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PURCHASE AGREEMENT
BY AND AMONG
CHS ELECTRONICS, INC.
AS BUYER
AND
MERISEL, INC.,
AND
MERISEL EUROPE, INC.
AS SELLERS
DATED AS OF AUGUST 29, 1996
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TABLE OF CONTENTS
PAGE
Background.................................................................. 1
Terms ................................................................... 1
ARTICLE 1 THE TRANSACTIONS................................................. 1
1.1 Sale and Purchase of the Stock and Europe
Assets........................................... 1
1.2 Purchase Price; Post-Closing Adjustments;
Payment.......................................... 2
1.3 Closing............................................... 7
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLERS........................ 8
2.1 Organization.......................................... 8
2.2 Capitalization and Ownership: Power and
Authority........................................ 9
2.3 Subsidiaries.......................................... 9
2.4 Qualification; Location of Business and Assets........ 9
2.5 Authorization and Enforceability...................... 10
2.6 No Violation of Laws or Agreements.................... 10
2.7 Financial Statements.................................. 12
2.8 No Undisclosed Liabilities............................ 13
2.9 No Changes............................................ 13
2.10 Taxes ............................................... 15
2.11 Inventory............................................. 17
2.12 Accounts Receivable................................... 17
2.13 No Pending Litigation or Proceedings.................. 17
2.14 Contracts; Compliance................................. 18
2.15 Compliance With Laws.................................. 18
2.16 Consents.............................................. 19
2.17 Title ............................................... 19
2.18 Real Estate........................................... 20
2.19 Transactions with Related Parties..................... 20
2.20 Condition of Assets................................... 20
2.21 Compensation Arrangements; Officers and
Directors........................................ 20
2.22 Labor Relations....................................... 21
2.23 Products Liability.................................... 21
2.24 Insurance............................................. 21
2.25 Patents and Intellectual Property Rights.............. 22
2.26 Employee Benefits..................................... 22
2.27 Brokerage............................................. 25
2.28 Questionable Payments................................. 25
2.29 Disclosure............................................ 25
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BUYER.......................... 26
3.1 Organization.......................................... 26
3.2 Power and Authority................................... 26
3.3 Authorization and Enforceability...................... 26
3.4 Brokerage............................................. 26
3.5 Securities Act........................................ 26
3.6 No Violation of Laws or Agreements.................... 26
3.7 Consents.............................................. 27
3.8 Litigation............................................ 27
3.9 Financing............................................. 27
(i)
3.10 Disclosure............................................ 27
ARTICLE 4 CERTAIN OBLIGATIONS OF THE PARTIES............................... 28
4.1 Conduct of Business Pending Closing................... 28
4.2 Insurance............................................. 30
4.3 Fulfillment of Agreements by Sellers.................. 30
4.4 Access, Information and Documents..................... 31
4.5 Exclusivity........................................... 31
4.6 Section 338(h)(10) Election........................... 32
4.7 Resignations.......................................... 32
4.8 Accounts Payable...................................... 32
4.9 Fulfillment of Agreements by Buyer.................... 32
4.10 Elimination of 30-Day Automatic Return Policy......... 33
ARTICLE 5 CONDITIONS TO CLOSING; TERMINATION............................... 33
5.1 Conditions Precedent to Obligations of Buyer.......... 33
5.2 Conditions Precedent to the Obligations of
Sellers.......................................... 36
5.3 Termination........................................... 37
ARTICLE 6 CERTAIN ADDITIONAL COVENANTS..................................... 39
6.1 Costs and Expenses.................................... 39
6.2 Covenant Not to Compete............................... 39
6.3 Confidential Information.............................. 40
6.4 Indemnification By Sellers............................ 40
6.5 Indemnification by Buyer.............................. 42
6.6 Indemnification Procedures............................ 42
6.7 Claims Against Latin America, Mexico or any
Subsidiary....................................... 44
6.8 European Anti-Competition Legislation................. 44
6.9 Brokers............................................... 44
6.10 Access ............................................... 44
6.11 Cooperation With Respect to Tax Matters............... 45
6.12 Released Obligations.................................. 46
6.13 Employee Obligations.................................. 46
6.14 Reduction of Revolving Credit Agreement............... 47
6.15 Fulfillment Agreement................................. 47
6.16 Audits of Purchased Entities.......................... 47
ARTICLE 7 MISCELLANEOUS.................................................... 47
7.1 Nature and Survival of Representations................ 47
7.2 Certain Definitions................................... 47
7.3 Notices............................................... 49
7.4 Successors and Assigns................................ 49
7.5 Governing Law......................................... 49
7.6 Headings.............................................. 49
7.7 Counterparts.......................................... 50
7.8 Further Assurances.................................... 50
7.9 Amendment and Waiver.................................. 50
7.10 Entire Agreement...................................... 50
7.11 Interpretations....................................... 50
7.12 Attorney's Fees....................................... 50
7.13 Public Announcement................................... 51
7.14 Knowledge of Sellers and Buyer........................ 51
7.15 Material Adverse Effect............................... 51
(ii)
LIST OF SCHEDULES
Schedule 1.1 Europe Assets and Assumed Liabilities
Schedule 2.1 List of Subsidiaries
Schedule 2.2 Capitalization
Schedule 2.4 Jurisdictions of Qualification; Location of
Business and Assets
Schedule 2.6 No Violations
Schedule 2.7 July Balance Sheets
Schedule 2.8 No Undisclosed Liabilities
Schedule 2.9 Changes Since Balance Sheet Date
Schedule 2.10 Taxes
Schedule 2.11 Inventory
Schedule 2.13 Pending Litigation or Proceedings
Schedule 2.14 Contracts
Schedule 2.15 Compliance with Laws
Schedule 2.16 Consents
Schedule 2.17 Permitted Liens and Encumbrances
Schedule 2.18 Real Estate
Schedule 2.19 Transactions with Related Parties
Schedule 2.20 Condition of Assets
Schedule 2.21 Compensation Arrangements, Bank Accounts and
Officers and Directors
Schedule 2.22 Labor Relations
Schedule 2.23 Products Liability
Schedule 2.24 Insurance
Schedule 2.25 Patents and Intellectual Property Rights
Schedule 2.26 Employee Benefit Plans
Schedule 4.1(b) Preservation of Business
Schedule 4.1(c) Material Transactions
Schedule 4.6 Consolidated Group
Schedule 5.1(viii) Executive Management
Schedule 5.1(xx) Miami, Florida Leases
Schedule 6.11 Cooperation Group
Schedule 6.12 Guarantees
Schedule 6.13 Certain Employees
Schedule 7.14 Individuals with Knowledge
LIST OF EXHIBITS
Exhibit A Formula to Adjust Net Book Value of Merisel
Europe, Inc.
Exhibit B Escrow Agreement
Exhibit C Landlord Estoppel Certificate
Exhibit D Vendors
(iii)
PURCHASE AGREEMENT
THIS IS A PURCHASE AGREEMENT (the "Agreement") dated August 29, 1996 by
and among CHS Electronics, Inc., a Florida corporation ("Buyer"), and Merisel,
Inc., a Delaware corporation ("Merisel"), and Merisel Europe, Inc., a Delaware
corporation ("Europe"). Merisel and Europe are collectively referred to herein
as the "Sellers."
BACKGROUND
Merisel, through a wholly-owned subsidiary, owns all of the issued and
outstanding capital stock (the term "capital stock" shall mean, for purposes of
this Agreement, ownership interest, which may be measured in terms of stock or
registration with the appropriate governmental agency) of Merisel Latin America,
Inc. ("Latin America" and with respect to its capital stock, the "Latin America
Stock") and Merisel Mexico S.A. de C.V. ("Mexico" and with respect to its
capital stock, the "Mexico Stock") (the Latin America Stock and the Mexico Stock
are collectively referred to herein as the "Latin/Mexico Stock"). Europe owns
all of the issued and outstanding capital stock of the European Subsidiaries (as
such term is defined in Section 2.1) (such stock is collectively referred to
herein as the "Europe Stock" and together with the Latin/Mexico Stock, the
"Stock") and certain assets as set forth on Schedule 1.1 (the "Europe Assets").
Buyer desires to purchase and Sellers desire to sell the Europe Stock, the Latin
America Stock and the Mexico Stock and the Europe Assets on the terms and
subject to the conditions set forth in this Agreement.
TERMS
In consideration of the mutual covenants contained herein and intending
to be legally bound hereby, the parties hereto agree as follows:
ARTICLE 1
THE TRANSACTIONS
1.1 SALE AND PURCHASE OF THE STOCK AND EUROPE ASSETS. At the Closing
referred to in SECTION 1.3 below, Sellers will sell and assign to Buyer, and
Buyer will purchase from Sellers, the Stock and Europe Assets, as set forth on
SCHEDULE 1.1 hereto, free and clear of all liens and encumbrances of any nature
whatsoever except as set forth in SCHEDULE 2.17. Buyer will assume the
liabilities and obligations set forth on SCHEDULE 1.1.
1.2 PURCHASE PRICE; POST-CLOSING ADJUSTMENTS; PAYMENT.
(a) PURCHASE PRICE. The aggregate purchase price for all of
the Stock and the Europe Assets (the "Purchase Price") shall be as follows: (i)
Forty Million Dollars ($40,000,000) for the Latin America Stock and the Mexico
Stock, subject to adjustment as set forth in Section 1.2(d)(ii) hereof (the
"Latin/Mexico Purchase Price"), (ii) with respect to the Europe Stock, an amount
equal to the Total Adjusted Capital of the European Subsidiaries and (iii) with
respect to the Europe Assets, the book value of the Europe Assets (the "Europe
Assets Value") as of the Closing Date (the aggregate of items (ii) and (iii) are
defined as the "Purchase Price of Europe Stock and the Europe Assets"). Each of
the Latin/Mexico Purchase Price and the Purchase Price of the Europe Stock and
the Europe Assets shall be apportioned between the Latin American Stock and the
Mexico Stock and among the Europe Stock and Europe Assets, respectively, in
accordance with the apportionment schedules set forth on Schedule 1.2(a). "Total
Adjusted Capital of the European Subsidiaries" is hereby defined to be Net
Assets, excluding any Amounts Due to or from Related Parties, as defined
hereafter, as adjusted by the formula set forth in Exhibit A. "Net Assets" is
defined as assets reflected on the Europe Closing Balance Sheet (as such term is
defined in Section 1.2(c)(i)) increased by any receivables subject to the Asset
Amortization Agreement (as such term is defined in Section 1.2(b), but decreased
by liabilities to third parties reflected on such balance sheet. The Europe
Closing Balance Sheet shall be deemed to have cash on hand and marketable
securities of no more than $500,000, with the excess being distributed to
Sellers immediately upon the determination of the actual amount thereof.
"Amounts Due to or from Related Parties" shall include any payables to or
receivables from Related Parties (as such term is defined in Section 2.19)
including, without limitation, any amounts outstanding under the Revolving
Credit Agreement dated as of December 26, 1993 and amended and restated as of
April 12, 1996 among Europe and Merisel America, Inc. as borrowers and Citicorp
USA Inc. as agent (the "Revolving Credit Agreement") and intercompany tax
accounts but excluding deferred tax liabilities and deferred tax assets which
will be assumed by the Buyer. The Purchase Price shall be further reduced by (X)
$4 million for the cost of eliminating duplicative facilities and severance of
redundant personnel and relocation costs and (Y) $3,216,000 representing the
rent payable under certain leases in the Netherlands during the 12 months
following the Closing Date. Attached as Schedule 1.2(a) is a sample calculation
of what the Purchase Price would be if the same were determined on the June 30,
1996 balance sheet. Merisel and Buyer shall cause a physical inventory to be
taken on the Closing Date in connection with the foregoing calculation.
(b) PAYMENTS. The Purchase Price shall be payable as follows:
on the Closing Date, Buyer shall pay (i) to Europe, by wire transfer, a cash
amount (the "Europe Cash Payment") equal to the Estimated Purchase Payment
Amount (as defined below) less Ten
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Million Dollars ($10,000,000) and less the amount payable to Deutsche Financial
Services (UK) Ltd. under the Asset Amortization Agreement as of the Closing
Date, (ii) to Merisel, by wire transfer, a cash amount (the "Latin/Mexico Cash
Payment") equal to Forty Million Dollars ($40,000,000) and (iii) to an escrow
agent reasonably satisfactory to Buyer and Sellers ("Escrow Agent"), by wire
transfer, a cash amount equal to Ten Million Dollars ($10,000,000) (the "Escrow
Payment") to be held in accordance with the terms of the escrow agreement in the
form of Exhibit B (the "Escrow Agreement"). For purposes of this Agreement, the
term "Estimated Purchase Payment Amount" means the dollar amount of an estimate
of the Purchase Price of the Europe Stock and Europe Assets, prepared by Europe
in good faith based upon the combining balance sheets and underlying supporting
information of Europe and the European Subsidiaries as of August 31, 1996, which
estimate shall be in reasonable detail with supporting documentation and shall
be subject to the approval of Buyer (such approval not to be unreasonably
withheld). In addition, Buyer shall assume the liability of Europe under the
Asset Amortization Agreement between Deutsche Financial Services, (UK) Ltd., and
Merisel (U.K.) Limited dated as of October 12, 1995 (the "Asset Amortization
Agreement") and the liabilities and obligations set forth on SCHEDULE 1.1.
(c) REGARDING THE CLOSING BALANCE SHEETS. (i) Promptly after
the Closing Date, but in any event no later than 60 days after the Closing Date,
Europe shall prepare and deliver to Buyer, or cause to be prepared and delivered
to Buyer, a combining balance sheet of the European Subsidiaries and Europe
Assets as of the close of business on the Closing Date (the "Europe Closing
Balance Sheet"), together with the draft audit report of Deloitte & Touche, LLP
thereon. The Europe Closing Balance Sheet shall be prepared in accordance with
United States generally accepted accounting principles ("U.S. GAAP") applied
consistently with those U.S. GAAP principles applied in the preparation of the
1995 Balance Sheets (as defined in SECTION 2.7) (such accounting principles
being, the "Accounting Principles"), except that the accounts receivable and
inventory on the Europe Closing Balance Sheet will be valued utilizing the
adjustments listed in Exhibit A. In addition, the combining closing balance
sheet will convert foreign currencies to U.S. dollars at the closing exchange
rate published in the Wall Street Journal as of the Closing Date, and the Europe
Closing Balance Sheet will be prior to the application of purchase accounting
and recordation of the transactions contemplated in the Agreement. MIFINCO,
Inc.'s investment in shares of Merisel France, Inc. and Mexico will be valued at
zero for the combining Closing Balance Sheet. The report of Deloitte & Touche,
LLP shall state (without qualification as to scope of audit or other matters)
that in their opinion the Europe Closing Balance Sheet presents fairly in all
material respects, the net assets of Europe sold as of the Closing Date, on the
basis of accounting defined in this Agreement and Exhibit A. The Europe Closing
Balance Sheet shall be subject to the review of Grant Thornton L.L.P. The
parties shall allow and cause the European Subsidiaries to allow the parties,
Grant
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Thornton, L.L.P. and other representatives of the parties full and complete
access to all work papers, books and records and all additional information used
in preparing the Europe Closing Balance Sheet and will make their and the
European Subsidiaries' officers and employees reasonably available to discuss
with the parties and their representatives such papers, books, records and
information. Buyer and its representatives shall be provided complete access to
all work papers and other information used by Deloitte & Touche, LLP in
examining the Europe Closing Balance Sheet which are not proprietary to Deloitte
& Touche, LLP and Sellers and their representatives shall be provided complete
access to all work papers and other information used by Grant Thornton, L.L.P.
in reviewing the Europe Closing Balance Sheet which are not proprietary to Grant
Thornton, LLP. The Europe Closing Balance Sheet, when delivered by Europe to
Buyer, shall be deemed final, conclusive and binding on the parties and will be
deemed to be the Europe Closing Balance Sheet, upon which the Purchase Price of
the Europe Stock and the Europe Assets will be based, unless either Europe or
Buyer notifies the other, within 10 days after receipt of the Europe Closing
Balance Sheet, of its disagreement therewith (which notice shall state with
reasonable specificity the reasons for any disagreement and the amounts in
dispute). If neither Europe nor Buyer disagrees with the draft Europe Closing
Balance Sheet, Deloitte & Touche, LLP will issue their final audit report. In
the event that the parties agree the Purchase Price of the Europe Stock and the
Europe Assets is higher (or lower) than the Estimated Purchase Price Amount and
agree on the minimum amount of such difference, pending resolution of any other
disagreements, such minimum amount shall be paid by the Escrow Agent from the
Escrow Fund (as defined in the Escrow Agreement) to Europe (if the Purchase
Price of the Europe Stock and the Europe Assets is higher than the Estimated
Purchase Price Amount), or to Buyer (if the Purchase Price of the Europe Stock
and the Europe Assets is lower than the Estimated Purchase Price Amount). If
there is a disagreement, and such disagreement cannot be resolved by Buyer and
Europe (each of which shall use their "reasonable efforts" to so resolve the
claim) within 30 days following the receipt by Europe of the Europe Closing
Balance Sheet, the items in dispute shall be submitted to a nationally
recognized firm of independent auditors acceptable to both Buyer and Europe (or,
in the absence of agreement, the auditing firm of KPMG Peat Marwick L.L.P.) (the
"Resolution Accountants"). The sole function of the Resolution Accountants shall
be to select as most accurately reflecting the Europe Closing Balance Sheet,
without adjustment or alteration, the Europe Closing Balance Sheet submitted by
Buyer or the Europe Closing Balance Sheet submitted by Europe as the true Europe
Closing Balance Sheet, and the determination by such independent auditing firm
shall be binding and conclusive upon the parties. If the Resolution Accountants
select the Europe Closing Balance Sheet submitted by Buyer, Europe shall pay the
fees and expenses of the Resolution Accountants; if the Resolution Accountants
select the Europe Closing Balance Sheet submitted by Europe, Buyer shall pay the
fees and expenses of the Resolution Accountants. Europe shall
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pay the cost of the fees and expenses of Deloitte & Touche, L.L.P. and Buyer
shall pay the cost of the fees and expenses of Grant Thornton L.L.P. There shall
be no adjustment to the Purchase Price unless and until such adjustment exceeds
$250,000 and only to the extent of that excess of $250,000.
(ii) Promptly after the Closing Date, but in any
event no later than 60 days after the Closing Date, Merisel shall prepare and
deliver to Buyer, or cause to be prepared and delivered to Buyer, a combining
balance sheet of Latin America and Mexico (the "Latin/Mexico Closing Balance
Sheet") as of the close of business on the Closing Date, together with the draft
audit report of Deloitte & Touche, LLP thereon. The Latin/Mexico Closing Balance
Sheet shall be prepared in accordance with U.S. GAAP applied consistently with
those U.S. GAAP principles applied in the preparation of the 1995 Balance
Sheets, except that the Latin/Mexico Closing Balance Sheet will convert Mexican
pesos to U.S. dollars at the closing exchange rate published in the Wall Street
Journal as of the Closing Date and the Latin/Mexico Closing Balance Sheet will
be prior to the application of purchase accounting and recordation of the
transactions contemplated in this Agreement (the "Latin American Accounting
Principles"). The report of Deloitte & Touche, L.L.P. shall state (without
qualification as to scope of audit or other matters) that in their opinion the
Latin/Mexico Closing Balance Sheet presents fairly in all material respects, the
net assets of Mexico and Latin America sold as of the Closing Date, on the basis
of the Latin American Accounting Principles defined in this Agreement. The
parties shall allow and cause Latin America and Mexico to allow the parties,
Grant Thornton, L.L.P. and other representatives of the parties, full and
complete access to all work papers, books and records and all additional
information used in preparing the Latin/Mexico Closing Balance Sheet and will
make their and will use their reasonable efforts to make Latin America's and
Mexico's officers and employees available to discuss with the parties and their
representatives such papers, books, records and information. Buyer and all its
representatives shall be provided complete access to all work papers and other
information used by Deloitte & Touche, LLP in auditing the Latin/Mexico Closing
Balance Sheet which are not proprietary to Deloitte & Touche LLP and Sellers and
their representatives should be provided complete access to all work papers and
other information used by Grant Thornton L.L.P. in reviewing the Latin/Mexico
Closing Balance Sheet which are not proprietary to Grant Thornton L.L.P. The
Latin/Mexico Closing Balance Sheet, when delivered by Sellers to Buyer, shall be
deemed final, conclusive and binding on the parties and will be deemed to be the
Latin/Mexico Closing Balance Sheet upon which the Latin/Mexico Purchase Price
may be adjusted, unless either Merisel or Buyer notifies the other, within 10
days after receipt of the Latin/Mexico Closing Balance Sheet, of its
disagreement therewith (which notice shall state with reasonable specificity the
reasons for any disagreement and the amounts in dispute). If neither Sellers nor
Buyer disagrees with the draft Latin/Mexico Closing Balance Sheet, Deloitte &
Touche, LLP will
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issue their final audit report. If such disagreement cannot be resolved by Buyer
and Merisel (each of which shall use their "reasonable efforts" to so resolve
the claim) within 30 days following the receipt from Latin America and Mexico of
the Latin/Mexico Closing Balance Sheet, the items in dispute shall be submitted
to the Resolution Accountants. The sole function of the Resolution Accountants
shall be to select as most accurately reflecting the Latin/Mexico Closing
Balance Sheet, without adjustment or alteration, the Latin/Mexico Closing
Balance Sheet submitted by Buyer to the Resolution Accountants, which closing
balance sheet reflects the results of any previous discussions between the
parties or the Latin/Mexico Closing Balance Sheet submitted by Merisel to the
Resolution Accountants, which closing balance sheet reflects the results of any
previous discussions between the parties as the true Latin/Mexico Closing
Balance Sheet, and the determination by such independent auditing firm shall be
binding and conclusive upon the parties. If the Resolution Accountants select
the Latin/Mexico Closing Balance Sheet submitted by Buyer, Merisel shall pay the
fees and expenses of the Resolution Accountants; if the Resolution Accountants
select the Latin/Mexico Closing Balance Sheet submitted by Merisel, Buyer shall
pay the fees and expenses of the Resolution Accountants. Merisel shall pay the
cost of the fees and expenses of Deloitte & Touche, LLP and Buyer shall pay the
cost of the fees and expenses of Grant Thornton L.L.P.
(iii) The balance sheet of each European
Subsidiary to be used in the preparation of the Europe Closing Balance Sheet and
the balance sheet of each entity included in the Latin/Mexico Closing Balance
Sheet shall be prepared by the individual who is the Managing Director and the
individual who is the Chief Financial Officer of the respective entity on the
date hereof. If one of these individuals is unavailable, the other will act
solely. Grant Thornton, L.L.P. shall be permitted to review the draft balance
sheets and work papers of each entity prepared under the supervision of said
individuals. Buyer shall have the right to meet with Deloitte & Touche, LLP in
conjunction with their planning of the procedures with respect to the audit of
the Europe Closing Balance Sheet and the Latin/Mexico Balance Sheet, such
approval not to be unreasonably withheld.
(d) POST-CLOSING DETERMINATION.
(i) To the extent that the Estimated Purchase
Payment Amount shall have been more than the sum of the Total Adjusted Capital
of the European Subsidiaries and Europe Assets Value, the amount of such
difference (less any interim payments to Buyer pursuant to SECTION 1.2(C)(i))
shall be paid to Buyer by Escrow Agent in accordance with the terms of the
Escrow Agreement within five business days after the determination of such
amount. The balance of the Escrow Fund together with interest earned on all
amounts distributed to Seller, if any, shall thereafter be paid to Seller. To
the extent the amount of the Escrow Fund is insuffici-
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ent to pay to Buyer the excess of the Estimated Purchase Payment Amount over the
Total Adjusted Capital of the European Subsidiaries and the Europe Assets Value,
Merisel shall pay to Buyer any shortfall within five business days of the
determination of such amount by wire transfer. To the extent that the Estimated
Purchase Payment Amount is less than the Total Adjusted Capital of the European
Subsidiaries and the Europe Assets Value, the total Escrow Payment plus a cash
consideration equal to the amount of any remaining difference (less any interim
payments to Europe, pursuant to Section 1.2(c)(i)) shall be paid by Buyer to
Europe, within five business days after the determination of such amount, by
wire transfer. Notwithstanding anything to the contrary in this Agreement, the
terms of the Escrow Agreement shall govern all payments to Buyer or Europe from
the Escrow Fund.
(ii) To the extent that the amount of the
shareholders equity of Latin America and Mexico as set forth on the Latin/Mexico
Closing Balance Sheet, assuming all liabilities of Latin America and Mexico to
Merisel or any of its other affiliates have been capitalized (the "Closing
Equity Value"), is less than the sum of (x) the amount of adjusted shareholders
equity of Latin America and Mexico as of June 30, 1996 which the parties hereby
agree is $36,698,191 computed as shown on Schedule 1.2(a) plus (y) the net
pretax earnings of Latin America and the net earnings of Mexico between July 1,
1996 and the Closing Date as reflected in the monthly financial statements of
Latin America and Mexico plus any provision which would increase the reserve for
inventory, receivables and/or other accruals in excess of normal provisions for
inventory, receivables and/or other accruals, computed consistently with past
practice, less (z) $1.5 million (the "Minimum Latin/Mexico Equity Value"), the
amount of such difference shall be deducted from the Escrow Fund and paid to
Buyer by Escrow Agent in accordance with the terms of the Escrow Agreement
within five business days after the determination of such amount; provided,
however, that no amount in excess of $2,000,000 shall be so deducted. The
balance of the Escrow Fund, if any, shall thereafter be paid to Merisel unless
further obligations exist under Section 1.2(d)(i), in which case the funds shall
continue to be held in accordance with that Section. To the extent that the
amount of the Escrow Fund is insufficient to pay to Buyer the excess of the
Minimum Latin/Mexico Equity Value over the Closing Equity Value, Merisel shall
pay to Buyer any shortfall within five business days after the determination of
such amount, by wire transfer. Notwithstanding anything to the contrary in this
Agreement, the terms of the Escrow Agreement shall govern all payments to Buyer
or Merisel from the Escrow Fund.
1.3 CLOSING.
(a) TIME AND PLACE. The closing under this Agreement (the
"Closing") will take place at 9:00 a.m., local time, on September 27, 1995 as
prescribed by Section 4.8 hereof or on such later date as the conditions
precedent contained in Section 5.1 and
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5.2 hereof are satisfied or waived (subject, however, to the provisions of
Section 5.3(a)(iv)), at the offices of Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A., 1221 Brickell Avenue, Miami, Florida, or at such other
time, date or place as the parties shall mutually agree. The date on which the
Closing occurs is referred to herein as the "Closing Date."
(b) DELIVERIES AND PROCEEDINGS AT THE CLOSING. At the Closing:
(i) DELIVERIES BY EUROPE. Europe will deliver to
Buyer (A) certificates evidencing its shares of the Europe Stock accompanied by
stock powers duly executed in blank or duly executed instruments of transfer,
and any other documents that are necessary to transfer to Buyer good title to
the Europe Stock, free and clear of all liens, claims, security interests,
pledges, charges, equities, options, restrictions and encumbrances of whatever
nature, and (B) such documents and instruments of conveyance, including but not
limited to, bills of sale, warranty deeds, assignments, or their equivalents, as
shall be sufficient to convey to the Buyer all right, title and interest in and
to the Europe Assets, free and clear of all liens, mortgages, pledges, claims,
encumbrances or other restrictions or limitations whatsoever except as set forth
on Schedule 2.17.
(ii) DELIVERIES BY MERISEL. Merisel will deliver
to Buyer certificates evidencing its shares of the Latin/Mexico Stock
accompanied by stock powers duly executed in blank or duly executed instruments
of transfer, and any other documents that are necessary to transfer to Buyer
good title to the Latin/Mexico Stock, free and clear of all liens, claims,
security interests, pledges, charges, equities, options, restrictions and
encumbrances of whatever nature.
(iii) DELIVERIES BY BUYER. Buyer will deliver (A)
to Europe the Europe Cash Payment, (B) to Merisel the Latin/Mexico Cash Payment
and (C) to the Escrow Agent the Escrow Payment.
(iv) OTHER DELIVERIES. The closing certificates,
opinions of counsel and other documents required to be delivered pursuant to
this Agreement will be exchanged.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers represent and warrant to Buyer as follows, except as set
forth in the Disclosure Schedule attached hereto specifically identifying the
Section number to which it relates:
2.1 ORGANIZATION. Each of Merisel, Europe, Latin America and Mexico is
a corporation duly organized, validly existing and in
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good standing under the laws of Delaware, Delaware, Delaware and Mexico,
respectively. Each Subsidiary of Europe listed on SCHEDULE 2.1 (the "European
Subsidiaries"), and any subsidiaries of Latin America and Mexico (the
"Latin/Mexico Subsidiaries") listed on SCHEDULE 2.1 (each a "Subsidiary" and,
collectively, the "Subsidiaries") is duly organized, validly existing and in
good standing (to the extent such concept is applicable) in the countries of
their organization. Each of Merisel, Europe, Latin America, Mexico, and the
Subsidiaries has all requisite power and authority to own or lease its
properties and assets as now owned or leased and to carry on its business as and
where now being conducted, except in each such case as would not have a Material
Adverse Effect. The copies of each of Merisel's, Europe's, Latin America's,
Mexico's and the Subsidiaries' charter documents, as amended to date, which have
been delivered to Buyer, are correct and complete and are in full force and
effect.
2.2 CAPITALIZATION AND OWNERSHIP: POWER AND AUTHORITY. Set forth on
SCHEDULE 2.2 is a list of the authorized and outstanding capital stock of Latin
America, Mexico and each of the Subsidiaries together with the holders thereof.
All of the foregoing outstanding shares have been duly authorized, validly
issued and are fully paid and nonassessable. None of such shares were issued in
violation of the terms of any agreement or other understanding, and all were
issued in compliance with all applicable securities laws and regulations except
where such violation or lack of compliance could not reasonably be expected to
have a Material Adverse Effect. There are no outstanding options, warrants,
rights, agreements, calls, commitments or demands of any character relating to
such capital stock and no securities convertible into or exchangeable for any of
such capital stock. All of such stock owned by the Sellers is owned, free and
clear of any lien, security interest, restriction, encumbrance or claim. Sellers
have the right, power and authority to enter into this Agreement, transfer the
Stock or Europe Assets, as the case may be, to Buyer in accordance with this
Agreement and to perform its other respective obligations hereunder.
2.3 SUBSIDIARIES. Except as set forth in SCHEDULE 2.1, none of Merisel,
Europe, Latin America or Mexico, directly or indirectly, owns any stock of, or
any other interest in, any other corporation, joint venture, partnership, trust
or other business entity that conducts business in a country located on the
continents of Europe (including Eastern Europe, but excluding the Russian
Federation) and South America, any country in Latin America or in Mexico.
2.4 QUALIFICATION; LOCATION OF BUSINESS AND ASSETS. Each of Merisel,
Europe, Latin America, Mexico and the Subsidiaries is duly qualified and in good
standing as a corporation (to the extent such concept is applicable), duly
authorized to do business in those jurisdictions wherein the character of the
properties owned or leased or the nature of activities conducted by such
entities make
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such qualification necessary, except in such case would not have a Material
Adverse Effect. Set forth on SCHEDULE 2.4 is each location (specifying country
and city) where each of Merisel, Europe, Latin America, Mexico and any
Subsidiary (a) has a place of business, (b) owns or leases real property or (c)
owns or leases any other property, including inventory, equipment or furniture
with an aggregate value at such location in excess of $100,000.
2.5 AUTHORIZATION AND ENFORCEABILITY. This Agreement has been, and each
other agreement and instrument required to be executed and delivered by Sellers
in connection with or pursuant hereto, will be, duly executed and delivered by
Sellers and constitutes and will constitute, as applicable, the legal, valid and
binding obligations of Sellers, enforceable in accordance with their terms,
subject to the qualification that enforcement of the rights and remedies created
hereby and thereby may be limited by bankruptcy, insolvency, reorganization and
other similar laws of general application relating to or affecting the rights
and remedies of creditors and that the remedy of specific enforcement or of
injunctive relief is subject to the discretion of the court before which any
proceeding therefor may be brought. Upon delivery to Buyer at the Closing of
instruments of title and conveyance, including but not limited to, bills of
sale, warranty deeds and assignments, or their equivalents, for the Europe
Assets in accordance herewith, Buyer will acquire good and valid title to the
Europe Assets free and clear of all liens, claims, security interests,
mortgages, pledges, charges, equities, options, restrictions and encumbrances of
whatsoever nature (collectively, "Liens"), other than a Lien arising as a result
of any action by Buyer and other than as set forth on SCHEDULE 2.17. The
execution, delivery and performance of this Agreement shall have been duly
authorized by all necessary corporate action on the part of Sellers (including
stockholder approval).
2.6 NO VIOLATION OF LAWS OR AGREEMENTS. Except as set forth on SCHEDULE
2.6 hereto, the execution and delivery of this Agreement does not, and the
performance of this Agreement by Sellers will not (a) contravene any provision
of Merisel's, Europe's, Latin America's, Mexico's or any Subsidiary's charter
documents; (b) conflict with or result in a breach of or constitute a default
(or an event which could reasonably be expected to, with the passage of time or
the giving of notice or both, constitute a default) under any of the terms,
conditions or provisions of (i) any Material Contract to which Merisel (with
respect to Europe, Latin America or Mexico), Europe, Latin America, Mexico, or
any Subsidiary is a party or by which any of them or any of their respective
assets may be bound or affected, or (ii) any judgment or order of any court or
governmental department, commission, board, agency or instrumentality, domestic
or foreign, or any applicable law, rule or regulation except in the case of such
judgment, order, law, rule or regulation as would not reasonably be expected to
have a Material Adverse Effect on such entity; (c) result in the creation or
imposition of any lien, charge or encumbrance of any nature
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whatsoever upon any of Europe's, Latin America's, Mexico's or any Subsidiary's
assets or give to others any interests or rights therein other than pursuant to
this Agreement, which lien, charge, encumbrance, interest or right could
reasonably be expected to have a Material Adverse Effect; (d) result in the
maturation or acceleration of any liability or obligation of Merisel (with
respect to the Europe Stock, the Europe Assets and Latin/Mexico Stock), Europe
(with respect to the Europe Stock and the Europe Assets), Latin America, Mexico
or any Subsidiary (or give others the right to cause such a maturation or
acceleration); or (e) result in the termination of or loss of any right (or give
others the right to cause such a termination or loss) under any Material
Contract to which Merisel, Europe, Latin America, Mexico or any Subsidiary is a
party or by which any of them may be bound. For the purposes of this Agreement,
the term "Material Contract" shall mean those contracts, agreements and
commitments, written or, to the Knowledge of Sellers (as such term is defined in
Section 7.14 hereof), Latin America, Mexico or any Subsidiary, oral, to which
any of Merisel (with respect to the Europe Stock, the Europe Assets or the
Latin/Mexico Stock), Europe (with respect to the Europe Stock and the Europe
Assets), Latin America, Mexico or any Subsidiary are a party or by which any of
their respective assets are bound and which constitute:
(a) an agreement to purchase or sell any capital assets
(excluding inventory) involving an amount in excess of $100,000;
(b) any union or other collective bargaining contracts;
(c) any management, consulting, employment, personal service,
agency or other contract or contracts providing for employment or rendition of
services at an annual base compensation of $100,000 or more (including any
promised, expected or customary bonus);
(d) the Revolving Credit Agreement, the Asset Amortization
Agreement or any other agreements or notes evidencing any liabilities or
obligations of Merisel (with respect to Europe, Latin America or the
Subsidiaries), Europe, Latin America, Mexico or any Subsidiary, whether primary
or secondary or absolute or contingent: (i) for borrowed money; or (ii)
evidenced by notes, bonds, debentures or similar instruments; or (iii) secured
by or granting Liens on any assets of Merisel, Europe, Latin America, Mexico or
any Subsidiary;
(e) a power of attorney (whether revocable or irrevocable)
given to any person by Merisel (with respect to Latin America or Mexico), Europe
(with respect to the European Subsidiaries), Latin America, Mexico or any
Subsidiary that is in force;
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(f) an agreement by Merisel (with respect to Latin America or
Mexico), Europe (with respect to the European Subsidiaries), Latin America,
Mexico or any Subsidiary not to compete in any business or in any geographical
area;
(g) a partnership, joint venture or similar arrangement;
(h) an Intellectual Property license other than the right to
distribute computer products in the ordinary course of business;
(i) an agreement with any affiliate of either Seller other
than agreements between or among the European Subsidiaries, Latin America or
Mexico;
(j) any lease, sublease, license, or occupancy agreement for
real property and equipment leases with an annual rental in excess of $100,000
("Lease"); or
(k) any other agreement in excess of $100,000 individually or
$250,000 in the aggregate, which is not in the ordinary course of business of
Europe, Latin America, Mexico or any Subsidiary.
2.7 FINANCIAL STATEMENTS. Sellers have delivered to Buyer the following
financial statements (the "Financial Statements"):
(a) statements of income and retained earnings and cash flows
of Europe, Latin America, Mexico and each Subsidiary for the years ended
December 31, 1993 through December 31, 1995, inclusive, and balance sheets of
Europe, Latin America, Mexico and the Subsidiaries as at each of such dates.
(b) a statement of income, cash flows and stockholders' equity
of Europe, Latin America, Mexico and each Subsidiary for the six-month period
ended June 30, 1996 and a balance sheet of Europe, Latin America, Mexico, and
each Subsidiary as at such date.
The Financial Statements: (a) are correct and complete and in
accordance with the books and records of Europe, Latin America, Mexico and each
Subsidiary, respectively, (b) fairly present the financial condition, assets and
liabilities of Europe, Latin America, Mexico, and each Subsidiary as at their
respective dates and the results of operations and cash flows for the periods
covered thereby, (c) have been prepared in accordance with GAAP consistently
applied, except as may be indicated therein or in the notes thereto and except
that the Interim Statements do not contain footnotes, and except for normal
year-end adjustments. All references in this Agreement to the "1995 Balance
Sheets" shall mean the balance sheets of Europe, Latin America, Mexico and the
Subsidiaries as at December 31, 1995 included in the Financial State-
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ments, all references in this Agreement to the "June Balance Sheets" shall mean
the balance sheets of Europe, Latin America, Mexico and the Subsidiaries as at
June 30, 1996 included in the Financial Statements, and all references to the
"Balance Sheet Date" shall mean December 31, 1995. Attached as SCHEDULE 2.7 are
the Financial Statements, as adjusted to be presented in accordance with the
Accounting Principles.
2.8 NO UNDISCLOSED LIABILITIES. None of Europe, Latin America, Mexico
or the Subsidiaries has any material liability or obligation of any nature,
whether due or to become due, absolute, contingent or otherwise, except (a) to
the extent reflected as a liability or adequately reserved, disclosed or
otherwise provided for, on the June Balance Sheets, (b) liabilities incurred in
the ordinary course of business since June 30, 1996 and of the same character,
kind and magnitude as are consistent with past practice and fully reflected as
liabilities on their books of account and (c) liabilities disclosed on SCHEDULE
2.8.
2.9 NO CHANGES. Except as disclosed on SCHEDULE 2.9, since June 30,
1996, each of Europe, Latin America, Mexico and the Subsidiaries has conducted
its business only in the ordinary course consistent with past practice. Without
limiting the generality of the foregoing sentence, since June 30, 1996, there
has not been:
(a) any change in the financial condition, assets,
liabilities, net worth or business of Europe, Latin America, Mexico or the
Subsidiaries, except changes in the ordinary course of business, none of which,
individually or in the aggregate, has been or will be materially adverse to any
of Europe, Latin America, Mexico or any Subsidiary;
(b) any damage, destruction or loss, whether or not covered by
insurance, other than normal wear and tear, of assets with an aggregate book
value of $50,000 or greater adversely affecting the properties, business or
prospects of any of Europe, Latin America, Mexico or any Subsidiary, or any
material deterioration in the operating condition of the assets of Europe, Latin
America, Mexico or any Subsidiary;
(c) any mortgage, pledge or subjection to lien, charge or
encumbrance of any kind of any of the assets, tangible or intangible with a
value in excess of $50,000 individually, or $250,000 in the aggregate, of
Europe, Latin America, Mexico or any Subsidiary not set forth on the June
Balance Sheets;
(d) any declaration, setting aside or payment of a dividend or
other distribution in respect of any of the capital stock of Latin America,
Mexico or a subsidiary of Mexico, or any direct or indirect redemption, purchase
or other acquisition of any capital stock of Latin America, Mexico or a
subsidiary of Mexico or any rights to purchase such capital stock or securities
convertible into or exchangeable for such capital stock;
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(e) Except as set forth on SCHEDULE 4.1 and except for the
obligations to employees for which Sellers are responsible after the Closing
Date which Sellers hereby agree shall be fulfilled, any increase in the salaries
or other compensation payable or to become payable to, or any advance (excluding
advances for ordinary business expenses) or loan to, any officer, director or
shareholder of Latin America, Mexico or any Subsidiary, any increase in the
salaries or other compensation payable or to become payable to, or any advance
(excluding advances for ordinary business expenses) or loan to, any employee of
Latin America, Mexico or any Subsidiary (except those made in the ordinary
course of business and consistent with past practice), any increase in, or any
addition to, other benefit (including without limitation any bonus, profit
sharing, pension or other plan) to which any of their respective officers,
directors or employees may be entitled (excluding as to employees only, those
made in the ordinary course of business consistent with prior practice), or any
payment to any pension, retirement, profit sharing, bonus or similar plan except
payments in the ordinary course of business and consistent with past practice
made pursuant to the employee benefit plans described on SCHEDULE 2.26.
(f) any making or authorization of any capital expenditures in
excess of $100,000 in the aggregate;
(g) any sale, transfer or other disposition of any capital
asset with a value on the 1995 Balance Sheets of Europe, Latin America, Mexico
or any Subsidiary in excess of $50,000 individually or $250,000 in the
aggregate, except sales of inventory and receivables in the ordinary course of
business consistent with past practices;
(h) any adverse change or any threat of any adverse change in
the relations of Europe, Latin America, Mexico or any Subsidiary with, or any
loss or threat of loss of, any of the suppliers listed on Exhibit D or any
customers representing individually in excess of 5% and in the aggregate more
than 10% of the sales in the eighteen months ended June 30, 1996 of any of
Europe, Latin America, Mexico or any Subsidiary;
(i) other than intercompany accounts, any writeoffs as
uncollectible of any notes or accounts receivable of Latin America, Mexico or
any Subsidiary or write-downs of the value of any assets or inventory by Europe,
Latin America, Mexico or any Subsidiary other than in the ordinary course of
business consistent with past practice;
(j) except as set forth on SCHEDULE 2.9(J), any change by
Europe, Latin America, Mexico or any Subsidiary in any accounting practices,
method of accounting or the accounting principles applicable to the keeping its
books of account;
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(k) any creation, incurrence, assumption or guarantee by Latin
America, Mexico or any Subsidiary of the obligations or liabilities of any
person other than Latin America, Mexico or any Subsidiary (whether absolute,
accrued, contingent or otherwise and whether due or to become due), except in
the ordinary course of business, or any creation, incurrence, assumption or
guarantee by Europe, Latin America, Mexico or any Subsidiary of any indebtedness
for money borrowed in excess of $100,000 individually or $500,000 in the
aggregate;
(l) any purchase, sale or other transfer of inventory from or
to any Related Party at other than arms-length prices; or
(m) any disposition of or failure to keep in effect any rights
in, to or for the use of any patent, trademark, service mark, trade name or
copyright, material to the operation of Europe, Latin America, Mexico or the
Subsidiaries.
2.10 TAXES.
(a) For the purpose of this Agreement:
"AUDIT" means any audit, assessment of Taxes, reassessment of
Taxes, or other examination by any taxing authority or any judicial or
administrative proceedings or appeal of such proceedings.
"CODE" means the Internal Revenue Code of 1986, as amended.
"GOVERNMENTAL BODY" means any foreign, federal, state, local
or other governmental authority or regulatory body.
"TAX" or "TAXES" means any federal, state, local, foreign or
other net income, gross income, gross receipts, windfall profits, severance,
property, production, sales, use, transfer, gains, license, excise, franchise,
employment, payroll, withholding, value added, estimated, alternative or add on
minimum tax, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed by any Governmental Body.
"TAX RETURN" means any return, report or similar statement
required to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
"TAX RULING" means a written private ruling of a taxing
authority to or with respect to Europe, Latin America, Mexico or any Subsidiary
relating to Taxes.
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(b) Except as set forth in SCHEDULE 2.10:
(i) FILING OF TAX RETURNS. Europe (with respect to
the Europe Assets and the European Subsidiaries), and each of Latin America,
Mexico and the Subsidiaries have filed (or have had filed on their behalf) all
material Tax Returns required to be filed by each of them and such Tax Returns
are in all material respects true, complete and correct and filed on a timely
basis.
(ii) PAYMENT OF TAXES. Europe (with respect to
the Europe Assets and the European Subsidiaries), and each of Latin America,
Mexico and the Subsidiaries have, within the time and in the manner prescribed
by law, paid (or have had paid on their behalf) all Taxes currently due and
payable, except for those for which adequate reserves have been established on
the books and records of such companies, and none of such companies is or will
be required to pay any Tax attributable to any other person by reason of filing
a consolidated, combined, unitary or other return or report with any such other
person in respect of any Taxable period closing on or prior to the Closing Date.
(iii) EXTENSIONS OF TIME FOR FILING. None of
Merisel (with respect to Europe, Latin America and Mexico), Latin America,
Mexico or the Subsidiaries has requested (or has had requested on its behalf)
any extension of time within which to file any material Tax Return, which Tax
Return has not yet been filed.
(iv) WAIVERS OF STATUTE OF LIMITATIONS. None of
Merisel (with respect to Europe, Latin America and Mexico), Latin America,
Mexico or the Subsidiaries has executed any outstanding waivers or comparable
consents (or has had any such waivers or consents executed on its behalf)
regarding the application of the statute of limitations with respect to any
material Taxes or Tax Returns.
(v) AUDIT, ADMINISTRATIVE AND COURT PROCEEDINGS.
No Audits are presently pending with regard to any Tax Returns of Merisel (with
respect to Europe, Latin America and Mexico), Europe (with respect to the
European Subsidiaries), Latin America, Mexico or the Subsidiaries.
(vi) POWERS OF ATTORNEY. No power of attorney
currently in force has been granted by Merisel (with respect to Europe, Latin
America and Mexico), Europe (with respect to the European Subsidiaries), Latin
America, Mexico or the Subsidiaries concerning any material Taxes or Tax
Returns.
(vii) TAX RULINGS. None of Merisel (with respect
to Europe, Latin America and Mexico), Europe (with respect to the European
Subsidiaries), Mexico, Latin America or any Subsidiary has received a Tax Ruling
with any taxing authority that has or would
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have a continuing effect on Mexico, Latin America, any Subsidiary or any of the
European Assets.
(viii) TAX SHARING AGREEMENTS. None of Merisel
(with respect to Europe, Latin America and Mexico), Europe (with respect to the
European Subsidiaries), Mexico, Latin America or any Subsidiary is a party to
any agreement relating to allocating or sharing of Taxes other than any such
agreements solely between or among Latin America, Mexico and the Subsidiaries.
2.11 INVENTORY. All of the inventories reflected in the 1995 Balance
Sheets are valued at the lower of cost or market, the cost thereof being
determined on a first-in, first-out basis, except as disclosed in the Financial
Statements. Except as set forth on SCHEDULE 2.11, all of the inventories
reflected in the June Balance Sheets, and all inventories acquired by Latin
America, Mexico and the Subsidiaries since the date of the June Balance Sheets
consist of items of a quality and quantity usable and saleable in the ordinary
course of the business of Latin America, Mexico and the Subsidiaries.
2.12 ACCOUNTS RECEIVABLE. All of the accounts and notes receivable of
Latin America, Mexico and the Subsidiaries represent amounts receivable for
merchandise actually delivered or services actually provided (or, in the case of
non-trade accounts or notes represent amounts receivable in respect of other
bona-fide business transactions), have arisen in the ordinary course of
business, are not subject to any defenses, counterclaims or offsets, except to
the extent of a reserve in an amount not in excess of the reserve for doubtful
accounts reflected on the June Balance Sheets, and have been billed and are
generally due within 45 days after such billing. All such receivables are fully
collectible in the normal and ordinary course of business, except to the extent
of a reserve in an amount not in excess of the reserve for doubtful accounts
reflected on the June Balance Sheets.
2.13 NO PENDING LITIGATION OR PROCEEDINGS. Except as set forth on
SCHEDULE 2.13 there are no actions, suits, investigations, or proceedings
pending or, to the Knowledge of Sellers, threatened against or affecting Merisel
(with respect to Europe, Latin America and Mexico), Europe (with respect to the
European Subsidiaries), Latin America, Mexico or the Subsidiaries or any of
their assets or affecting the Stock, at law or in equity, by or before any court
or governmental department, agency or instrumentality, and no party has
manifested an intention to commence such action, suit, investigation or
proceeding. There are presently no outstanding judgments, decrees or orders of
any court or any governmental or administrative agency against Merisel (with
respect to Europe, Latin America and Mexico), Europe (with respect to the
European Subsidiaries), or against Europe, Latin America, Mexico or the
Subsidiaries.
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2.14 CONTRACTS; COMPLIANCE. All Material Contracts are listed on
SCHEDULE 2.14, and copies of all of which have been provided to Buyer. All
Material Contracts to which Europe, Latin America, Mexico or the Subsidiaries is
a party or by which any of them is bound are in full force and effect and each
of Europe, Latin America, Mexico and the Subsidiaries has complied with the
provisions thereof; and to the Knowledge of Sellers, all parties to such
Material Contracts have complied with the provisions thereof, no party is in
default under any of the terms thereof, and no event has occurred that with the
passage of time or the giving of notice or both would constitute a default by
any party under any provision thereof which default could reasonably be expected
to have a Material Adverse Effect.
2.15 COMPLIANCE WITH LAWS.
(a) Except as set forth in SCHEDULE 2.15(A) (and any
sub-schedules thereto),
(i) each of Europe, Latin America, Mexico and the
Subsidiaries are in material compliance with Statutes regulating any hazardous,
toxic or polluting contaminant, substance or waste, including petroleum products
and radioactive materials ("Hazardous Substances") (such Statutes hereinafter
defined as "Environmental Laws"), including material compliance with permits,
certificates, licenses, approvals, registrations and authorizations ("Permits")
required under such Environmental Laws, in connection with its respective
business;
(ii) none of Europe, Latin America, Mexico or the
Subsidiaries have received written notice that remains outstanding from any
governmental entity or third party alleging that their respective businesses, or
any property owned or leased by any of them, is not in compliance with any
Environmental Law;
(iii) there has been no release, spill, discharge,
disposal, emission, injection or dumping of a Hazardous Substance by Europe,
Latin America, Mexico or the Subsidiaries, respectively, in violation of any
Environmental Law on any of their respective owned or leased real property,
which could reasonably be expected to have a Material Adverse Effect; and
(iv) there are no environmental priority liens
or other deed restrictions on any properties owned by Latin America, Mexico or
any Subsidiary or which have attached as a result of actions of Sellers, Latin
America, Mexico or any Subsidiary with respect to leased property.
(b) OTHER LAWS. All material permits, certificates, licenses,
orders, registrations, franchises, authorizations and other approvals from all
federal, state, local and foreign governmental and regulatory bodies held by
Merisel (with respect to Europe, Latin America and Mexico), Europe (with respect
to the
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European Subsidiaries), Latin America, Mexico or any Subsidiary are in full
force and effect and each of Merisel (with respect to Europe, Latin America and
Mexico), Europe (with respect to the European Subsidiaries), Latin America,
Mexico and the Subsidiaries is in material compliance with the terms and
conditions thereof. Except where the failure to have the same would not
reasonably be expected to have a Material Adverse Effect, no other permits,
certificates, licenses, orders, registrations, franchises or authorizations or
other approvals are necessary for the operation of the business of such entities
as currently conducted. No notice, citation, summons or order has been issued
that remain outstanding, no complaint has been filed, no penalty has been
assessed that remains unpaid and no investigation or review is pending or, to
the Knowledge of Sellers, threatened by any governmental or other entity (a)
with respect to any alleged violation by Merisel (with respect to Europe, Latin
America and Mexico), Europe (with respect to the European Subsidiaries), Latin
America, Mexico or any Subsidiary of any law, ordinance, rule, regulation or
order of any governmental entity or (b) with respect to any alleged failure by
Merisel (with respect to Europe, Latin America and Mexico), Europe (with respect
to the European Subsidiaries), Latin America, Mexico or any Subsidiary to have
any permit, certificate, license, approval, registration or authorization
required in connection with its business.
2.16 CONSENTS. Except as set forth in SCHEDULE 2.16 or 3.7 or where the
failure to obtain the same could not be reasonably expected to have a Material
Adverse Effect, no consent, approval or authorization of, or registration or
filing with, any person, including any governmental authority or other
regulatory agency, is required in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
2.17 TITLE. Each of Europe, Latin America, Mexico and the Subsidiaries
has good and marketable title to all of its properties and assets, including the
properties and assets reflected in the June Balance Sheets (except those
disposed of in the ordinary course of business since June 30, 1996), free and
clear of any mortgage, pledge, lien, restriction, encumbrance, tenancy, license,
encroachment, covenant, condition, right of way, easement, claim, security
interest, charge or any other matter affecting title, except (a) minor
imperfections of title, none of which, individually or in the aggregate,
materially detracts from the value of or impairs the use of the affected
properties or impairs the operations of Latin America, Mexico or the
Subsidiaries, (b) liens for current taxes not yet due and payable, and (c) as
disclosed on SCHEDULE 2.17 (collectively "Permitted Encumbrances"). All real
property owned is listed on SCHEDULE 2.17.
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2.18 REAL ESTATE. Except as set forth on SCHEDULE 2.18, Sellers have
delivered to Buyer a true, correct and complete copy of each Lease with respect
to real property. Europe, Latin America, Mexico or the applicable Subsidiary is
in quiet and undisturbed possession of the real property with respect to which
it is the lessee and each Lease is valid and subsisting and in full force and
effect in accordance with its terms and has not been modified, in writing or
otherwise except with respect to those modifications, copies of which have been
delivered to Buyer.
2.19 TRANSACTIONS WITH RELATED PARTIES. Except as disclosed on
SCHEDULE 2.19, no Related Party currently:
(a) has any contractual or other claim, express or implied, of
any kind whatsoever against Europe, Latin America, Mexico or any Subsidiary; or
(b) has any interest in any property or assets used by Europe,
Latin America, Mexico or any Subsidiary in its business.
For purposes of this Agreement, a "Related Party" means each of the Sellers, any
of the officers or directors of Sellers, Latin America, Mexico or any
Subsidiary, any affiliate, or relative of Sellers, Latin America, Mexico or any
Subsidiary, or any business or entity in which Sellers, Latin America, Mexico or
any Subsidiary, or any affiliate, associate or relative of any such person has
any direct or material indirect interest. For the purposes of this Section 2.19,
a transaction solely among any of Latin America, Mexico or any of the
Subsidiaries shall not be deemed to be a Related Party transaction.
2.20 CONDITION OF ASSETS. Except as set forth on SCHEDULE 2.20 and
except for assets which in the aggregate do not have a book value in excess of
$100,000, the buildings, machinery, equipment, furniture, improvements and other
assets of Latin America, Mexico and the Subsidiaries are in good operating
condition and repair, subject to normal wear and tear, and are suitable for the
purposes for which they are used in its business.
2.21 COMPENSATION ARRANGEMENTS; OFFICERS AND DIRECTORS. SCHEDULE 2.21
sets forth the following information:
(a) the names and current annual salary, including any bonus
or amounts payable upon a "change in control" as such term is defined in Section
280G of the Code, if applicable, of all present officers and employees of
Europe, Latin America, Mexico and each Subsidiary whose current annual salary,
including any promised, expected or customary bonus, equals or exceeds $100,000,
together with a statement of the full amount of all remuneration paid by Europe,
Latin America, Mexico and each Subsidiary to each such person and to any
director of Europe, Latin America, Mexico and each Subsidiary, during the
twelve-month period ending December 31, 1995 and the six-month period ending
June 30, 1996; and
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(b) as of the date hereof, the names and titles of all
directors and officers of Europe, Latin America, Mexico and each Subsidiary and
of each trustee, fiduciary or plan administrator of each employee benefit plan
of Europe, Latin America, Mexico and each Subsidiary.
2.22 LABOR RELATIONS. Except as disclosed on SCHEDULE 2.22 (a) no
employee of Europe, Latin America, Mexico or any Subsidiary is represented by
any union or other labor organization; (b) there is no unfair labor practice
complaint against Europe, Latin America, Mexico or any Subsidiary pending or to
Seller's Knowledge threatened;(c) there is no labor strike, dispute, slow down
or stoppage actually pending or, to the Knowledge of Sellers, threatened against
or involving Europe, Latin America, Mexico or any Subsidiary; (d) no grievance
which could reasonably be expected to have a Material Adverse Effect on Europe,
Latin America, Mexico or any Subsidiary or the conduct of their respective
businesses is pending; (e) no agreement restricts Europe, Latin America, Mexico
or any Subsidiary from relocating, closing or terminating any of its operations
or facilities; and (f) none of Europe, Latin America, Mexico or any Subsidiary
in the past year has experienced any work stoppage, other event set forth in
(b)-(d) above or has committed any unfair labor practice.
2.23 PRODUCTS LIABILITY. Except as set forth in SCHEDULE 2.23 and
except for lawsuits, claims, damages and expenses adequately covered by
insurance or indemnified by the suppliers of Europe, Latin America, Mexico and
each Subsidiary in accordance with industry practice, there are no (a)
liabilities, fixed or contingent, asserted or unasserted, with respect to any
product liability or any similar claim that relates to any product stored,
distributed or sold by Latin America, Mexico or any Subsidiary to others, or (b)
liabilities, fixed or contingent, asserted or unasserted, with respect to any
claim for the breach of any express or implied product warranty or any other
similar claim with respect to any product stored, distributed or sold by Latin
America, Mexico or any Subsidiary to others.
2.24 INSURANCE. Attached hereto as SCHEDULE 2.24 is a complete and
correct list of all policies or binders of insurance of which Merisel (with
respect to Europe, Latin America and Mexico), Europe (with respect to the
European Subsidiaries), Latin America, Mexico or any Subsidiary is the owner,
insured or beneficiary, or covering any of its property or product liability or
general liability, copies of each of which have been provided to Buyer. Also set
forth on SCHEDULE 2.24 is a loss history for the past three years with respect
to each of Latin America, Mexico and each Subsidiary and a list of all pending
claims with respect to any insurance policies and a description of any provision
contained in such policies which provides for retrospective or retroactive
premium adjustments. All such policies are outstanding and in full force and
effect. No notice of cancellation or non-renewal with respect to, or
disallowance of any claim under, any such policy has been
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received by Sellers, Latin America, Mexico or any Subsidiary. None of Merisel
(with respect to Europe, Latin America or Mexico), Europe, Latin America, Mexico
or any Subsidiary has been refused any insurance, nor has coverage of any of
them been limited by any insurance carrier to which any of them has applied for
insurance or with which any of them has carried insurance during the last two
years. Since 1994, all general liability policies have been "occurrence
policies."
2.25 PATENTS AND INTELLECTUAL PROPERTY RIGHTS. Attached hereto as
SCHEDULE 2.25 is a correct list of all material patents, patent applications,
trademarks, service marks and any applications for registrations therefor,
copyrights, trade names, brand names, logos and the like, and any registrations
therefor, and all material licenses, sublicenses or other rights entered into
with respect thereto (other than rights to distribute computer products in the
ordinary course of business), both U.S. and foreign, presently held, owned or
used by Merisel (with respect to Europe, Latin America and Mexico), Europe (with
respect to the European Subsidiaries), Latin America, Mexico or any Subsidiary.
All of the Intellectual Property presently held, owned or used by Merisel (with
respect to Europe, Latin America and Mexico), Europe (with respect to the
European Subsidiaries), Europe, Latin America, Mexico or any Subsidiary (the
"Intellectual Property") is held of record in the name of Europe, Latin America,
Mexico or the applicable Subsidiary, is valid and in good standing and none of
which infringes the intellectual property rights of others. To the Knowledge of
Sellers, there are no pending claims by any Person that challenges the rights of
Europe, Latin America, Mexico or the applicable Subsidiary with respect to any
of the Intellectual Property. To the Knowledge of Sellers, the operation of the
business of Europe, Latin America, Mexico and the Subsidiaries did not and does
not infringe (nor has any claim been made that any such operation infringes) the
intellectual property rights of others. For purposes of this Agreement, the term
"Intellectual Property" shall mean all material patents, patent applications,
trademarks, service marks and any applications for registrations therefor,
copyrights, trade names, brand names, logos and the like, and any registrations
therefor, and all licenses, sublicenses or other rights entered into with
respect thereto, trade secrets, know-how or other proprietary information, which
is used in such Person's business.
2.26 EMPLOYEE BENEFITS.
(a) Schedule 2.26 sets forth a true and complete list of each
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension, or
retirement plan, program, agreement or arrangement, vacation pay, sick pay and
each other employee benefit plan, program, agreement or arrangement, sponsored,
maintained or contributed to or required to be contributed to by Merisel,
Europe, Latin America, Mexico or any Sub-
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sidiary or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with Merisel, Europe, Latin America, Mexico or any
Subsidiary would be deemed a "single employer" within the meaning of Section
4001 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), for the benefit of any U.S. Employee (each a "U.S. Plan") and each
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension, or
retirement plan, program, agreement or arrangement, vacation pay, sick pay and
each other employee benefit plan, program, agreement or arrangement, sponsored,
maintained or contributed to or required to be contributed to by Merisel,
Europe, Latin America, Mexico or any Subsidiary for the benefit of any Non-U.S.
Employee (each a "Non-U.S. Plan", the U.S. Plans and the Non-U.S. Plans being
referred to collectively as the "Plans").
(b) With respect to each U.S. Plan, Sellers have heretofore
delivered to Buyer true and complete copies of each of the following documents;
(i) a copy thereof;
(ii) a copy of the most recent form 5500 as filed
with the Internal Revenue Service for the most recent plan year and, for all
funded U.S. Plans the most recent annual audit and accounting of Plan assets.
(iii) a copy of the most recent Summary Plan
Description required under ERISA with respect thereto;
(iv) if the Plan is funded through a trust or any
third party funding vehicle, a copy of the trust or other funding agreement and
the latest financial statements thereof; and
(v) the most recent determination letter received
from the Internal Revenue Service with respect to each Plan intended to qualify
under Section 401 of the Code.
(c) No U.S. Plan (or other employee benefit plan, program,
agreement or arrangement to which any Employer or any ERISA Affiliate made, or
was required to make, contributions during the five (5) year period ending on
the Closing Date) is subject to Title IV of ERISA.
(d) With respect to each U.S. Plan, neither any Employer nor
any ERISA Affiliate, or any trust created thereunder, or, to the Knowledge of
Sellers, any trustee or administrator thereof has engaged in a transaction in
connection with which any Employer or any such ERISA Affiliate, any such trust,
or any such trustee or administrator thereof, could be subject to either a
material civil penalty assessed pursuant to Section 409 or 502(i)
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of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code
or any other applicable law or regulation.
(e) No U.S. Plan or any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, as of the last day of
the most recent fiscal year of each Plan ended prior to the Closing Date; and
all contributions required to be made with respect thereto on or prior to the
Closing Date have been timely made or will be timely made.
(f) No U.S. Plan is a "multiemployer pension plan," as defined
in Section 3(37) or ERISA, nor is any U.S. Plan a plan described in Section
4063(a) of ERISA.
(g) Each Plan has been operated and administered in all
material respects in accordance with its terms and applicable law, including but
not limited to ERISA and the Code.
(h) Each U.S. Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under Section 501(a) of the Code.
(i) No Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to any U.S.
Employee or Non-U.S. Employee beyond their retirement or other termination of
service (other than (i) coverage mandated by applicable law, or (ii) death
benefits or retirement benefits under any "employee pension plan," as that term
is defined in Section 3(2) of ERISA) or any Non-U.S. Plan.
(j) Except as set forth in SCHEDULE 2.26, the consummation of
the transactions contemplated by this Agreement will not (i) entitle any U.S.
Employee or Non-U.S. Employee to severance pay, unemployment compensation or any
other payment, except as expressly provided in this Agreement or as it relates
to Non-U.S. Employees required by applicable law or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such
employee.
(k) There are no pending, anticipated, or to the knowledge of
any Employer, threatened claims by or on behalf of any Plan, by any U.S.
Employee or Non-U.S. Employee, or otherwise involving any such Plan (other than
routine claims for benefits).
(l) Each Non-U.S. Plan has at all times prior to the Closing
Date has been maintained and operated in all material respects in accordance
with its terms and applicable laws and regulations of the jurisdiction governing
such Non-U.S. Plans including, but not limited to laws and regulations related
to funding, reporting, disclosure and the provision of benefits to eligible
participants.
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(m) As used in this Section 2.26, the following terms have the
following meanings:
(i) "U.S. Employee" means each current or former
employee of an Employer who (A) is (or at the time of his employment by an
Employer was) a citizen or legal resident of the United States and (B) worked
for (or at the time of his employment with an Employer, worked for) an Employer
in the United States (and each such employee's eligible beneficiaries under a
Plan) and who is eligible or receiving benefits under a U.S. Plan.
(ii) "Non-U.S. Employee" means each current or
former employee of an Employer who is not a U.S. Employee (and each such
employee's eligible beneficiaries under a Plan) and who is eligible or receiving
benefits under a Non-U.S. Plan.
(iii) "Employer" means Merisel, Europe, Latin
America, Mexico and any Subsidiary.
2.27 BROKERAGE. Except as described in SECTION 6.9, none of Merisel,
Europe, Latin America, Mexico or any Subsidiary has made any agreement or taken
any other action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
2.28 QUESTIONABLE PAYMENTS. None of Merisel (with respect to Europe,
Latin America, Mexico or any Subsidiary), Europe, Latin America, Mexico or any
Subsidiary or any of the current or former stockholders, directors, officers,
agents, and/or employees of Merisel, Europe, Latin America, Mexico or any
Subsidiary, has on behalf of such entity (a) used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, (b) made any direct or indirect unlawful payments to
foreign or domestic government officials or employees from corporate funds, (c)
violated any provision of the Foreign Corrupt Practices Act of 1977, (d)
established or maintained any unlawful or unrecorded fund of corporate monies or
other assets, or (e) made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment of any nature, (collectively, a "Questionable
Payment"). None of Merisel (with respect to Europe, Latin America, Mexico or any
Subsidiary), Europe, Latin America, Mexico or any Subsidiary or any of their
current or former stockholders, directors, officers, agents, employees, sales
persons or other persons associated with or active on behalf of any of them has
on behalf of any of them or in connection with their respective businesses made
or received a Questionable Payment.
2.29 DISCLOSURE. No representation or warranty by the Sellers with
respect to the Sellers, Latin America, Mexico or any Subsidiary in this
Agreement, and no exhibit, statement, certificate or schedule furnished or to be
furnished to Buyer pursuant hereto, or in connection with the transactions
contemplated hereby,
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contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained herein or therein not misleading or necessary to provide Buyer with
adequate and complete information as to Merisel, Europe, Latin America, Mexico
or any Subsidiary and their affairs, the Stock and the Europe Assets.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
3.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida.
3.2 POWER AND AUTHORITY. Buyer has full corporate power and authority
to make, execute, deliver and perform this Agreement.
3.3 AUTHORIZATION AND ENFORCEABILITY. This Agreement has been, and each
other agreement and instrument required to be executed and delivered by Buyer in
connection with or pursuant hereto will be, duly executed and delivered by Buyer
and constitutes and will constitute, as applicable, the legal, valid and binding
obligation of Buyer, enforceable in accordance with their terms subject to the
qualification that the enforcement of the rights and remedies created hereby and
thereby may be limited by bankruptcy, insolvency, reorganization and other
similar laws of general application relating to or affecting the rights and
remedies of creditors and that the remedy of specific enforcement or injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.
3.4 BROKERAGE. Except as set forth in Section 6.9, Buyer has not made
any agreement or taken any other action which might cause anyone to become
entitled to a broker's fee or commission as a result of the transactions
contemplated hereunder.
3.5 SECURITIES ACT. The Stock purchased by Buyer pursuant to this
Agreement will be acquired without a view to any public distribution thereof,
and Buyer will not offer to sell or otherwise dispose of any shares of the Stock
so acquired by it in violation of the registration requirements of the
Securities Act of 1933, as amended.
3.6 NO VIOLATION OF LAWS OR AGREEMENTS. The execution and delivery of
this Agreement do not, and the performance of this Agreement by Buyer, will not:
(a) contravene any provision of the Buyer's Articles of Incorporation or Bylaws;
(b) conflict with or result in a breach of or constitute a default (or an event
which could reasonably be expected to, with the passage of time or the
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giving of notice or both, constitute a default) under the terms, conditions or
provisions of any material contract to which the Buyer is a party or by which it
or any of its assets may be bound or affected or any judgment or any order of
any court or governmental department, commission, board, agency or
instrumentality, domestic or foreign, or any applicable law, rule or regulation
except in the case of such judgment, order, law, rule or regulation as would not
reasonably be expected to have a Material Adverse Effect on Buyer; (c) result in
the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of Buyer's assets or give to others any interests or rights
therein which lien, charge, encumbrance, interest or right could reasonably be
expected to have a Material Adverse Effect; (d) result in the maturation or
acceleration of any liability or obligation of Buyer (or give others the right
to cause such a maturation or acceleration); or (e) result in the termination of
or loss of any right (or give others the right to cause such a termination or
loss) under any Material Contract to which Buyer is a party or by which it may
be bound.
3.7 CONSENTS. Except as set forth in SCHEDULE 2.16 or where the failure
to obtain the same could not reasonably be expected to have a Material Adverse
Effect, no consent, approval, or authorization of, or registration or filing
with, any person, including any governmental authority or other regulatory
agency, is required in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
3.8 LITIGATION. There are no actions, suits, claims, or proceedings
pending, or to the knowledge of Buyer, threatened against or affecting Buyer or
any of its assets or properties, at law or in equity, by or before any court or
governmental department, agency or instrumentality (an "Authority") that
question the validity of this Agreement or seek to prohibit, enjoin or otherwise
challenge the consummation of the transactions contemplated hereby and no party
has manifested an intention to commence such action, suit, investigation or
proceeding. There are presently no outstanding orders, judgments, injunctions,
stipulations, awards, decrees or orders of any Authority against the Buyer or
any of its assets or properties which prohibit or enjoin the consummation of the
transactions contemplated hereby.
3.9 FINANCING. Buyer has obtained letters regarding financing from bona
fide financial institutions in connection with the transactions contemplated
hereby, copies of which letters have been delivered to Merisel.
3.10 DISCLOSURE. No representation or warranty by Buyer in this
Agreement, and no exhibit, statement, certificate or schedule furnished or to be
furnished to Sellers pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a fact necessary to make the statements or
facts
- 27 -
contained herein or therein not misleading or necessary to provide Sellers with
adequate and complete information as to Buyer and its affairs.
ARTICLE 4
CERTAIN OBLIGATIONS OF THE PARTIES
4.1 CONDUCT OF BUSINESS PENDING CLOSING. From and after the date hereof
and to and including the Closing Date, and unless Buyer shall otherwise consent
or agree in writing, Sellers covenant and agree that:
(a) ORDINARY COURSE. The businesses of Latin America, Mexico
and each of the Subsidiaries will be conducted only in the ordinary course and
consistent with past practice, including billing, shipping and collection
practices, inventory transactions and payment of accounts payable except as
indicated in Sections 4.8 and 4.10 and except that Seller may sell inventory and
collect accounts receivable so as to minimize adjustments to the Purchase Price.
(b) PRESERVATION OF BUSINESSES. Except as set forth in
SCHEDULE 4.1, Sellers, Latin America, Mexico and each of the Subsidiaries will
use all reasonable efforts to preserve the business organizations of Latin
America, Mexico and each of the Subsidiaries intact, and except as may otherwise
be required by this Agreement, will not, without the prior consent of Buyer
which consent will not be unreasonably withheld, terminate the services of the
present officers and key employees of Latin America, Mexico or any of the
Subsidiaries, and will use all reasonable efforts to preserve for Buyer the good
will of the suppliers, customers and others having business relations with Latin
America, Mexico and each of the Subsidiaries.
(c) MATERIAL TRANSACTIONS. Except as set forth on SCHEDULE
4.1(c), Sellers will not permit Latin America, Mexico or any of the Subsidiaries
to:
(i) amend its articles of incorporation or bylaws;
(ii) change its authorized or issued equity
interests or issue any rights or options to acquire shares of its equity
interests;
(iii) enter into or commit to enter into any
Material Contract except in the ordinary course of business;
(iv) enter into any employment or consulting
contract or arrangement except in the ordinary course of business
- 28 -
with any person that is not terminable at will, without penalty or continuing
obligation to the Buyer;
(v) sell, transfer, lease or otherwise dispose of
any of its assets other than inventory, receivables and obsolete equipment in
the ordinary course of business and consistent with past practice;
(vi) except as set forth in SCHEDULE 4.1, incur,
create or assume any mortgage, pledge, lien, restriction, encumbrance, tenancy,
encroachment, covenant, condition, right-of-way, easement, claim, security
interest, charge or other matter affecting title on any of its assets or other
property, except Permitted Encumbrances;
(vii) except as set forth in Schedule 4.1, make,
change or revoke any tax election or make any agreement or settlement with any
taxing authority;
(viii) declare or pay any dividend or other
distribution (except in respect of the payment of any Taxes) in respect of any
of its equity interests, or make any payment to redeem, purchase or otherwise
acquire, or call for redemption, any of such equity interests; provided,
however, that this subsection shall not apply to the European Subsidiaries;
(ix) except to the extent set forth in SCHEDULE
4.1, increase or otherwise change the compensation payable or to become payable
to any officer, employee or agent;
(x) make or authorize the making of any capital
expenditure in excess of $50,000 in the aggregate;
(xi) except as set forth in SCHEDULE 4.1, incur
any debt or other obligation for money borrowed;
(xii) incur any other obligation or liability,
absolute or contingent except in the ordinary course of business
and consistent with past practice;
(xiii) cancel or permit the waiver of any right
material to the operation of the business of Latin America, Mexico or any
Subsidiary relating to any of its suppliers listed on Exhibit D or any customers
representing individually in excess of 5% and in the aggregate more than 10% of
sales in the 18 months ended June 30, 1996 of any of Europe, Latin America,
Mexico or any Subsidiary;
(xiv) guarantee or become a co-maker or
accommodation maker or otherwise become or remain contingently liable in
connection with any liability or obligation of any person other than endorsement
of checks received for deposit;
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(xv) loan, advance funds or make an investment in
or capital contribution to any person, except advances made in the ordinary
course of business to employees in the ordinary course of business consistent
with past practices;
(xvi) increase any prepaid expenses or other
intangible asset the full right, title, interest and benefit of which will not
be available to Latin America, Mexico or the applicable Subsidiary after Closing
(other than ordinary course one-month prepayments in respect of rent and health
insurance);
(xvii) take any action or omit to take any action
which will result in a violation of any applicable law and which could
reasonably be expected to have a Material Adverse Effect or cause a breach of
any Material Contracts;
(xviii) impose or collect any intercompany charge
with respect to Latin America or Mexico in excess of the average of the amounts
charged during the months of April, May and June of 1996 other than with respect
to products saleable in the ordinary course of business at normal markups at
"arms length" prices; or
(xix) enter into any agreement to do any of the
foregoing.
(xx) Notwithstanding any of the foregoing, nothing
in this Agreement shall prohibit Merisel from engaging in intercompany
transactions with any of its subsidiaries other than Latin America and Mexico,
or Europe from engaging in any inter-company transactions with any of the
European Subsidiaries, provided that, except with respect to Latin America,
Mexico and the Subsidiaries other than the European Subsidiaries, all such
inter-company transactions shall be permitted so long as they are settled or
forgiven on or prior to the Closing Date and are in accordance with Section
4.1(c)(xviii) above.
4.2 INSURANCE. Sellers shall cause Latin America, Mexico and each of
the Subsidiaries to maintain in full force and effect the policies of insurance
listed on SCHEDULE 2.24, subject only to variations required by the ordinary
operations of its business, or else will use its reasonable efforts to obtain,
prior to the lapse of any such policy, substantially similar coverage with
insurers of recognized standing and approved in writing by the Buyer. Sellers
shall promptly advise the Buyer in writing of any change of insurer or type of
coverage in respect of the policies listed on SCHEDULE 2.24.
4.3 FULFILLMENT OF AGREEMENTS BY SELLERS. Sellers shall use their
reasonable efforts to cause all of the conditions to the obligations of Buyer
under SECTION 5.1 of this Agreement to be satisfied on or prior to the Closing,
including, but not limited to, not permitting Latin America, Mexico or any of
the Subsidiaries to take any action, omit to take any action or permit to occur
any
- 30 -
event that would make any of the representations and warranties of Sellers
contained herein untrue. Sellers shall cause Latin America, Mexico and each
Subsidiary to use their reasonable efforts, to conduct their business in such a
manner that at the Closing the representations and warranties of Sellers
contained in this Agreement shall be true and correct as though such
representations and warranties were made on, as of, and with reference to such
date. Sellers will promptly notify Buyer in writing of any event or fact which
represents a breach of any of its representations, warranties, covenants or
agreements. To the extent that the Sellers have Knowledge of the same, Sellers
shall promptly advise Buyer in writing of the occurrence of any condition or
development of a nature that is materially adverse to the business, operations,
properties, assets or conditions (financial or otherwise) of Europe, Latin
America, Mexico or any of the Subsidiaries.
4.4 ACCESS, INFORMATION AND DOCUMENTS. Sellers will cause Latin
America, Mexico and each of the Subsidiaries to give to Buyer and to Buyer's
counsel, accountants and other representatives full access during normal
business hours to all of their respective properties, books, tax returns,
contracts, commitments, records, officers, personnel and accountants and will
furnish to Buyer all such documents and copies of documents (certified to be
true copies if requested) and all information with respect to the affairs of
Latin America, Mexico and each of the Subsidiaries as Buyer may reasonably
request. Sellers shall further cause the counsel for each of Europe, Mexico,
Latin America and the Subsidiaries to cooperate with Buyer and hereby waive any
claim of confidentiality with respect to Buyer's access pursuant this Section
4.4. Without limiting the generality of the foregoing, the Buyer shall have the
right to have a reasonable number of its representatives present on-site and
have access, from time to time, to all facilities of Latin America, Mexico and
the Subsidiaries during business hours for the purpose of monitoring the
activities conducted.
4.5 EXCLUSIVITY. Sellers shall not and shall ensure that none of Latin
America, Mexico or any of the Subsidiaries or any of their affiliates, officers,
directors, employees and other agents, directly or indirectly (x) take any
action to encourage, solicit or initiate any Acquisition Proposal (as
hereinafter defined), or (y) respond to, continue, initiate or engage in
discussions or negotiations concerning any Acquisition Proposal with, or
disclose any non-public information relating to Europe, Latin America, Mexico or
any of the Subsidiaries to or afford access to their properties, books or
records to, any person (except Buyer and its representatives). Sellers shall
provide the Buyer with notice and copies of any Acquisition Proposal received by
Sellers not later than twenty-four (24) hours after receipt. The term
"Acquisition Proposal" as used herein means any offer or proposal for, or
indication of interest in, any acquisition of Europe, Latin America, Mexico or
any of the Subsidiaries, whether by way of a merger, consolidation or other
business combination involving any equity interest in, or
- 31 -
a substantial portion of the assets of Europe, Latin America, Mexico or any of
the Subsidiaries.
4.6 SECTION 338(H)(10) ELECTION. Merisel and Buyer shall, at Buyer's
request, make a joint election under section 338(h)(10) of the Code with respect
to the purchase of the stock of the companies listed on SCHEDULE 4.6 (the
"Consolidated Group"). Buyer represents that it is qualified to make such
election. Buyer and Sellers shall (i) negotiate in good faith and agree to an
allocation of the Purchase Price among the assets of companies that are deemed
to have been acquired pursuant to section 338(h)(10) of the Code (the "Section
338 Asset Allocation Schedule") on a basis consistent with the preliminary asset
allocation schedule set forth in SCHEDULE 4.6 and (ii) on the Closing Date,
exchange completed and properly executed copies of Internal Revenue Service Form
8023-A and required schedules related thereto, all of which are to be prepared
on a basis consistent with the Section 338 Asset Allocation Schedule. If any
changes are required to be made to these forms or schedules (including the
Section 338 Asset Allocation Schedule) as a result of information that first
becomes available after the Closing Date, the parties shall promptly and in good
faith reach an agreement as to the precise changes required to be made. The
parties shall use the Section 338 Asset Allocation Schedule for purposes of
preparing all reports and returns with respect to Taxes, including, if
necessary, Internal Revenue Service Form 8594.
4.7 RESIGNATIONS. At the Closing, Sellers will deliver the written
resignation of each of Latin America's, Mexico's and each of the Subsidiaries'
directors, officers, trustees, plan administrators and fiduciaries of the
Benefit Plans. Each of Europe, Latin America, Mexico and each of the
Subsidiaries shall also deliver to Buyer evidence satisfactory to Buyer, in its
sole discretion, of the revocation of any powers of attorney or any
authorization of any person to draw on the bank accounts set forth on the list
prepared pursuant to SCHEDULE 5.1(XIX) of this Agreement.
4.8 ACCOUNTS PAYABLE. With respect to each of Latin America, Mexico and
the Subsidiaries, Sellers shall use their reasonable efforts to obtain the
consent of the ten vendors and suppliers listed on Exhibit D from which the
Subsidiaries purchased the greatest volume of products in the eighteen months
ended June 30, 1996, to the deferral of payment of accounts and shall cause the
Subsidiaries not to pay any accounts payables to the extent that the respective
vendor or supplier shall have consented to such payment deferral; provided,
however, that the obtaining of such consents and the failure to pay accounts
payable to the vendors so consenting shall not constitute a breach of any
representation, warranty or covenant of Sellers hereunder.
4.9 FULFILLMENT OF AGREEMENTS BY BUYER. Buyer shall use its reasonable
efforts to cause all of the conditions to the obligations of Sellers under
Section 5.2 of this Agreement to be satis-
- 32 -
fied on or prior to the Closing. Buyer shall use its best efforts to conduct its
business in such a manner that at the Closing the representations and warranties
of Buyer contained in this Agreement shall be true and correct as though such
representations and warranties were made on, as of, and with reference to such
date. Buyer will promptly notify Merisel in writing of any event or fact which
represents a breach of any of its representations, warranties, covenants or
agreements.
4.10 ELIMINATION OF 30-DAY AUTOMATIC RETURN POLICY. Effective upon the
signing of this Agreement, Europe (with respect to the European Subsidiaries)
and each Subsidiary shall discontinue any existing 30-day automatic return
policy; provided, however, that the discontinuance of such return policy shall
not constitute a breach of any representation, warranty or covenant of Sellers
hereunder.
ARTICLE 5
CONDITIONS TO CLOSING; TERMINATION
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligations of
Buyer to proceed with the Closing under this Agreement are subject to the
fulfillment prior to or at Closing of the following conditions (any one or more
of which may be waived in whole or in part by Buyer at Buyer's option):
(i) BRINGDOWN OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Sellers in this Agreement shall be true
and correct in all material respects on and as of the time of Closing, with the
same force and effect as though such representations and warranties had been
made on, as of and with reference to such time and Buyer shall have received a
certificate to such effect, signed by Sellers.
(ii) PERFORMANCE AND COMPLIANCE. Sellers shall
have performed all of the covenants and complied with all of the provisions
required by this Agreement to be performed or complied with by them on or before
the Closing, and Buyer shall have received a certificate to such effect, signed
by Sellers.
(iii) ACCOUNTS RECEIVABLE CERTIFICATE. Buyer
shall have received a certificate from the Chief Executive Officer of Merisel
certifying as to a summary of the amount and an aging of the accounts and notes
receivable of Latin America, Mexico and each of the Subsidiaries and a
certificate of the Chief Executive Officer of Europe certifying as to a summary
of the amount and an aging of the accounts and notes receivable of each of the
European Subsidiaries as of the close of business on the last day of the month
prior to the date of Closing.
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(iv) SATISFACTORY INSTRUMENTS. All instruments and
documents required on Sellers' part to effectuate and consummate the
transactions contemplated hereby shall be delivered to Buyer and shall be in
form and substance reasonably satisfactory to Buyer and its counsel.
(v) REQUIRED CONSENTS. All consents and approvals
of third parties, including consents of those vendors representing 90% of
purchases for the eighteen months ended June 30, 1996 by Europe, Latin America,
Mexico or the Subsidiaries from the vendors identified on Exhibit D, but
excluding all other vendors to Latin America, Mexico or any Subsidiary to the
transactions contemplated hereby shall have been obtained, and all waiting
periods specified by law the passing of which is necessary for the consummation
of such transactions (including without limitation any waiting periods under
applicable governmental laws) shall have passed or been terminated.
(vi) LITIGATION. No order of any court or
administrative agency shall be in effect which restrains or prohibits the
transactions contemplated hereby or which would materially adversely affect
Buyer's ownership or control of Latin America, Mexico, or any of the
Subsidiaries or their respective businesses or the Europe Assets or seeking
monetary relief by reason of the consummation of such transactions, and there
shall not have been threatened, nor shall there be pending, any such action or
proceeding by or before any court or governmental agency or other regulatory or
administrative agency or commission.
(vii) EXECUTIVE MANAGEMENT. Sellers shall have
terminated, without cost to any of Europe, Latin America, Mexico or any of the
Subsidiaries, and without liability to any of the foregoing, all employment and
other agreements with those individuals listed on SCHEDULE 5.1; provided,
however, that if Buyer or its affiliates rehire any individual listed on
Schedule 5.1 prior to or on the date of Closing, or within one year thereafter,
Buyer will reimburse Sellers for any severance costs paid by them to such
individual.
(viii) RELATED PARTY RECEIVABLES AND PAYABLES. All
loans or payables by Europe, Latin America, Mexico, or any of the Subsidiaries
to, and any receivables of Europe, Latin America, Mexico or any Subsidiary from,
any Related Party shall have been repaid or forgiven in full and there shall be
no outstanding debts or obligations (including, without limitation, amounts
outstanding under the Revolving Credit Agreement and any intercompany tax
accounts) between any Related Party on the one hand, and Europe, Latin America,
Mexico, or any of the Subsidiaries on the other hand.
(ix) ESCROW AGREEMENT. Sellers and the Escrow
Agent shall have executed and delivered the Escrow Agreement to Buyer.
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(x) MATERIAL CHANGES. Since the date hereof, there
shall not have been any material adverse change in the financial condition,
assets, liabilities, net worth, earning power or business of Latin America,
Mexico, or any of the Subsidiaries, and Buyer shall have received a certificate
to such effect, signed by Sellers and the chief executive officer of Sellers.
(xi) PERMITS AND LICENSES REQUIRED. Buyer shall
have received all licenses, permits and certificates and governmental approvals
listed on SCHEDULE 2.16 applicable to it.
(xii) LENDER RELEASE. The European Assets and
Latin America, Mexico and each of the Subsidiaries and all of their assets shall
have been released from any liability under the Revolving Credit Agreement and
any liens arising under said agreement on any of their assets shall have been
released.
(xiii) USE OF MERISEL NAME. Merisel and/or Europe,
as may be required, shall have granted, for no additional consideration, to
Buyer the right and license to the unrestricted use of the "Merisel" name for a
period of one year commencing on the Closing Date in the countries located on
the continents of Europe (including Eastern Europe but excluding the Russian
Federation) and South America, in each country in Latin America and in Mexico.
(xiv) CAMBAR SYSTEM. Sellers shall have provided
Buyer with the use of the CAMBAR System for no longer than 90 days after the
Closing Date; provided, however, that Sellers shall not be responsible for the
successful transmission (uploading) of data from remote systems to CAMBAR. Use
of the CAMBAR System shall include use of the McCormick & Dodge financial
software package, a license for the use of Sales net for DOS and source code
technical support for downloads, use of the Dell EDI, network access to ISSC
(from Los Angeles, California to Boulder, Colorado) and utilization of two
United States based employees to support the system. Such license shall (A)
provide for the payment to Sellers of $100,000 per 30-day month, (B) be
terminable at any time by Buyer at its election without the payment by Buyer of
any additional consideration and (C) include access to the source code but with
no right to modify the same. The operation of the CAMBAR system by Buyer for 90
days shall be in accordance with past practice.
(xv) TOLAS SYSTEM. Sellers shall transfer to
Buyer their rights with respect to the use of the TOLAS System; provided that
Buyer shall have assumed all obligations with respect thereto. Such use shall
include access to the source code and the right to modify the same. Sellers
shall have no right to any improvements or modifications of said system.
(xvi) SBT SYSTEM AND SITE LICENSES. Sellers shall
have transferred to Buyer their rights with respect to the use of the SBT
System; provided that Buyer shall have assumed all
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obligations with respect thereto. Such use shall include access to the
respective source codes and the right to modify the same. Sellers shall have no
right to any improvements or modifications of said system and uses by Buyer.
(xvii) SOFTTEACH TRADEMARK AND PROGRAM. Sellers
shall have allowed Buyer, without additional charge, the non-exclusive right to
use the SoftTeach trademark program in the countries located on the continent of
Europe (including Eastern Europe, but excluding the Russian Federation) and
South America, in each country in Latin America and in Mexico for a period of
one year commencing on the Closing Date and shall execute any and all assignment
documents reasonably required by Buyer to permit the registration of said mark
in the name of Buyer or any of its assignees in all jurisdictions in which the
mark is registered.
(xviii) ESTOPPEL CERTIFICATES. To the extent
reasonably available, Seller shall have delivered to Buyer an original landlord
estoppel certificate and consent in substantially the form attached hereto and
made a part hereof as Exhibit C (collectively, the "Landlord Estoppel
Certificates") from each landlord and sublandlord, if any, under each Lease of
real property.
(xix) BANK ACCOUNTS. Sellers shall have provided
a list setting forth the name of each bank in which Latin America, Mexico and
each Subsidiary has an account or safe deposit box, the identifying numbers or
symbols thereof and the names of all persons authorized to draw thereon or to
have access thereto.
(xx) MIAMI, FLORIDA LEASE. Sellers shall have
delivered to Buyer an assignment of the lease or a sublease and agreements set
forth on SCHEDULE 5.1(XX) to the extent permitted by the terms of such
agreements; provided, in each case that Buyer assumes all obligations
thereunder.
(xxi) FINANCING. Financing necessary to fund the
Purchase Price shall have been obtained by Buyer in connection with the
transactions contemplated hereby on terms reasonably satisfactory to Buyer.
5.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS. The obligation
of Sellers to proceed with the Closing hereunder is subject to the fulfillment
prior to or at Closing of the following conditions (any one or more of which may
be waived in whole or in part by Sellers at Sellers' option):
(i) BRINGDOWN OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects on and as of the time of the Closing,
with the same force and effect as though such representations and warranties had
been made on, as of and with reference to such time and Buyer shall have
delivered to Sellers a certificate to such effect.
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(ii) PERFORMANCE AND COMPLIANCE. Buyer shall have
performed in all material respects all of the covenants and complied in all
material respects with all the provisions required by this Agreement to be
performed or complied with by it on or before the Closing and Buyer shall have
delivered to Sellers a certificate to such effect.
(iii) LITIGATION. No order of any court or
administrative agency shall be in effect which restrains or prohibits the
transactions contemplated hereby and there shall not have been threatened, nor
shall there be pending, any action or proceeding by or before any court or
governmental agency or other regulatory or administrative agency or commission,
challenging any of the transactions contemplated by this Agreement or seeking
monetary relief by reason of the consummation of such transactions.
(iv) SATISFACTORY INSTRUMENTS. All instruments and
documents required on the part of Buyer to effectuate and consummate the
transactions contemplated hereby shall be delivered to Sellers and shall be in
form and substance reasonably satisfactory to Merisel and its counsel.
(v) REQUIRED CONSENTS. All consents and approvals
of all governmental departments, agencies, authorities and commissions required
for the transactions contemplated hereby shall have been obtained, and all
waiting periods specified by law the passing of which is necessary for the
consummation of such transactions (including without limitation any particular
waiting periods) shall have passed or been terminated.
(vi) ESCROW AGENT. Buyer and Escrow Agent shall
have executed and delivered the Escrow Agreement to Sellers.
(vii) DFS RELEASE. Sellers and all of their assets
shall have been released from any liability under the Asset Amortization
Agreement and any liens arising under said agreement on any of their assets
shall have been released.
(viii) LENDER CONSENTS. All consents and approvals
of all lenders for borrowed money of either or both of Merisel or Europe
required for the transactions contemplated hereby shall have been obtained on
terms reasonably satisfactory to Sellers, including without limitation, the
rescheduling of amortization payments and obtaining covenant amendments on terms
reasonably satisfactory to Sellers.
5.3 TERMINATION.
(a) WHEN AGREEMENT MAY BE TERMINATED. This Agreement may be
terminated at any time prior to Closing:
(i) By mutual consent of Buyer and Sellers;
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(ii) By Buyer if the representations and
warranties of Sellers contained in this Agreement shall not be true and correct
in all material respects as at any date prior to Closing, or if Sellers shall
have failed to perform all of the covenants and comply with all of the
provisions required by this Agreement to be performed or complied with by them
on or before the Closing unless such are not material in the aggregate, or if
any of the conditions specified in SECTION 5.1 hereof shall not have been
fulfilled by the time required and shall not have been waived by Buyer;
(iii) By Merisel if the representations and
warranties of Buyer contained in this Agreement shall not be true and correct in
all material respects as at any date prior to Closing, or Buyer shall have
failed to perform all of the covenants and comply with all of the provisions
required by this Agreement to be performed or complied with by it on or before
the Closing unless such are not material in the aggregate or if any of the
conditions specified in SECTION 5.2 hereof shall not have been fulfilled by the
time required and shall not have been waived by Seller; or
(iv) By Buyer or Merisel, if the Closing shall not
have occurred prior to November 29, 1996; PROVIDED, that Buyer or Merisel may
terminate this Agreement pursuant to this subparagraph (iv) only if Closing
shall not have occurred by such date for a reason other than a failure by such
party to satisfy the conditions to Closing of the other party set forth in
SECTION 5.1 or 5.2 hereof.
(v) Notwithstanding the provisions of (ii) or
(iii) above, in the event that Buyer does not proceed with the Closing on
September 27, 1996 as a result of its failure to obtain financing pursuant to
Section 5.1(xxi) or Sellers do not proceed with the Closing on September 27,
1996 as a result of their failure to obtain lender consents pursuant to Section
5.2(viii) hereof, then the Closing shall be extended to such date as the
financing or consents are obtained, but in no event beyond November 29, 1996.
(b) EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Merisel or Buyer, as provided above, this Agreement shall
forthwith terminate and there shall be no liability on the part of the Sellers
or Buyer, except for liabilities arising from a material breach of this
Agreement prior to such termination; PROVIDED, HOWEVER, that the obligations of
the parties set forth in SECTION 6.4 and 6.5 hereof shall survive such
termination and further provided that if at any time prior to December 7, 1996,
Sellers accept an Acquisition Proposal and at such time as this Agreement is
terminated Buyer is not in material breach of its obligations hereunder and
Buyer had the financial ability to consummate this transaction, then Sellers
shall pay Buyer a fee equal to Three Million Dollars ($3,000,000).
Notwithstanding any of the foregoing, if Buyer does not proceed with the Closing
under this Agreement as a result of its failure to obtain
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financing pursuant to Section 5.1(xxi) hereof, or if Sellers do not proceed with
the Closing under this Agreement as a result of their failure to obtain lender
consents pursuant to Section 5.2(viii) hereof, then the party which failed to
satisfy such condition shall reimburse the other party's reasonable
out-of-pocket expenses incurred in connection with the negotiation of this
Agreement and the consummation of the transactions contemplated hereby up to a
maximum of $500,000. Sellers acknowledge that the agreements contained in this
Section are an integral part of the transactions contemplated by this Agreement
and that, without these agreements, Buyer would not enter into this Agreement.
Accordingly, if Sellers fail to pay any amounts pursuant to this Section and, in
order to obtain such payment, legal action is commenced which results in a
judgment against Sellers therefor, Sellers will pay the plaintiff's reasonable
costs (including reasonable attorneys' fees) in connection with such suit,
together with interest computed on any amounts determined pursuant to this
Section (computed from the date when such amounts were due and payable pursuant
to this Section) and such costs (computed from the date or dates incurred) at
the prime rate of interest announced from time to time by Citibank, N.A.
Sellers' obligations pursuant to this Section will survive any termination of
this Agreement.
ARTICLE 6
CERTAIN ADDITIONAL COVENANTS
6.1 COSTS AND EXPENSES. Sellers will pay all costs and expenses,
including legal fees, in connection with the performance of and compliance with
this Agreement by Sellers, Latin America, Mexico and the Subsidiaries, and all
transfer, documentary and similar taxes in connection with the delivery of the
shares of Stock to be made hereunder. Buyer will pay all costs and expenses,
including legal fees, of Buyer's performance of and compliance with this
Agreement, except for the fees paid to Deloitte & Touche, L.L.P. pursuant to
Section 1.2(c).
6.2 COVENANT NOT TO COMPETE. For a period of three years from and after
the Closing, neither the Sellers nor any of their affiliates, will, in any
country located on the continent of Europe (excluding the Russian Federation) or
South America, any country in Latin America or in Mexico, directly or
indirectly, own, manage, operate, join, control or participate in the ownership,
management, operation or control of, any business conducting business under any
name similar to the name of Latin America, Mexico or any Subsidiary. For a
period of three years from and after the Closing, neither the Sellers nor any of
their affiliates will, directly or indirectly, own, manage, operate, join,
control or participate in the ownership, management, operation or control of,
any entity, person, firm, corporation or business that engages in the Business
in, or sells to customers either located in or sells to customers which sell to
end users located in any country located on the con-
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tinent of Europe (excluding the Russian Federation) or South America, any
country in Latin America or in Mexico; provided, however that any bona fide
third party acquiror of the stock or all or substantially all of the assets of
Merisel shall be subject to only the provisions of the first sentence of this
Section 6.2. For purposes of this Agreement, the term "Business" includes
distribution of microcomputer products, networking products and software. The
restrictive covenant contained in this Section is a covenant independent of any
other provision of this Agreement and the existence of any claim which Sellers
may allege against Buyer, whether based on this Agreement or otherwise, will not
prevent the enforcement of this covenant. Sellers agree that Buyer's remedies at
law for any breach or threat of breach by Sellers of the provisions of this
Section will be inadequate, and that Buyer shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Section and to enforce
specifically the terms and provisions hereof, in addition to any other remedy to
which Buyer may be entitled at law or equity. In the event of litigation
regarding the covenant not to compete, the prevailing party in such litigation
shall, in addition to any other remedies the prevailing party may obtain in such
litigation, be entitled to recover from the other party its reasonable legal
fees and out of pocket costs incurred by such party in enforcing or defending
its rights hereunder. The length of time for which this covenant not to compete
shall be in force shall not include any period of violation or any other period
required for litigation during which Buyer seeks to enforce this covenant.
Should any provision of this Section be adjudged to any extent invalid by any
competent tribunal, such provision will be deemed modified to the extent
necessary to make it enforceable.
6.3 CONFIDENTIAL INFORMATION. Sellers acknowledge that for a period of
three years after the Closing, Buyer could be irreparably damaged if Sellers' or
any of their affiliates' confidential knowledge of the operations of Latin
America, Mexico and the Subsidiaries were disclosed to or utilized on behalf of
any person, firm, corporation or other business entity other than Buyer or its
affiliates, and Sellers covenant and agree that they will not following the
Closing, without the prior written consent of Buyer, disclose (or permit to be
disclosed) or use in any way any such confidential information, unless (i)
compelled to disclose such confidential information by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of law, or (ii) such confidential information is generally available to the
public through no fault of Sellers.
6.4 INDEMNIFICATION BY SELLERS.
(a) EXTENT OF INDEMNITY. Sellers hereby agree to indemnify,
defend and hold harmless Buyer and its affiliates from and against:
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(i) any and all claims, actions, proceedings,
judgments, damages, losses, costs, expenses or liabilities incurred or suffered
by, or brought or made against Buyer arising out of or resulting from any
misrepresentation, breach of warranty or nonfulfillment of any covenant or
agreement on the part of Sellers contained in this Agreement or in any statement
or certificate furnished or to be furnished to Buyer pursuant to this Agreement;
(ii) any actions, judgments, costs and expenses
(including reasonable attorneys' fees and all other expenses reasonably incurred
in investigating, preparing or defending any litigation or proceeding, commenced
or threatened) incident to any such breach or nonfulfillment, including the
enforcement of this Section in connection therewith.
For purposes of this Agreement, the aggregate amount of such losses,
liabilities, claims, obligations, damages, costs, expenses and fees shall be
hereinafter referred to as "Damage" or "Damages". In addition, the amount of any
Damages for which indemnification may be sought hereunder shall be determined on
an after-tax basis. Notwithstanding the foregoing, Sellers, with respect to the
European Subsidiaries, shall have no liability to Buyer for a breach of Sections
2.11 and 2.12 unless and until the value of any claims shall have exceeded the
total of the adjustments made pursuant to items (i) through (v) on Exhibit A
with respect to Section 2.11 and items (vi) through (ix) with respect to Section
2.12, respectively. With respect to Latin America and Mexico, Sellers shall have
no liability unless and until the value of any claims shall have exceeded the
adjustments made pursuant to Section 1.2(d)(ii) but in no event in excess of
$2,000,000.
(b) TIME LIMIT ON CERTAIN INDEMNIFICATION CLAIMS. No action or
claim for Damages resulting from breaches of the representations and warranties
of Sellers shall be brought or made after the expiration of a one-year period
from the Closing Date, as the case may be, except that such time limitation
shall not apply to (i) claims for misrepresentations or breaches of warranty
relating to SECTION 2.10 (relating to Taxes), which may be asserted until 60
days after the running of the applicable statute of limitations with respect to
the taxable period to which the particular claims relate, (ii) claims for
misrepresentations or breaches of warranty relating to SECTIONS 2.15 or 2.26,
which may be asserted until three years following the Closing, (iii) any claims
which have been the subject of a good faith written notice from Buyer to Sellers
prior to the expiration of any of the foregoing periods, which notice specifies
in reasonable detail the nature of the claim and that Buyer requests indemnity
hereunder, or (iv) claims for misrepresentations or breaches of warranty related
to Sections 2.11 or 2.12, which may not be asserted after the calculation of the
post-closing adjustment as finally determined by the Resolution Accountants
pursuant to Section 1.2 hereof and any claims based thereon shall be resolved by
such Resolution Accountants at or prior to the determination of the post-closing
adjustment.
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(c) LIMITATIONS ON LIABILITY. Sellers shall not be liable to
Buyer for breaches of representations and warranties under SECTION 6.4(a) unless
the cumulative total of Damages for breaches of representations and warranties
under SECTION 6.4(a) including any amounts that would not individually give rise
to a breach because they are not otherwise material, exceeds $1,000,000 (less
any amount that would have constituted an adjustment to the Purchase Price but
for the fact it was less than $250,000 pursuant to Section 1.2(c)(i)), and then
only to the extent of such excess.
(d) CERTAIN MATTERS EXCLUDED. Notwithstanding anything to the
contrary in this SECTION 6.4, no limitation or condition of liability provided
in this Section shall apply to the breach of any of the representations and
warranties contained herein if such representation or warranty was made in bad
faith with the intent that (i) it contain an untrue statement of a material fact
or (ii) omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
(e) CONTINUATION OF INDEMNITY. In the event of a merger,
consolidation or other business combination of Merisel with any other entity
(the "Transferee") or any other transaction which results in the sale, lease,
exchange, transfer or other disposition of all or substantially all of the
assets of Merisel and its affiliates, provision shall be made for the Transferee
to specifically assume the indemnification obligations set forth in this
Agreement.
6.5 INDEMNIFICATION BY BUYER. Buyer hereby agrees to indemnify and hold
harmless Sellers from and against:
(a) any loss, liability, claim, obligation, damage or
deficiency arising out of or resulting from any misrepresentation, breach of
warranty or nonfulfillment of any covenants, agreement on the part of Buyer
contained in this Agreement or in any statement or certificate furnished or to
be furnished to Sellers pursuant to this Agreement, and
(b) any actions, judgments, costs and expenses (including
reasonable attorneys' fees and all other expenses incurred in investigating,
preparing or defending any litigation or proceeding, commenced or threatened)
incident to any of the foregoing or the enforcement of this Section.
6.6 INDEMNIFICATION PROCEDURES.
(a) The provisions of this Section shall govern any claim for
indemnification by Sellers pursuant to SECTION 6.4, or by the Buyer, pursuant to
SECTION 6.5, (each such indemnified party, an "Indemnitee") against the party or
parties agreeing to provide indemnification hereunder (each such indemnifying
party, an "Indemnitor") with respect to third party claims made against the
Indemnitee.
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(b) The Indemnitee shall promptly give notice hereunder to the
Indemnitor, after obtaining notice of any claim as to which recovery may be
sought against the Indemnitor pursuant to SECTIONS 6.4 or 6.5, and, the
Indemnitor shall have the right to assume the defense of any such claim;
PROVIDED, that (x) the Indemnitee shall not be required to permit the Indemnitor
to assume the defense of any third party claim that seeks an injunction,
restraining order, declaratory relief or other non-monetary relief that, if
granted, is reasonably likely to have a Material Adverse Effect on the
Indemnitee (but Indemnitor shall have the right to participate therein), and (y)
the Indemnitee shall have the right to participate in the defense of any third
party claim where the named parties to any such action include both the
Indemnitee and the Indemnitor and the Indemnitee shall have been advised by
counsel that there are one or more legal or equitable defenses available to the
Indemnitee which are different from those available to the Indemnitor. If the
Indemnitor assumes the defense of such claim or litigation resulting therefrom,
the obligations of the Indemnitor hereunder as to such claim shall include
taking all steps reasonably necessary in the defense or settlement of such claim
or litigation resulting therefrom including the retention of counsel, which
counsel must be to the Indemnitee's reasonable satisfaction, and holding the
Indemnitee harmless from and against any and all Damage resulting from, arising
out of, or incurred with respect to any settlement approved by the Indemnitor or
any judgment in connection with such claim or litigation resulting therefrom and
so long as the Indemnitor performs in accordance with this Section, the
Indemnitor shall not be liable to the Indemnitee for any legal or other expenses
subsequently incurred by the Indemnitee in connection with the defenses thereof
other than reasonable costs of investigation. The Indemnitor shall not, in the
defense of such claim or litigation, consent to the entry of any judgment or
enter into any settlement involving equitable or non-monetary damages or claims
which in the reasonable judgment of the Indemnitee would have a continuing
Material Adverse Effect on the Indemnitee's business (including any material
impairment of its relationships with customers and suppliers) except with the
written consent of the Indemnitee, which consent shall not be unreasonably
withheld, unless the Indemnitee is released and held harmless from and against
any and all Damages resulting from, arising out of or incurred with respect to
such judgment or settlement.
(c) If the Indemnitor shall not assume the defense of any such
claim by a third party or litigation resulting therefrom, the Indemnitee may
defend against such claim or litigation in such manner as it deems appropriate,
provided that the Indemnitee may not settle such claim or litigation without the
consent of the Indemnitor, which consent shall not be unreasonably withheld and
the Indemnitor shall promptly reimburse the Indemnitee for the amount of any
such settlement and for all Damages incurred by the Indemnitee in connection
with the defense against or settlement of such claim or litigation.
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(d) The parties hereto shall cooperate in the defense of any
such claims and shall furnish records, information and testimony, and attend
such conferences, discovery, proceedings, hearings, trials and appeals in each
case as may be reasonably required in connection therewith.
6.7 CLAIMS AGAINST LATIN AMERICA, MEXICO OR ANY SUBSIDIARY.
Notwithstanding any provision in this Agreement to the contrary, Sellers agree
that they shall not be entitled to any indemnification from, or to make or
receive any amount for any claim against, Latin America, Mexico or any
Subsidiary in respect of any Damage or Damages arising out of or resulting from
this Agreement or the transactions contemplated by this Agreement.
6.8 EUROPEAN ANTI-COMPETITION LEGISLATION. Buyer and Sellers have
caused to be filed or will promptly cause to be filed the required notifications
with the applicable European governmental authorities concerning the nature,
terms and conditions of this Agreement. The parties hereto shall not
intentionally or negligently delay submission of information requested by any
such applicable governmental authority and shall use their respective reasonable
efforts promptly to supply, or cause to be supplied, such information and shall
use their best efforts to obtain early termination of any applicable waiting
period.
6.9 BROKERS. Sellers have engaged Merrill Lynch & Co., Inc. as a broker
in connection with this transaction, and any fee, com- mission or other amount
payable to such broker will be paid by Sellers. Buyer has engaged Raymond James
& Associates, Inc. as a broker in connection with this transaction, and any fee,
commission or other amount payable to such broker will be paid by Buyer.
6.10 ACCESS. Until the date which is seven years after the Closing
Date, Buyer will give, and will cause Latin America, Mexico and the Subsidiaries
to give, to the Sellers reasonable access to (and the right to make copies at
the expense of the Sellers) the books, files, records and tax returns of Europe,
Latin America, Mexico and the Subsidiaries to the extent that such relate to the
respective businesses and operations of Europe, Latin America, Mexico and the
Subsidiaries on or prior to the Closing Date. Any access pursuant to this
SECTION 6.10 will be conducted by the Sellers in good faith, with a reasonable
purpose and in such manner as not to interfere unreasonably with the operations
of Buyer, Latin America, Mexico or any of the Subsidiaries following the
Closing. None of Buyer, Latin America, Mexico or any of the Subsidiaries will
destroy or dispose of any such books, files, records or tax returns prior to the
expiration of such seven-year period or such longer period as may be required by
applicable laws.
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6.11 COOPERATION WITH RESPECT TO TAX MATTERS.
(a) Sellers and Buyers recognize that the entities listed on
SCHEDULE 6.11 (the "Cooperation Group") have joined with Merisel in filing
unitary, consolidated, or combined Tax Returns. After the Closing Date (i)
Merisel shall include (to the extent required by law) the taxable income or
loss, and all other items, of the Cooperation Group for periods ending before or
on the Closing Date, in its unitary, consolidated or combined Tax Returns, and
(ii) with respect to any other Tax Returns of the Cooperation Group for any
taxable period that includes but does not end on the Closing Date (the "Straddle
Tax Returns"), Sellers shall prepare a schedule apportioning, on a basis
consistent with the preparation of Sellers' consolidated Federal income tax
return for the taxable period ending on the Closing Date, the taxable income or
loss, and all other items, of the Cooperation Group allocable to the period up
to and including the Closing Date (the "Pre-Closing Period") and the period
after the Closing Date (the "Post-Closing Period") by an interim closing of the
books as of the end of the day on the Closing Date.
(b) Sellers shall be responsible for, and shall have ultimate
discretion with respect to, (i) all Tax Returns required or permitted by
applicable law to be filed by Latin America with respect to periods that end on
or before the Closing Date, (ii) any elections related to such Tax Returns,
provided, that, any such election shall be subject to the review of Buyer prior
to the filing of any Tax Returns, and (iii) any Audit (including the execution
of any waiver of limitation with respect to any Audit) relating to any such Tax
Returns; FURTHER, Buyer and the Cooperation Group shall cooperate with Sellers
for the purpose of making any election under applicable law. Sellers shall
consult in good faith with Buyer in respect to the issues set forth in this
Section 6.11(b).
(c) Buyer and the Cooperation Group shall be responsible for,
and shall have ultimate discretion with respect to, (i) all Tax Returns required
to be filed by the Cooperation Group with respect to periods that begin after
the Closing Date and (ii) the Straddle Tax Returns, if any, and (iii) any Audit
(including the execution of any waiver of limitation with respect to any Audit)
relating to any such Tax Returns; PROVIDED, HOWEVER, that (x) in the case of any
Straddle Tax Return, the preparation and filing of such Return shall be subject
to review and approval of Sellers, and (y) in the event that any Audit for which
Buyer or the Cooperation Group is responsible pursuant to this Section 6.11(c)
could reasonably be expected to result in a material increase in Tax liability
for which the Sellers would be liable, Buyer shall consult in good faith with
Sellers in respect of the specific issues that could give rise to such increased
Tax liability.
(d) After the Closing Date, each of Buyer and the members of
the Cooperation Group on the one hand, and Sellers, on the
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other, shall (i) provide, or cause to be provided, to each other's respective
subsidiaries, officers, employees, representatives and affiliates, such
assistance as may reasonably be requested by any of them in connection with the
preparation of any Tax Return or any Audit of the companies in respect of which
Buyer, the members of Cooperation Group or Sellers, as the case may be, is
responsible pursuant to Section 6.11(b) or (c) hereof and (ii) retain, or cause
to be retained, for so long as any such taxable years or Audits shall remain
open for adjustments, any records or information which may be relevant to any
such Tax Returns or Audits. The assistance provided for in this Section 6.11
shall include without limitation each of Buyer, the members of the Cooperation
Group and Sellers (x) making their agents and employees and the agents and
employees of their respective subsidiaries and affiliates available to each
other on a mutually convenient basis to provide such assistance as might
reasonably be expected to be of use in connection with any such Tax Returns or
Audits and (y) providing, or causing to be provided, such information as might
be reasonably expected to be of use in connection with any such Tax Returns or
Audits, including without limitation records, returns, schedules, documents,
work papers, opinions, letters or memoranda, or other relevant materials
relating thereto.
(e) Each of Buyer, the members of the Cooperation Group and
Sellers, shall promptly inform, keep regularly apprised of the progress with
respect to, and notify the other party in writing not later than (i) ten
business days after the receipt of any notice of any Audit, or (ii) fifteen
business days prior to the settlement or final determination of any Audit for
which it was responsible pursuant to Section 6.11(b) or (c) hereof which could
affect the Tax liability of such other party for any taxable year.
6.12 RELEASED OBLIGATIONS. Buyer will indemnify Sellers from and
against any and all claims, actions, proceedings, judgments, damages, losses,
costs, expenses or liabilities incurred or suffered by, or brought or made
against Sellers with respect to any accounts payable reflected on the Europe and
Latin/Mexico Closing Balance Sheet and any accounts payable of Latin America or
Mexico guaranteed by Sellers in existence at the Closing and the leases and
agreements being transferred or assigned through the transfer of stock or
otherwise under this Agreement to the extent that the existence of any of the
foregoing does not constitute a breach of any representation or warranty
contained in this Agreement and will enter into an agreement reasonably
satisfactory to Sellers with respect to such guarantees set forth on SCHEDULE
6.12.
6.13 EMPLOYEE OBLIGATIONS. Seller agrees to indemnify Buyer against all
claims and liabilities arising from any Plan (as defined in Section 2.26(a)) or
any obligations thereunder or liabilities relating thereto (the "Employee
Benefits") arising prior to the Closing Date to the extent that such claims or
liabilities are not reflected as a liability on the Europe and Latin/Mexico
Closing Balance Sheet; and Buyer agrees to indemnify Seller and its
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affiliates against all claims and liabilities arising from any Employee Benefits
arising on or after the Closing Date or reflected as a liability on the Europe
and Latin/Mexico Closing Balance Sheet.
6.14 REDUCTION OF INTERCOMPANY BALANCES. Sellers shall cause Latin
America, Mexico and the Subsidiaries to use all cash and marketable securities
held by them to repay outstanding balances to the maximum extent practicable as
of the Closing Date.
6.15 FULFILLMENT AGREEMENT. Latin America and Merisel Americas, Inc.
shall enter into a Fulfillment Agreement on substantially the terms set forth on
SCHEDULE 6.15 for a period of up to one year.
6.16 AUDITS OF PURCHASED ENTITIES. Sellers shall engage Deloitte &
Touche, LLP to perform audits of the combined financial statements of the
Europe, Latin America, Mexico and the Subsidiaries for the three years ended
December 31, 1993, 1994 and 1995. Buyer shall be responsible for the cost of the
same.
ARTICLE 7
MISCELLANEOUS
7.1 NATURE AND SURVIVAL OF REPRESENTATIONS. The representations,
warranties, covenants and agreements of Buyer and Sellers contained in this
Agreement, and all statements contained in this Agreement or any exhibit or
schedule hereto or any certificate, financial statement or report or other
document delivered pursuant to this Agreement, shall be deemed to constitute
representations, warranties, covenants and agreements of the respective party
delivering the same. All such representations, warranties, covenants and
agreements shall survive the Closing for the period set forth in Section 6.4(b)
of this Agreement. Sellers acknowledge that their representations and warranties
in this Agreement shall not be affected or mitigated by any investigation
conducted by Buyer or its representatives prior to Closing or any Knowledge of
Buyer.
7.2 CERTAIN DEFINITIONS. For the purpose of this Agreement, the
following terms are defined in the Sections indicated:
TERM SECTION
---- -------
"1995 Balance Sheets" 2.7
"Accounting Principles" 1.2(c)
"Acquisition Proposal" 4.5
"Amounts Due to or From
Related Parties" 1.2(a)
"Asset Amortization Agreement" 1.2(b)
"Authority" 3.8
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"Balance Sheet Date" 2.7
"Business" 6.2
"Buyer" First Paragraph
"Closing Date" 1.3(a)
"Closing" 1.3
"Code" 2.10(a)
"Consolidated Group" 4.6
"Cooperation Group" 6.11
"Damage" or "Damages" 6.4(a)(ii)
"ERISA Affiliate" 2.26(a)
"ERISA" 2.26(a)
"Escrow Agent" 1.2(b)
"Escrow Agreement" 1.2(b)
"Escrow Payment" 1.2(b)
"Estimated Purchase Payment
Amount" 1.2(b)
"Europe Assets" Page 1
"Europe Cash Payment" 1.2(b)
"Europe and Latin/Mexico
Closing Balance Sheet" 1.2(c)(i)
"Europe Stock" Page 1
"Financial Statements" 2.7
"Governmental Body" 2.10(a)
"Hazardous Substances" 2.15
"Indemnitee" 6.6(a)
"Indemnitor" 6.6(a)
"Intellectual Property" 2.25
"Interim Statements" 2.7(b)
"June Balance Sheet" 2.7
"Latin American Accounting Principles" 1.2(c)(ii)
"Latin/Mexico Stock" Page 1
"Latin/Mexico Cash Payment" 1.2(b)
"Lease" 2.6(j)
"Liens" 2.5
"Material Contract" 2.6
"Minimum Latin/Mexico
Equity Value 1.2(d)(ii)
"Net Assets" 1.2(a)
"Permitted Encumbrances" 2.17
"Purchase Price" 1.2(a)
"Questionable Payment" 2.28
"Regulations" 2.10(a)
"Related Party" 2.19(b)
"Resolution Accountants" Page 1
"Revolving Credit Agreement" 1.2(a)
"Seller" First Paragraph
"Stock" Background
"Tax Return" 2.10(a)
"Tax" or "Taxes" 2.10(a)
"Total Adjusted Capital of
the European Subsidiaries" 1.2(a)
"U.S. GAAP" 1.2(c)
- 48 -
7.3 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or, if sent by recognized overnight courier (in which case
they shall be deemed received on the business day following the day of delivery
to said courier if delivered pursuant to such courier's next day delivery
service) at the following addresses (or at such other address as shall be given
in writing by any party to the other):
If to Buyer, to:
CHS ELECTRONICS, INC.
2153 N.W. 86th Avenue
Miami, Florida 33122
ATTENTION: Claudio Osorio, President
With a required copy to:
Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, FL 33131
ATTENTION: Paul Berkowitz, Esq.
If to Sellers, to:
Merisel, Inc.
200 Continental Boulevard
El Segundo, California 90245
ATTENTION: Kelly Martin, Esq.
With a required copy to:
Skadden Arps Slate Meagher & Flom
300 South Grand Avenue
Los Angeles, California 90071-3144
ATTENTION: Joseph Giunta, Esq.
7.4 SUCCESSORS AND ASSIGNS. This Agreement, and all rights and powers
granted and obligations created hereby, will bind and inure to the benefit of
and bind the parties hereto and their respective successors and assigns. Buyer
shall have the right to assign its rights, but not delegate its obligations,
under this Agreement, to an affiliate of Buyer.
7.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Florida, without giving effect
to principles of conflicts of laws.
7.6 HEADINGS. The headings preceding the text of the sec- tions and
subsections hereof are inserted solely for convenience of
- 49 -
reference, and shall not constitute a part of this Agreement, nor shall they
affect its meaning, construction or effect.
7.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
7.8 FURTHER ASSURANCES. Each party shall cooperate and take such action
as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
7.9 AMENDMENT AND WAIVER. The parties may by mutual agreement amend
this Agreement in any respect, and any party, as to such party, may (a) extend
the time for the performance of any of the obligations of any other party, (b)
waive any inaccuracies in representations or warranties by any other party, (c)
waive compliance by any other party with any of the agreements contained herein
and performance of any obligations by such other party, and (d) waive the
fulfillment of any condition that is precedent to the performance by such party
of any of its obligations under this Agreement. To be effective, any such
amendment or waiver must be in writing and be signed by the party against whom
enforcement of the same is sought.
7.10 ENTIRE AGREEMENT. This Agreement and the Schedules and Exhibits
hereto, each of which is hereby incorporated herein, and the Confidentiality
Agreement between Merisel and Buyer dated February 29, 1996 (which Sellers and
Buyer hereby agree to abide by and as to which Sellers waive any alleged
breaches based on any allegations raised to date raised by either Sellers or
their affiliates) set forth all of the promises, covenants, agreements,
conditions and undertakings between the parties hereto with respect to the
subject matter hereof, and supersede all prior and contemporaneous agreements
and understandings, inducements or conditions, express or implied, oral or
written.
7.11 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party hereto,
whether under any rule of construction or otherwise. No party to this Agreement
shall be considered the draftsman. On the contrary, this Agreement has been
reviewed, negotiated and accepted by all parties and their attorneys and shall
be construed and interpreted according to the ordinary commercial meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
7.12 ATTORNEY'S FEES. If Buyer on the one hand or Sellers on the other
hand initiates any action or proceeding to enforce or interpret any provision
hereof, the prevailing party in such action or proceeding shall be entitled to
recover from the other party, in addition to any damages or other relief granted
as a result of or in connection with such action or proceeding, all costs and
expen-
- 50 -
ses of such suit (including any appeals proceedings), including, without
limitation, reasonable attorneys' fees and the cost of investigation and
discovery related to such action or proceeding.
7.13 PUBLIC ANNOUNCEMENT. No party to this Agreement shall make or
issue, or cause to be made or issued, any public announcement (whether oral or
written) or written statement concerning this Agreement or the transactions
contemplated hereby (except as may be required by applicable law or legal
process and except to the respective directors, officers, agents and creditors
of each party and, with respect to Buyer, parties from which financing for the
transactions contemplated herein is sought) without the prior written consent of
all other parties or as may be otherwise required by law or the rules of any
stock exchange or market on which the equity securities of such party are listed
or traded.
7.14 KNOWLEDGE OF SELLERS AND BUYER. For the purposes hereof, the term
"Knowledge of Sellers" shall mean the knowledge of each of the individuals
listed on SCHEDULE 7.14. For the purposes hereof, the term "Knowledge of Buyer"
shall mean knowledge of the President or Chief Financial Officer of Buyer.
7.15 MATERIAL ADVERSE EFFECT. For the purposes hereof, the term
"Material Adverse Effect" or a variation thereof shall mean any change or effect
that, individually or when taken together with all other such changes or
effects, is, or could reasonably be, or is reasonably likely to be, materially
adverse to the business, condition (financial or otherwise), results of
operations, properties, assets or liabilities of (i) with respect to Buyer,
Buyer and its subsidiaries taken as a whole, and (ii) with respect to Sellers,
Latin America, Mexico or the Subsidiaries (A) Merisel (U.K.) Limited and
Merisel-UK Swiss Branch, together taken as a whole, (B) Merisel France, Inc.
taken as a whole, (C) Merisel GESmbh, Merisel GmbH and Merisel Netherlands B.V.,
together taken as a whole and (D) Mexico and Latin America and their
subsidiaries, together taken as a whole.
- 51 -
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date set forth above.
CHS ELECTRONICS, INC.
By: /s/ CLAUDIO OSORIO
----------------------------------------------
Claudio Osorio, President
MERISEL, INC.
By: /s/ DWIGHT STEFFENSEN
----------------------------------------------
MERISEL EUROPE, INC.
By: /s/ DWIGHT STEFFENSEN
----------------------------------------------
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FIRST AMENDMENT TO PURCHASE AGREEMENT
THIS IS A FIRST AMENDMENT TO PURCHASE AGREEMENT (the "Amendment") dated
as of October 4, 1996 by and among CHS Electronics, Inc., a Florida corporation
("Buyer"), and Merisel, Inc., a Delaware corporation ("Merisel"), and Merisel
Europe, Inc., a Delaware corporation ("Europe"). Merisel and Europe are
collectively referred to herein as the "Sellers." All capitalized terms without
definition used in this Amendment shall retain their respective meanings as
specified in the Purchase Agreement (as defined hereafter).
BACKGROUND
Pursuant to the Purchase Agreement (the "Purchase Agreement") dated
August 29, 1996 by and among the Buyer and the Sellers, the Buyer agreed to
purchase and the Sellers agreed to sell the Europe Stock, the Latin America
Stock and the Mexico Stock and the Europe Assets on the terms and subject to the
conditions set forth in such Purchase Agreement. The Buyer and the Sellers have
deemed it advisable to amend certain terms of the Purchase Agreement, subject to
the terms and conditions of this Amendment.
TERMS
In consideration of the mutual covenants contained herein and intending
to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
1.1. AMENDMENT TO SECTION 1.2(A). Section 1.2(a) of the Purchase Agreement is
hereby amended in its entirety as follows:
(a) PURCHASE PRICE. The aggregate purchase price for all of the Stock
and the Europe Assets (the "Purchase Price") shall be as follows: (i) Forty
Million Dollars ($40,000,000) for the Latin America Stock and the Mexico Stock,
subject to adjustment as set forth in Section 1.2(d)(ii) hereof (the
"Latin/Mexico Purchase Price"), (ii) with respect to the Europe Stock, an amount
equal to the Total Adjusted Capital of the European Subsidiaries and (iii) with
respect to the Europe Assets, the book value of the Europe Assets (the "Europe
Assets Value") as of the Closing Date (the aggregate of items (ii) and (iii) are
defined as the "Purchase Price of Europe Stock and the Europe Assets"). Each of
the Latin/Mexico Purchase Price and the Purchase Price of the Europe Stock and
the Europe Assets shall be apportioned between the Latin American Stock and the
Mexico Stock and among the Europe Stock and Europe Assets, respectively, in
accordance with the apportionment schedules set forth on Schedule 1.2(a). "Total
Adjusted Capital of the European Subsidiaries" is hereby defined to be Net
Assets, excluding any Amounts Due to or from Related Parties, as defined
hereafter, as adjusted by the formula set forth in Exhibit A. "Net Assets" is
defined as assets reflected on the Europe Closing Balance Sheet (as such term is
defined in Section 1.2(c)(i)) increased by any receivables subject to the Asset
Amortization Agreement (as such term is defined in Section 1.2(b), but decreased
by liabilities to third parties reflected on such balance sheet. "Amounts Due to
or from Related Parties" shall include any payables to or receivables from
Related Parties (as such term is defined in Section 2.19) including, without
limitation, any amounts outstanding under the Revolving Credit Agreement dated
as of December 26, 1993 and amended and restated as of April 12, 1996 among
Europe and Merisel Americas, Inc. as borrowers and Citicorp USA Inc. as agent
(the "Revolving Credit Agreement") and inter-company tax accounts but excluding
deferred tax liabilities and deferred tax assets which will be assumed by the
Buyer. The Purchase Price shall be further reduced by (X) $4 million for the
cost of eliminating duplicative facilities and severance of redundant personnel
and relocation costs and (Y) $3,216,000 representing the rent payable under
certain leases in the Netherlands during the 12 months following the Closing
Date. Attached as Schedule 1.2(a) is a sample calculation of what the Purchase
Price would be if the same were determined on the June 30, 1996 balance sheet.
Merisel and Buyer shall cause a physical inventory to be taken on the Closing
Date in connection with the foregoing calculation.
1.2. AMENDMENT TO SECTIONS 1.2(B), (C)(I) AND (D). Sections 1.2(b), (c)(i) and
(d) of the Purchase Agreement are hereby amended in their entirety as follows:
(b) PAYMENTS. The Purchase Price shall be payable as follows: on the
Closing Date, Buyer shall pay (i) to Europe, by wire transfer, a cash amount
(the "Europe Cash Payment") equal to the Estimated Purchase Payment Amount (as
defined below) less the amount payable to Deutsche Financial Services (UK) Ltd.
under the Asset Amortization Agreement as of the Closing Date and (ii) to
Merisel, by wire transfer, a cash amount (the "Latin/Mexico Cash Payment") equal
to Forty Million Dollars ($40,000,000). For purposes of this Agreement, the term
"Estimated Purchase Payment Amount" means the dollar amount of One Hundred and
Twenty Eight Million Two Hundred and Thirty Eight Thousand One Hundred and Forty
Five Dollars ($128,238,145) less the amounts paid pursuant to clause (ii) above
less cash transfers to Merisel prior to Closing of Sixteen Million Four Hundred
and Eight Thousand Dollars ($16,408,000). In addition, Buyer shall assume the
liability of Europe under the Asset Amortization Agreement between Deutsche
Financial Services, (UK) Ltd., and Merisel (U.K.) Limited dated as of October
12, 1995 (the "Asset Amortization Agreement") and the liabilities and
obligations set forth on SCHEDULE 1.1.
(c)(ii) REGARDING THE CLOSING BALANCE SHEETS. (i) Promptly after the
Closing Date, but in any event no later than 60 days after the Closing Date,
Europe shall prepare and deliver to Buyer,
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or cause to be prepared and delivered to Buyer, a combining balance sheet of the
European Subsidiaries and Europe Assets as of the close of business on the
Closing Date (the "Europe Closing Balance Sheet"), together with the draft audit
report of Deloitte & Touche, LLP thereon. The Europe Closing Balance Sheet shall
be prepared in accordance with United States generally accepted accounting
principles ("U.S. GAAP") applied consistently with those U.S. GAAP principles
applied in the preparation of the 1995 Balance Sheets (as defined in SECTION
2.7) (such accounting principles being, the "Accounting Principles"), except
that the accounts receivable and inventory on the Europe Closing Balance Sheet
will be valued utilizing the adjustments listed in Exhibit A. In addition, the
combining closing balance sheet will convert foreign currencies to U.S. dollars
at the closing exchange rate published in the Wall Street Journal as of the
Closing Date, and the Europe Closing Balance Sheet will be prior to the
application of purchase accounting and recordation of the transactions
contemplated in the Agreement. MIFINCO, Inc.'s investment in shares of Merisel
France, Inc. and Mexico will be valued at zero for the combining Closing Balance
Sheet. The report of Deloitte & Touche, LLP shall state (without qualification
as to scope of audit or other matters) that in their opinion the Europe Closing
Balance Sheet presents fairly in all material respects, the net assets of Europe
sold as of the Closing Date, on the basis of accounting defined in this
Agreement and Exhibit A. The Europe Closing Balance Sheet shall be subject to
the review of Grant Thornton L.L.P. The parties shall allow and cause the
European Subsidiaries to allow the parties, Grant Thornton, L.L.P. and other
representatives of the parties full and complete access to all work papers,
books and records and all additional information used in preparing the Europe
Closing Balance Sheet and will make their and the European Subsidiaries'
officers and employees reasonably available to discuss with the parties and
their representatives such papers, books, records and information. Buyer and its
representatives shall be provided complete access to all work papers and other
information used by Deloitte & Touche, LLP in examining the Europe Closing
Balance Sheet which are not proprietary to Deloitte & Touche, LLP and Sellers
and their representatives shall be provided complete access to all work papers
and other information used by Grant Thornton, L.L.P. in reviewing the Europe
Closing Balance Sheet which are not proprietary to Grant Thornton, LLP. The
Europe Closing Balance Sheet, when delivered by Europe to Buyer, shall be deemed
final, conclusive and binding on the parties and will be deemed to be the Europe
Closing Balance Sheet, upon which the Purchase Price of the Europe Stock and the
Europe Assets will be based, unless either Europe or Buyer notifies the other,
within 10 days after receipt of the Europe Closing Balance Sheet, of its
disagreement therewith (which notice shall state with reasonable specificity the
reasons for any disagreement and the amounts in dispute). If neither Europe nor
Buyer disagrees with the draft Europe Closing Balance Sheet, Deloitte & Touche,
LLP will issue their final audit report. If there is a disagreement, and such
disagreement cannot be resolved
- 3 -
by Buyer and Europe (each of which shall use their "reasonable efforts" to so
resolve the claim) within 30 days following the receipt by Europe of the Europe
Closing Balance Sheet, the items in dispute shall be submitted to a nationally
recognized firm of independent auditors acceptable to both Buyer and Europe (or,
in the absence of agreement, the auditing firm of KPMG Peat Marwick L.L.P.) (the
"Resolution Accountants"). The sole function of the Resolution Accountants shall
be to select as most accurately reflecting the Europe Closing Balance Sheet,
without adjustment or alteration, the Europe Closing Balance Sheet submitted by
Buyer or the Europe Closing Balance Sheet submitted by Europe as the true Europe
Closing Balance Sheet, and the determination by such independent auditing firm
shall be binding and conclusive upon the parties. If the Resolution Accountants
select the Europe Closing Balance Sheet submitted by Buyer, Europe shall pay the
fees and expenses of the Resolution Accountants; if the Resolution Accountants
select the Europe Closing Balance Sheet submitted by Europe, Buyer shall pay the
fees and expenses of the Resolution Accountants. Europe shall pay the cost of
the fees and expenses of Deloitte & Touche, L.L.P. and Buyer shall pay the cost
of the fees and expenses of Grant Thornton L.L.P. There shall be no adjustment
to the Purchase Price unless and until such adjustment exceeds $250,000 and only
to the extent of that excess of $250,000.
(d) POST-CLOSING DETERMINATION.
(i) To the extent that the Estimated Purchase Payment Amount
shall have been more than the sum of the Total Adjusted Capital of the European
Subsidiaries and Europe Assets Value, the amount of such difference shall be
paid by Sellers to Buyer within five business days after the determination of
such amount. To the extent that the Estimated Purchase Payment Amount is less
than the Total Adjusted Capital of the European Subsidiaries and the Europe
Assets Value, the amount of such difference shall be paid by Buyer to Europe,
within five business days after the determination of such amount, by wire
transfer.
(ii) To the extent that the amount of the shareholders equity of
Latin America and Mexico as set forth on the Latin/Mexico Closing Balance Sheet,
assuming all liabilities of Latin America and Mexico to Merisel or any of its
other affiliates have been capitalized (the "Closing Equity Value"), is less
than the sum of (x) the amount of adjusted shareholders equity of Latin America
and Mexico as of June 30, 1996 which the parties hereby agree is $36,698,191
computed as shown on Schedule 1.2(a) plus (y) the net pretax earnings of Latin
America and the net earnings of Mexico between July 1, 1996 and the Closing Date
as reflected in the monthly financial statements of Latin America and Mexico
plus any provision which would increase the reserve for inventory, receivables
and/or other accruals in excess of normal provisions for inventory, receivables
and/or other accruals, computed consistently with past practice, less (z) $1.5
million (the
- 4 -
"Minimum Latin/Mexico Equity Value"), the amount of such difference shall be
paid to Buyer by Sellers within five business days after the determination of
such amount; provided, however, that no amount in excess of $2,000,000 shall be
so deducted.
1.3. AMENDMENT TO SECTIONS 1.3(A) AND (B)(III). Sections 1.3(a) and (b)(iii) of
the Purchase Agreement are hereby amended in their entirety as follows:
(a) TIME AND PLACE. The closing under this Agreement (the "Closing")
will take place at 9:00 a.m., local time, on September 27, 1996 or on such later
date as the conditions precedent contained in Section 5.1 and 5.2 hereof are
satisfied or waived (subject, however, to the provisions of Section 5.3(a)(iv)),
at the offices of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.,
1221 Brickell Avenue, Miami, Florida, or at such other time, date or place as
the parties shall mutually agree; provided, however, that notwithstanding the
actual date of Closing, the Closing shall be deemed to have occurred on
September 27, 1996. The date on which the Closing occurs is referred to herein
as the "Closing Date."
(b)(iii) DELIVERIES BY BUYER. Buyer will deliver (A) to Europe the
Europe Cash Payment and (B) to Merisel the Latin/Mexico Cash Payment.
1.4 AMENDMENT TO SECTION 5.1(I). Section 5.1(i) of the Purchase Agreement is
hereby amended in its entirety as follows:
(i) BRINGDOWN OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Sellers in this Agreement shall be true and correct in all
material respects on and as of the time of Closing, except as set forth on
Exhibit 5.1 attached hereto and incorporated herein by reference, with the same
force and effect as though such representations and warranties had been made on,
as of and with reference to such time and Buyer shall have received a
certificate to such effect, signed by Sellers.
1.5 AMENDMENT TO SECTION 5.1(II). Section 5.1(ii) of the Purchase Agreement is
hereby amended in its entirety as follows:
(ii) PERFORMANCE AND COMPLIANCE. Sellers shall have performed all of
the covenants and complied with all of the provisions required by this Agreement
to be performed or complied with by them on or before the Closing, except as set
forth on Exhibit 5.1 attached hereto and incorporated herein by reference, and
Buyer shall have received a certificate to such effect, signed by Sellers.
1.6 AMENDMENT TO SECTION 5.1(V). Section 5.1(v) of the Purchase Agreement is
hereby amended in its entirety as follows:
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(v) REQUIRED CONSENTS. All consents and approvals of third parties,
including consents of those vendors representing 90% of purchases for the
eighteen months ended June 30, 1996 by Europe, Latin America, Mexico or the
Subsidiaries from the vendors identified on Exhibit D, but excluding all other
vendors to Latin America, Mexico or any Subsidiary to the transactions
contemplated hereby shall have been obtained, except as set forth on Exhibit 5.1
attached hereto and incorporated herein by reference, and all waiting periods
specified by law the passing of which is necessary for the consummation of such
transactions (including without limitation any waiting periods under applicable
governmental laws) shall have passed or been terminated.
1.7 AMENDMENT TO SECTION 5.1(VII). Section 5.1(vii) of the Purchase Agreement is
hereby amended in its entirety as follows:
(vii) EXECUTIVE MANAGEMENT. Sellers shall have terminated, without
cost to any of Europe, Latin America, Mexico or any of the Subsidiaries, and
without liability to any of the foregoing, all employment and other agreements
with those individuals listed on Schedule 5.1, except as set forth on Exhibit
5.1 attached hereto and incorporated herein by reference; provided, however,
that if Buyer or its affiliates rehire any individual listed on Schedule 5.1
prior to or on the date of Closing, or within one year thereafter, Buyer will
reimburse Sellers for any severance costs paid by them to such individual.
1.8 DELETION OF SECTION 5.1(IX). Section 5.1(ix) is hereby deleted in its
entirety.
1.9 AMENDMENT TO SECTION 5.1(X). Section 5.1(x) of the Purchase Agreement is
hereby amended in its entirety as follows:
(x) MATERIAL CHANGES. Since the date hereof, there shall not have
been any material adverse change in the financial condition, assets,
liabilities, net worth, earning power or business of Latin America, Mexico or
any of the Subsidiaries, except as set forth on Exhibit 5.1 attached hereto and
incorporated herein by reference, and Buyer shall have received a certificate to
such effect, signed by the chief executive officer of each of the Sellers on
behalf of each of the Sellers.
1.10 AMENDMENT TO SECTION 5.1(XI). Section 5.1(xi) of the Purchase Agreement is
hereby amended in its entirety as follows:
(xi) PERMITS AND LICENSES REQUIRED. Buyer shall have received all
licenses, permits and certificates and governmental approvals listed on Schedule
2.16, except as set forth on Exhibit 5.1 attached hereto and incorporated herein
by reference, applicable to it.
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1.11 AMENDMENT TO SECTION 5.1(XVI). Section 5.1(xvi) of the Purchase Agreement
is hereby deleted in its entirety.
1.12 AMENDMENT TO SECTION 5.1(XX). Section 5.1(xx) of the Purchase Agreement is
hereby amended in its entirety as follows:
(xx) MIAMI, FLORIDA LEASE. Sellers shall have delivered to Buyer an
assignment of the lease or a sublease and agreements set forth on Schedule
5.1(xx), except as set forth on Exhibit 5.1 attached hereto and incorporated
herein by reference, to the extent permitted by the terms of such agreements;
provided, in each case that Buyer assumes all obligations thereunder.
1.13 Deletion of Section 5.2(vi). Section 5.2(vi) is hereby deleted in its
entirety.
1.14 AMENDMENT TO ARTICLE VI. Article VI of the Purchase Agreement is hereby
amended to include the following additional Section:
6.17 CONDITIONAL ACQUISITION OF THE MEXICO STOCK. Buyer and Sellers
hereby agree that the consummation of the acquisition of the Mexico Stock (the
"Acquisition") upon the Closing of this Purchase Agreement is subject to
revocation upon the disapproval of the Mexican Federal Competence Commission
("Comision Federal de Competencia Economica" hereinafter referred to as the
"CFC") of such Acquisition. Therefore, if the CFC disapproves the Acquisition,
the Buyer shall return the Mexico Stock to Sellers and Sellers shall return all
consideration received from Buyer with respect to such Mexico Stock within five
business days of the date of such disapproval. In addition, Buyer and Sellers
hereby agree to take all necessary action to obtain CFC approval of the
Acquisition, including the filing of appropriate notification applications.
1.15 AMENDMENT TO SECTION 7.2. Section 7.2 is hereby amended to delete the terms
"Escrow Agent," "Escrow Agreement" and "Escrow Payment."
1.16 AMENDMENT TO SCHEDULE 1.1. Schedule 1.1 of the Purchase Agreement is hereby
amended to include such additional text as set forth in Exhibit A attached
hereto.
1.17 AMENDMENT TO SCHEDULE 1.2(A). Schedule 1.2(a) of the Purchase Agreement is
hereby amended in its entirety to read as provided in Exhibit B attached hereto.
1.18 DELETION OF EXHIBIT B. Exhibit B of the Purchase Agreement is hereby
deleted.
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ARTICLE II.
2.1 EFFECT OF AMENDMENT. Except as expressly provided in Article I of this
Amendment, nothing shall affect or be deemed to affect any provisions of the
Purchase Agreement, and, except only to the extent that they may be varied
hereby, the Buyer and Sellers hereby ratify and confirm all of their agreements
and obligations contained in the Purchase Agreement, as amended hereby.
2.2 COUNTERPARTS. This Amendment may be executed in two or more counterparts,
each of which shall be deemed an original, but which together shall constitute
one and the same instrument.
2.3 GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the internal laws of the State of Florida without giving effect
to principles of conflicts of laws.
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Amendment to be executed by their duly authorized representatives as of the day
and year first above written.
CHS ELECTRONICS, INC.
By: /s/ CLAUDIO OSORIO
-----------------------------------------
Claudio Osorio, Chief Executive
Officer
MERISEL, INC.
By: /s/ DWIGHT STEFFENSEN
-----------------------------------------
Dwight Steffensen, Chief Executive
Officer
MERISEL EUROPE, INC.
By: /s/ DWIGHT STEFFENSEN
-----------------------------------------
Dwight Steffensen, Chief Executive
Officer
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