prior
to the Closing, without giving effect to the Transactions except for the
repur-chase of accounts receivable by the Company pursuant to Section 5.8(b)
which shall be reflected in the Preliminary Closing Balance Sheet, in
accordance with GAAP (as adjusted consistent with the reconciliations
reflected in Section 1.3(b) of the Disclosure Schedule), consistently
applied, and in a manner consistent with the Balance Sheet.
"Preliminary Working Capital" shall mean Working Capital of the Company, as
calculated in accordance with the Preliminary Closing Balance Sheet and the
provisions of Section 5.8(b).
"Pricing Balance Sheet" shall mean the unaudited balance sheet of MOCA as of
March 31, 2000.
"Purchase Price" shall mean the amount set forth in Section 1.2.
"Purchaser" shall mean Arrow Electronics, Inc., a New York corporation.
"Purchaser Indemnified Persons" shall mean Purchaser and each of its
Affiliates.
"Purchaser Losses" shall mean any and all actual losses, liabilities,
damages, judgments, settlements, Taxes, and expenses (including interest and
penalties recovered by a third party with respect thereto and reasonable
attorneys' fees and expenses and reasonable accountants' fees and expenses
incurred in the investigation or defense of any of the same or in asserting,
preserving or enforcing any of the rights of Purchaser arising under Article
VIII) incurred by the Company or any of the Purchaser Indemnified Persons
that arise out of any breach by Parent or Seller of any of Parent's or
Seller's representations and warranties contained in Article III or any
breach by Parent or Seller of their covenants or obligations to be performed
after the Closing; provided, however, that the term "Purchaser Losses" shall
not include the Taxes and related losses and liabilities described in Section
8.1(b).
"Section 338(h)(10) Election" shall have the meaning set forth in Section
5.4(j).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller" shall mean Merisel Americas, Inc., a Delaware corporation.
"Seller Indemnified Persons" shall mean Parent, Seller and each of their
respective Affiliates.
"Seller Losses" shall mean any and all actual losses, liabilities, damages,
judgments, settlements and expenses (including interest and penalties
recovered by a third party with respect thereto and reasonable attorneys'
fees and expenses and reasonable accountants' fees and expenses incurred in
the investigation or defense of any of the same or in asserting, preserving
or enforcing any of the rights of Parent or Seller arising under Article
VIII) incurred by any of the Seller Indemnified Persons that arise out of any
breach by Purchaser of any of Purchaser's representations and warranties
contained in Article IV or any of Purchaser's covenants or obligations be
performed after the Closing.
"Shares" shall mean shares of common stock, par value $0.01, issued by the
Company.
"Straddle Period" shall mean a taxable year or period beginning on or before,
and ending on or after, the Closing Date.
"Subsidiary" shall mean, with respect to any Person, any corporation or other
organization, whether incorporated or unincorporated, of which (a) at least a
majority of the securities or other interests having by their terms ordinary
voting
power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such Person or by any one or
more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries, or (b) such Person or any other Subsidiary of such Person is a
general partner (excluding any such partnership where such Person or any
Subsidiary of such party does not have a majority of the voting interest in
such partnership).
"Sun" shall mean Sun Microsystems, Inc.
"Tax" or "Taxes" shall mean all taxes, charges, fees, duties, levies,
penalties or other assessments imposed by any federal, state, local or
foreign govern-mental authority, including income, gross receipts, excise,
real and personal property, sales, gain, use, license, custom duty,
unemployment, capital stock, transfer, franchise, payroll, withholding,
social security, minimum estimated, profit, gift, severance, value added,
disability, premium, recapture, credit, occupation, service, leasing,
employment, stamp withholding and other taxes, and shall include interest,
penalties or additions attributable thereto or attributable to any failure to
comply with any requirement regarding Tax Returns.
"Tax Benefits" shall mean the sum of any increased deductions, losses, or
credits then allowable or allowable in future years or decreases in income,
gains or recapture of tax credits then allowable (including by way of amended
Tax Returns) or allowable in future years.
"Tax Benefits Actually Realized" shall mean (i) any refund of Taxes actually
received as a result of a Tax Benefit, (ii) a Tax Benefit applied against
other Taxes due, or (iii) a Tax Benefit applied on a Tax Return to reduce the
amount of Taxes otherwise payable.
"Taxing Authority" shall mean any federal, state, local or foreign
Governmental Entity responsible for the imposition of any Taxes.
"Tax Return" shall mean any return, declaration, report, claim for refund, or
information return or statement or other documents (including any related or
supporting information) required to be filed with respect to Taxes, and
including any amendment thereof.
"Title IV Plan" shall mean a Plan that is subject to Section 302 or Title IV
of ERISA or Section 412 of the Code.
"Trademarks" shall mean all U.S. and foreign registered and unregistered
trademarks, trade dress, service marks, logos, trade names, corporate names,
and domain names, including all goodwill associated therewith, and all
registrations, renewals and applications to register the same.
"Trade Secrets" shall mean all trade secrets and confidential business
information, including without limitation, all research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, methods, schematics, technology, flowcharts, block diagrams,
technical data, designs, drawings, specifications, customer and supplier
lists, pricing and cost information and business and marketing plans and
proposals.
"Transactions" shall mean all the transactions provided for or contemplated
by this Agreement.
"Transition Services Agreement" shall mean that certain Transition Services
Agreement to be entered into by Seller and Purchaser at Closing.
"Transfer Taxes" shall mean all sales (including bulk sales), use, transfer
(including real property transfers or gains), filing, recording, ad valorem,
privilege, documentary, gains, gross receipts, registration, conveyance,
excise, license, stamp, duties or similar Taxes and fees, together with any
interest, additions or penalties with respect thereto and any interest in
respect of such additions or penalties.
"WARN Act" shall mean the Worker Adjustment and Retraining Notification Act,
as amended.
"Working Capital" shall mean (a) accounts receivable and inventory minus (b)
accounts payable of the Company.
Section 1.85 Interpretation tc \l2 "Interpretation.
(1) The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
(2) Whenever the words "include", "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation."
(3) The words "hereof", "herein" and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any particular provision of this Agreement,
and article, section, paragraph, exhibit and schedule references are to the
articles, sections, paragraphs, exhibits and schedules of this Agreement
unless otherwise specified.
(4) The meaning assigned to each term defined herein shall be equally
applicable to both the singular and the plural forms of such term, and words
denoting any gender shall include all genders. Where a word or phrase is
defined herein, each of its other grammatical forms shall have a
corresponding meaning.
(5) A reference to any party to this Agreement or any other agreement
or document shall include such party's successors and permitted assigns.
(6) A reference to any legislation or to any provision of any
legislation shall include any amendment to, and any modification or re-
enactment thereof, any legislative provision substituted therefor and all
regulations and statu-tory instruments issued thereunder or pursuant thereto.
(7) The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
ARTICLE X
MISCELLANEOUS tc \l1 " ARTICLE X
MISCELLANEOUS
Section 1.86 Fees and Expenses tc \l2 "Fees and Expenses. All costs
and expenses incurred in connection with this Agreement and the consummation
of the Transactions shall be paid by the party incurring such expenses,
except as otherwise specifically provided in this Agreement.
Section 1.87 Amendment and Modification tc \l2 "Amendment and
Modification. This Agreement may be amended, modified and supplemented in
any and all respects, but only by a written instrument signed by all of the
parties hereto expressly stating that such instrument is intended to amend,
modify or supplement this Agreement.
Section 1.88 Notices tc \l2 "Notices. All notices and other
communications hereunder shall be in writing and shall be deemed given if
mailed, delivered personally, facsimiled (which is confirmed) or sent by an
overnight courier service, such as Federal Express, to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice):
if to Purchaser, to:
Arrow Electronics, Inc.
25 Hub Drive
Melville, New York 11747,
Attention: Executive Vice President
Telephone: (516) 391-1830
Facsimile: (516) 391-1683
with a copy (which shall not constitute notice) to:
Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, New York 10005
Attention: Howard S. Kelberg, Esq.
Telephone: (212) 530-5530
Facsimile: (212) 530-5219
if to Parent or Seller, to:
Merisel, Inc.
200 Continental Boulevard
El Segundo, CA 90245-0984
Attention: Chief Financial Officer
Telephone: (310) 615-3080
Facsimile: (310) 615-1234
with a copy (which shall not constitute notice) to:
Merisel, Inc.
200 Continental Boulevard
El Segundo, CA 90245-0984
Attention: General Counsel
Telephone: (310) 615-3080
Facsimile: (310) 615-6819
and
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, CA 90071
Attention: Joseph J. Giunta, Esq.
Telephone: (213) 687-5040
Facsimile: (213) 687-5600
Section 1.89 Counterparts tc \l2 "Counterparts. This Agreement may be
executed in one or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when two or more
counterparts have been signed by each of the parties and delivered to the
other parties.
Section 1.90 Entire Agreement; No Third Party Beneficiaries tc \l2
"Entire Agreement; No Third Party Beneficiaries. This Agreement and the
Confidentiality Agreement constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof and thereof.
Section 1.91 Severability tc \l2 "Severability. Any term or provision
of this Agreement that is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other
jurisdiction. If the final judgment of a court of competent jurisdiction or
other authority declares that any term or provision hereof is invalid, void
or unenforceable, the parties agree that the court making such determination
shall have the power to reduce the scope, duration, area or applicability of
the term or provision, to delete specific words or phrases, or to replace any
invalid, void or unenforceable term or provision with a term or provision
that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
Section 1.92 Governing Law tc \l2 "Governing Law. This Agreement
shall be governed by and construed in accordance with the laws of the State
of Delaware without giving effect to the principles of conflicts of law
thereof.
Section 1.93 Venue. tc \l2 "Venue. Each of the parties hereto (a)
consents to submit itself to the exclusive personal jurisdiction of any
federal court located in the State of Delaware or any Delaware state court in
the event any dispute arises out of this Agreement or any of the
Transactions, (b) agrees that it shall not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such
court and (c) agrees that it shall not bring any action relating to this
Agreement or any of the Transactions in any court other than a federal or
state court sitting in the State of Delaware; provided, however, that such
consent to jurisdiction is solely for the purposes referred to in this
Section 10.8 and shall not be deemed a general submission to the jurisdiction
of said courts in the State of Delaware.
Section 1.94 Time of Essence tc \l2 "Time of Essence. Each of the
parties hereto hereby agrees that, with regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
Section 1.95 Extension; Waiver tc \l2 "Extension; Waiver. At any time
prior to the Closing Date, either party hereto may (a) extend the time for
the performance of any of the obligations or other acts of the other party,
(b) waive any inaccuracies in the representations and warranties of the other
party contained in this Agreement or in any document delivered pursuant to
this Agreement or (c) waive compliance by the other parties with any of the
agreements or conditions contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by or on behalf of such party. The
failure of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of those rights.
Section 1.96 Assignment tc \l2 "Assignment. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned
by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties, provided, however,
that Purchaser may assign without Parent's or Seller's consent any or all of
its rights, interests and obligations hereunder (including without limitation
its respective rights under Article VIII) to a wholly-owned Subsidiary of
Purchaser; provided, further, that any such Subsidiary agrees in writing to
be bound by all of the terms, conditions and provisions contained herein, and
no such assignment shall relieve Purchaser of its obligations hereunder.
Subject to the preceding sentence, this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
IN WITNESS WHEREOF, Purchaser, Parent and Seller have executed this
Agreement or caused this Agreement to be executed by their respective
officers thereunto duly authorized as of the date first written above.
ARROW ELECTRONICS, INC.
By:
-----------------------
Name:
Title:
MERISEL, INC.
By:
-----------------------
Name:
Title:
MERISEL AMERICAS, INC.
By:
-----------------------
Name:
Title: