PURCHASE AGREEMENT
between
D&H SERVICES, LLC
and
MERISEL AMERICAS, INC.
AUGUST 13, 2004
TABLE OF CONTENTS
ARTICLE 1 PURCHASE AND SALE OF ASSETS................................................................1
1.1 Purchase and Sale of Assets....................................................................1
1.2 Excluded Assets; Consents to Assignment........................................................2
1.3 Consideration..................................................................................3
1.4 Assumption of Liabilities......................................................................3
1.5 Excluded Liabilities...........................................................................4
1.6 Allocation of Purchase Price...................................................................4
1.7 Employees......................................................................................4
1.8 Closing........................................................................................5
1.9 Deliveries at Closing..........................................................................5
1.10 Purchase Price Calculation.....................................................................5
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE SELLER...............................................8
2.1 Organization and Good Standing.................................................................8
2.2 Investment.....................................................................................8
2.3 Authorization and Enforceability...............................................................8
2.4 Consents, No Violations........................................................................8
2.5 Title to Tangible Assets and Purchased Shares..................................................9
2.6 Transactions with Affiliates...................................................................9
2.7 Financial Statements...........................................................................9
2.8 Accounts Receivable............................................................................9
2.9 Licenses and Permits...........................................................................9
2.10 Absence of Certain Changes....................................................................10
2.11 Contracts.....................................................................................10
2.12 Compliance With Laws..........................................................................10
2.13 Employees.....................................................................................11
2.14 Litigation....................................................................................11
2.15 Environmental Compliance......................................................................11
2.16 Taxes.........................................................................................12
2.17 Brokers and Finders...........................................................................12
2.18 Cross-References on Schedules.................................................................12
2.19 No Warranties.................................................................................13
2.20 Intentionally omitted.........................................................................13
2.21 Intentionally omitted.........................................................................13
2.22 Real Property.................................................................................13
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BUYER...............................................14
3.1 Organization and Power; Foreign Qualification.................................................14
3.2 Authorization and Enforceability of Agreements................................................14
3.3 Investment Representations....................................................................14
ARTICLE 4 COVENANTS.................................................................................15
4.1 Covenants Pending Closing.....................................................................15
4.2 Consents and Approvals; Fulfillment of Conditions.............................................15
4.3 Access........................................................................................16
4.4 Disclosure of Breach Discovered...............................................................16
4.5 Publicity.....................................................................................16
4.6 Discharge of Liabilities......................................................................16
4.7 Maintenance of Records........................................................................16
4.8 Confidentiality...............................................................................16
4.9 Noncompetition and Nonsolicitation Agreement..................................................17
4.10 Transition Services...........................................................................17
ARTICLE 5 CONDITIONS TO THE OBLIGATIONS OF THE BUYER................................................17
5.1 Representations and Warranties of the Seller..................................................17
5.2 Absence of Litigation or Investigation........................................................17
5.3 Delivery of Documents.........................................................................17
5.4 No Material Adverse Change....................................................................18
ARTICLE 6 CONDITIONS TO THE OBLIGATIONS OF THE SELLER...............................................18
6.1 Representations and Warranties of the Buyer...................................................18
6.2 Absence of Litigation or Investigation........................................................18
6.3 Purchase Price................................................................................18
6.4 Employees.....................................................................................18
6.5 Delivery of Documents.........................................................................18
ARTICLE 7 SURVIVAL; INDEMNIFICATION.................................................................18
7.1 Survival......................................................................................18
7.2 Indemnity by the Seller.......................................................................18
7.3 Transfer Taxes................................................................................19
7.4 Indemnity by The Buyer........................................................................19
7.5 Limitations on Recoverable Losses.............................................................19
7.6 Claims for Indemnification; Disputes..........................................................19
7.7 Exclusive Remedy..............................................................................20
ARTICLE 8 TERMINATION...............................................................................20
8.1 Termination...................................................................................20
8.2 Effect of Termination.........................................................................21
ARTICLE 9 GENERAL PROVISIONS........................................................................21
9.1 Expenses......................................................................................21
9.2 Further Assurances............................................................................21
9.3 Notices.......................................................................................22
9.4 Successors and Assigns........................................................................22
9.5 Entire Agreement; Modifications; Waiver.......................................................22
9.6 Severability..................................................................................22
9.7 Governing Law.................................................................................23
9.8 Bulk Sales Compliance.........................................................................23
9.9 Interpretation................................................................................23
9.10 Counterparts..................................................................................23
9.11 Recitals, Schedules and Exhibits..............................................................23
9.12 Section Headings..............................................................................23
PURCHASE AGREEMENT
This PURCHASE AGREEMENT (the "Agreement") is dated as of August 13,
2004 and is entered into between Merisel Americas, Inc., a Delaware corporation
(the "Seller") and D&H Services, LLC, a California limited liability company
(the "Buyer").
WHEREAS, the Seller is engaged in the business of providing software
licensing distribution services.
WHEREAS, the Seller owns all of the issued and outstanding capital
stock of the Subsidiaries (as defined below).
WHEREAS, the Buyers desire to acquire and the Seller desires to sell,
substantially all of the assets, including the capital stock of the
Subsidiaries, and certain of the liabilities of the Seller.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and such other consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of Assets. Subject to the terms and conditions of this
Agreement, at the Closing (as defined in Section 1.8), the Seller shall transfer
and deliver to the Buyer, and Buyer shall purchase and accept from the Seller,
all of the Seller's right, title and interest, as of the Closing Date, in and to
all of the assets of the Seller (other than the Excluded Assets (as defined
below)) (collectively, the "Purchased Assets"), including, without limitation,
(a) the trademarks and patents (and applications with respect to any of the
foregoing) listed on Schedule 1.1(a);
(b) the trade names, intellectual property and other intangible rights of
whatever nature listed on Schedule 1.1(b);
(c) the machinery, equipment, supplies and furniture owned by the Seller
("FF&E") listed on Schedule 1.1(c) (the "Tangible Assets");
(d) the agreements and contracts of the Seller listed on Schedule 2.11 or
Schedule 1.1(d) (the "Contracts"), subject to the provisions of Sections 1.2(b)
and 4.2;
(e) intentionally omitted;
(f) the deposits or other prepayments made by the Seller in connection with
existing Contracts as of the Closing Date listed on Schedule 1.1(f) (the
"Deposits");
(g) all supplier lists, sales files, business development information,
databases, price lists and pricing records and schedules, accounting records,
rate records, sales literature, technical literature, information and know-how,
and general intangibles, licenses (to the extent transferable), trade
association or other memberships (to the extent transferable), and any other
books, documents, instruments and records used by the Seller;
(h) a copy of the customer lists of the Seller, provided that the Buyer
acknowledges and agrees that the Seller shall retain its ownership of such
customer lists and may transfer rights in such lists to third parties;
(i) all billed and unbilled accounts receivable of the Seller, as of the Closing
Date (the "Accounts Receivable");
(j) all goodwill of the Seller;
(k) all of the issued and outstanding capital stock of the subsidiaries of the
Seller listed on Schedule 1.1 (k) hereof (collectively, the "Subsidiaries"); and
(l) all other assets of the Seller except the Excluded Assets.
At the Closing, the Seller shall cause Merisel Properties, Inc. to transfer the
real property set forth on Schedule 2.22(a) to the Buyer.
1.2 Excluded Assets; Consents to Assignment.
(a) Notwithstanding any other provision of this Agreement, the Buyer shall not
acquire (i) the Seller's rights under this Agreement; (ii) cash and cash
equivalents; (iii) the bank accounts and investment accounts set forth on
Schedule 1.2; (iv) rights with respect to any Plan (as defined in Section 1.7),,
(v) refunds of Taxes including without limitation those based on or measured by
reference to net income of the Seller ("Income Taxes"), except for refunds
related to Tax liabilities assumed by the Buyer hereunder; (vi) insurance
policies and any rights with respect thereto; (vii) copies of corporate records,
tax returns and financial records of the Seller, (viii) the real property lease
held by the Seller for 000 Xxxxxxxxxxx Xxxxxxxxx, Xx Xxxxxxx, Xxxxxxxxxx, and
related leasehold improvements and fixtures, (ix) any FF&E not set forth on
Schedule 1.1(c), (x) any agreements or contracts not set forth on Schedules
1.1(d) or 2.11, (xi) assets or stock related to any purchases of any businesses
by the Seller after June 30, 2004 and (xii) all assets set forth on Schedule 1.2
(collectively, the "Excluded Assets"). To avoid any ambiguity, the Tax
attributes of the Subsidiaries (including any net operating loss carryover of
the Subsidiaries based upon the Tax losses incurred by the Subsidiaries) are
transferred hereunder in connection with the transfer of the stock of the
Subsidiaries, but all Tax attributes of the Seller are being retained by the
Seller and are included in the definition of Excluded Assets.
(b) To the extent that the assignment or subcontracting of any Contract shall
require the consent of any other party, this Agreement shall not constitute a
contract to transfer the same if any attempted transfer would constitute a
breach thereof. The Seller and the Buyer shall use their reasonable efforts to
obtain any consent necessary to assignment or subcontracting of a Contract in
accordance with Section 4.2. If any such consent is not obtained prior to the
Closing then the Seller shall cooperate with the Buyer, at Buyer's sole cost and
expense, in any reasonable arrangement requested by the Buyer designed to
provide to the Buyer the benefits under any Contract, including enforcement of
any and all rights of the Seller against the other party thereto arising out of
breach or cancellation thereof by such other party or otherwise.
1.3 Consideration. In consideration for the sale and delivery of the
Purchased Assets the Buyer shall:
(a) deliver the estimated Purchase Price (as such term is defined below), if
such amount is a positive number, payable in immediately available funds at the
Closing;
(b) assume the Assumed Liabilities (as such term is defined in Section 1.4), and
(c) perform the promises and covenants contained herein (collectively the
"Purchase Price").
The Purchase Price shall be an amount equal to (i) the book value of the
Purchased Assets and the assets of the Subsidiaries as of the Closing (with
depreciation of such assets calculated as of the start of business on the
Closing Date), less (ii) the amount of the Assumed Liabilities as of the
Closing, each calculated in accordance with the terms and provisions of Section
1.10. If Purchase Price is a negative number, Buyer shall acquire cash from the
Seller in an amount equal to such difference.
1.4 Assumption of Liabilities. The Buyer shall assume and thereafter shall pay
and perform, satisfy and otherwise discharge the following liabilities and
obligations of the Seller or the Subsidiaries (the "Assumed Liabilities"):
(i) all obligations and liabilities under the Contracts, in an
amount not to exceed any reserves established therefor on the
Closing Statement, if such reserves are required by generally
accepted accounting principals;
(ii) all obligations and liabilities to Transferred Employees (as
defined in Section 1.7) including by reason of any alleged
termination of employment as a result of the sale of the
Purchased Assets or Purchased Shares;
(iii) all other obligations and liabilities that arise out of the
operations of the business of the Buyer arising after the
Closing Date;
(iv) all Tax obligations and liabilities of the Seller, other than
as set forth in Section 1.5(i) up to the sum of (A) the amount
of Tax refunds transferred to the Buyer under Section 1.1 and
(B) the amount of Tax obligations and liabilities set forth on
Schedule 1.4(iv); and
(v) the specific obligations and liabilities set forth on Schedule
1.4(v), in an amount not to exceed the amounts shown on such
schedule.
1.5 Excluded Liabilities. The Buyer expressly does not and shall not assume any
liability, obligation or commitment of the Seller unless set forth in Section
1.4, including without limitation:
(i) for any Income Taxes payable by the Seller by reason of the transactions
contemplated hereby;
(ii) with respect to any Plan (as defined in Section 1.7) of the Seller;
(iii) any obligation or liability with respect to product or service warranties
or liabilities; or
(iv) any obligation or liability not expressly listed in Section 1.4
(collectively, the "Excluded Liabilities").
1.6 Allocation of Purchase Price. The Buyer and the Seller agree that the
Purchase Price shall be allocated among the Purchased Assets based upon their
fair market value as reasonably determined by the Buyer, in accordance with
generally accepted accounting principles and applicable laws, a schedule of
which shall be delivered to the Seller within 90 days after the Closing. The
Buyer and the Seller agree that each will report the federal, state and local
income and other tax consequences of the purchase and sale contemplated hereby
in a manner consistent with such allocation and that neither will take any
position inconsistent therewith upon examination of any tax return, in any
refund claim, in any litigation, or otherwise.
1.7 Employees.
---------
(a) The Buyer hereby agrees to offer to employ, at the Closing, the persons
identified to the Seller in writing 2 business days prior to the Closing Date
(collectively the "Transferred Employees" and each a "Transferred Employee") on
such terms and conditions as the Buyer shall determine. At the Closing, the
Seller shall terminate the employment of those Transferred Employees who accept
employment with the Buyer.
(b) The term of the employment of the Transferred Employees is a matter within
the Buyer's sole discretion, it being expressly understood that the Buyer
reserves full right to terminate the employment of such persons at any time.
However, Buyer hereby agrees to comply with the provisions of the Worker
Adjustment and Retraining Notification Act ("WARN"), and shall hold the Seller
harmless against all loss and expense, including attorneys' fees, with respect
to any WARN liabilities arising as a result of events transpiring on or after
the Closing Date.
(c) Except as provided herein, the terms and conditions of the employment of
Transferred Employees are matters within the Buyer's sole discretion, it being
expressly understood that the Buyer reserves full right to amend or terminate
its benefit plans as it sees fit.
(d) The Buyer is not assuming any severance contracts or obligations with
respect to the Transferred Employees.
(e) No assets or liabilities of any employee benefit pension, profit sharing, or
welfare plans of the Seller or its affiliates (the "Plans") shall be transferred
to any comparable plan established or maintained by the Buyer, and the Buyer
does not agree to adopt or assume any obligations under the Plans or to
contribute to the Plans.
1.8 Closing. The Closing for the sale of the Purchased Assets (the "Closing")
will be held at the offices of Xxxxxxx XxXxxxxxx LLP, 000 Xxxxx Xxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, at 10:00 a.m. on the day on which all
closing conditions are satisfied (other than those actions the parties will take
at the Closing itself), or such other date as the parties hereto mutually agree
to, but no later than August 31, 2004 (the "Closing Date").
1.9 Deliveries at Closing.
(a) Seller's Deliveries. At the Closing, the Seller will deliver
to the Buyer:
(i) bills of sale or other documents to transfer title to the
Purchased Assets; including an assignment and assumption
agreement substantially in the form of Exhibit A attached
hereto (the "Assignment and Assumption Agreement"), executed
by the Seller;
(ii) a deed of trust transferring the real property owned by the
Subsidiaries to the Buyer;
(iii) stock certificates evidencing the outstanding shares of
capital stock of the Subsidiaries;
(iv) the certificate described in Section 5.1;
(v) resignations of the directors of the Subsidiaries; and
(vi) any Purchase Price adjustment payment to be made by the Seller
as provided in Section 1.3.
(b) Buyer Deliveries. At the Closing, the Buyer will deliver to
the Seller:
(i) any assumption agreements necessary for the Buyer to take
title to the Purchased Assets and assume the Assumed
Liabilities, including the Assignment and Assumption
Agreement, executed by the Buyer;
(ii) the certificate described in Section 6.1; and
(iii) the Purchase Price, if any, by wire transfer of immediately
available funds to an account designated by the Seller.
1.10 Purchase Price Calculation.
(a) The amount of the Purchase Price, as defined in Section 1.3,
shall be determined pursuant to this Section 1.10.
Notwithstanding anything to the contrary in this Agreement,
for all Purchase Price calculations, the Assumed Liabilities
listed on Schedule 1.4(v) will be valued at the amounts shown
on Schedule 1.4(v).
(b) No later than two (2) days prior to the Closing Date, the
Seller shall prepare and deliver to the Buyer an estimated
Statement of Purchased Assets and Assumed Liabilities of the
Seller and the Subsidiaries as of the start of business on the
Closing Date, which will reflect the Purchased Assets, the
assets of the Subsidiaries and the Assumed Liabilities (the
"Closing Statement"), prepared in accordance with generally
accepted accounting principles consistently applied (the
"Estimated Closing Statement"). The Purchased Asset and
Assumed Liabilities accounts on the Estimated Closing
Statement shall be used to calculate the estimated Purchase
Price as of the start of business on the Closing Date, with
any off-balance sheet liabilities valued at their nominal fair
market value (the "Estimated Purchase Price") .
(c) The Buyer shall review the Estimated Closing Statement and
Estimated Purchase Price and the parties shall resolve in good
faith any disagreements concerning such estimates prior to the
anticipated Closing Date.
(d) After the Closing, the Purchase Price will be determined as
follows:
(i)Within thirty (30) calendar days after the Closing, the
Seller shall prepare and deliver to the Buyer a Statement
of Purchased Assets and Assumed Liabilities, prepared in
accordance with generally accepted accounting principles
consistently applied (the "Closing Statement"). The
applicable Closing Statement Purchased Asset and Assumed
Liabilities accounts shall be used to calculate the Purchase
Price as of the start of business on the Closing Date,
with any off-balance sheet liabilities valued at their
nominal fair market value (the "Final Purchase Price"). The
Buyer shall have a period of thirty (30) calendar days
from receipt of the Closing Statement to review such
statement and the Seller's calculation of Final Purchase
Price. In connection therewith, the Buyer shall provide
the Seller and its representatives with access to all
records and work papers necessary to prepare, compute or
verify the Closing Statement and the Final Purchase Price.
(ii) Within thirty (30) calendar days following receipt
by the Buyer of the Closing Statement, the Buyer shall
deliver written notice (a "Notice of Disagreement") to the
Seller of any dispute the Buyer has with respect to the
preparation or content of such Closing Statement or
calculation of the Final Purchase Price. The Notice of
Disagreement must describe in reasonable detail the items
contained in the Closing Statement or calculation of Final
Purchase Price that the Buyer disputes and the basis for any
such dispute. If the Buyer does not notify the Seller in
writing of a dispute with respect to the Closing Statement or
calculation of the Final Purchase Price within such thirty
(30) day period, the calculation of the Final Purchase Price
reflected in the Closing Statement will be final, conclusive
and binding on the Seller and the Buyer. If a Notice of
Disagreement is delivered to the Seller, the Buyer and
the Seller shall negotiate in good faith to resolve the
disputed items contained therein. If the Buyer and the
Seller, notwithstanding such good faith effort, fail to
resolve such disputed items within fifteen (15) calendar days
after delivery of the Notice of Disagreement to the
Seller, then the Buyer and the Seller jointly shall
engage a recognized independent public accounting firm as may
be mutually agreed (the "Independent Accountant"), to
resolve such disputed items in accordance with the
standards set forth in this clause (d). The Seller and the
Buyer shall cooperate in the engagement of the Independent
Accountant and shall use reasonable efforts to cause the
Independent Accountant to render a written decision resolving
the matters submitted to the Independent Accountant as
promptly as practicable. The scope of the disputes to be
resolved by the Independent Accountant will be limited to the
items in dispute that were properly included in the Notice of
Disagreement. The Independent Accountant's decision will be
based solely on written submissions by the Seller and its
representatives and written submissions by the Buyer and
its representatives. The Independent Accountant may not
assign a value to a disputed item greater than the greatest
value assigned to the disputed item by the Buyer, on the one
hand, or the Seller, on the other hand, or smaller than
the smallest value assigned to the disputed item by the
Buyer on the one hand, or the Seller, on the other hand.
All determinations made by the Independent Accountant will
be final, conclusive and binding on the Buyer and the
Seller and judgment may be entered upon the determination
of the Independent Accountant in any court having
jurisdiction over the party against which such
determination is to be enforced. The fees and expenses of
the Independent Accountant shall be shared equally between the
Buyer and the Seller.
(iii) For purposes of complying with the terms set forth in
this Section 1.10(d), the Seller shall cooperate with and make
available to the Buyer and its representatives all
information, records, data and working papers, as may be
reasonably required in connection with the analysis of the
Closing Statement and Final Purchase Price and the resolution
of any disputes thereunder.
(iv) After giving effect to this Section 1.10(d), the Purchase
Price shall either be (A) increased by the amount, if any, by
which (1) Final Purchase Price exceed (2) Estimated Purchase
Price or (B) decreased by the amount, if any, by which (1)
Estimated Purchase Price exceeds (2) the Final Purchase Price.
(v) The payment of the amount of any adjustment required under
this Section 1.10(d) shall be made, within (A) five (5)
business days after the Buyer notified the Seller that it does
not object to the Final Purchase Price, or the end of the
thirty (30) day review period if no dispute notice has been
given by the Buyer or (B) five (5) business days following the
final determination of any disputed items pursuant to Section
1.10(d)(ii).
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer as follows:
2.1 Organization and Good Standing. The Seller and each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Seller is duly qualified to transact business and
is in good standing in every jurisdiction in which such qualification is
necessary, except for where the failure to be so qualified would not have a
material adverse effect on the business of the Seller. The Seller has all
necessary corporate power and authority to carry on its business as it is now
being conducted. Each of the Subsidiaries is duly qualified to transact business
and is in good standing in every jurisdiction in which the character of its
business makes such qualification necessary, except for jurisdictions where the
failure to be so qualified would not have a material adverse effect its
business. Each of the Subsidiaries has all necessary corporate power and
authority to carry on its business as it is now conducted.
2.2 Investment. The Subsidiaries do not, directly or indirectly, own or control
any interest or investment (whether equity or debt) in any corporation,
partnership, joint venture, business organization, trust or other entity, other
than as disclosed on Schedule 2.11.
2.3 Authorization and Enforceability. The Seller has all requisite corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder. This Agreement has been duly authorized by the Seller's Board of
Directors and this Agreement will be duly executed and delivered by the Seller
and will constitute the legal, valid and binding obligation of the Seller,
enforceable in accordance with its terms, except as may be limited by
bankruptcy, reorganization, insolvency, moratorium or other laws relating to or
affecting the enforcement of creditors' rights and remedies generally; and
except as enforcement may be limited by general principles of equity.
2.4 Consents, No Violations. Except as set forth on Schedule 2.4, no approvals
or consents by, or filings with, any federal, state, municipal, foreign or other
court or governmental or administrative body, agency or other third party is
required in connection with the execution and delivery by the Seller of this
Agreement or the consummation by the Seller of the transactions contemplated
hereby, except for those which, if not obtained, would not have, individually or
in the aggregate, a material adverse effect on the operations, financial
condition or results of operations of the Seller or of the Subsidiaries taken as
a whole (a "Material Adverse Effect") or the ability of the Seller to execute
and deliver this Agreement or to consummate the transactions contemplated
hereby. Except as set forth on Schedule 2.4 or as would not have, individually
or in the aggregate, a Material Adverse Effect, neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby will (a) violate any provision of the Certificate of
Incorporation or the Bylaws of the Seller or of any of the Subsidiaries, (b)
violate, or be in conflict with, or constitute a default (or other event which,
with the giving of notice or lapse of time or both, would constitute a default)
under, or give rise to any right of termination, cancellation or acceleration
under any of the terms, conditions or provisions of any material lease, license,
promissory note, contract, agreement, mortgage, deed of trust or other
instrument or document to which the Seller or any of the Subsidiaries is a party
or by which any of the Purchased Assets or the assets of any of the Subsidiaries
may be bound, (c) violate any order, writ, injunction, decree, law, statute,
rule or regulation of any court or governmental authority applicable to the
Seller or any of the Subsidiaries or any of the Purchased Assets or the assets
of any of the Subsidiaries or (d) give rise to a declaration or imposition of
any claim, lien, charge, security interest or encumbrance upon any of the
Purchased Assets or the assets of any the Subsidiaries.
2.5 Title to Tangible Assets and Purchased Shares.
(a) The Seller has good and marketable title to all of the owned Tangible
Assets. All such owned Tangible Assets are free and clear of any conditions or
restrictions on transfer or assignment and, except as shown on Schedule 2.5(a),
of any and all liens, pledges, claims, security interests, encumbrances,
charges, restrictions or liabilities of any kind (collectively, "Liens"). Each
Subsidiary has good and marketable title to all of the Tangible Assets it
purports to own, free and clear of any Liens.
(b) The Seller beneficially owns all outstanding capital stock of the
Subsidiaries free and clear of all Liens (other than restrictions on transfer
under federal or state securities laws).
2.6 Transactions with Affiliates. Schedule 2.6 sets forth any material
contracts, agreements or transactions of the Seller or any Subsidiary with any
of the officers, directors or employees.
2.7 Financial Statements. The Seller has previously delivered to the Buyer
balance sheets of the Seller and its affiliates at December 31, 2003 and June
30, 2004 and statements of operations for the three and six month periods ended
June 30, 2004 (the "Financial Statements"). The Financial Statements were (a)
prepared from the books and records kept by the Seller and the Subsidiaries and
(b) have been prepared, in all material respects, in accordance with generally
accepted accounting principles as in effect from time to time (other than the
omission of footnotes). The Financial Statements present fairly in all material
respects the financial position and results of operations of the Seller and the
Subsidiaries as of and for the periods then ended.
2.8 Accounts Receivable. The accounts receivable of the Seller and the
Subsidiaries, as reflected in the June 30, 2004 Balance Sheet, represent sales
actually made or services actually performed on or prior to such date in the
ordinary course of the business and consistent with past practices.
2.9 Licenses and Permits. Schedule 2.9 hereto contains a complete list of all
material governmental licenses and permits held by the Seller and the
Subsidiaries (the "Licenses"). Except as set forth on Schedule 2.9, or as would
not have, individually or in the aggregate, a Material Adverse Effect, to the
knowledge of the Seller (i) there are no pending or, threatened claims or
proceedings challenging the validity of or seeking to revoke or discontinue
(other than expiration according to each respective License's terms), any of the
Licenses and (ii) there are no defaults or events which but for notice of lapse
of time or both would constitute a default under the Licenses.
2.10 Absence of Certain Changes. As of the date hereof, except as set forth in
Schedule 2.10, and except for the transactions specifically contemplated under
this Agreement, since June 30, 2004, there has not been:
(a) Any declaration, setting aside or payment of any dividend or distribution in
the form of assets or property with respect to the capital stock of the
Subsidiaries;
(b) Any material transaction not in the ordinary course of business, including
any sale of properties or assets;
(c) Except in the ordinary course of business and consistent with past
practices, any payment, satisfaction, discharge or cancellation of any material
debts or claims of the Seller or the Subsidiaries;
(d) Any mortgage, pledge or subjection to lien, charge or encumbrance of any
kind on any of the Purchased Assets;
(e) Other than in the ordinary course of business, any increase in, or
commitment to increase, the direct or indirect compensation payable or to become
payable to any Transferred Employee or any commitment to make severance, bonus
or special payments to any Transferred Employee, upon a change in ownership of
the Seller; and
(f) Any material alteration in the manner of keeping the books, accounts or
records of the Seller or the Subsidiaries or in the accounting practices of the
Seller or the Subsidiaries.
2.11 Contracts. Schedule 2.11 contains, as of the date of this Agreement, a
complete, list of all written contracts to which the Seller or any Subsidiary is
a party: (i) pursuant to which the Seller or any Subsidiary will make or receive
payments in excess of $100,000 per annum; (ii) regarding financing for the
Seller or any Subsidiary or (iii) relating to the real property leased by the
Seller or any Subsidiary (the "Leased Real Property")(the "Material Contracts").
Other than as set forth on Schedule 2.11 or as would not have, individually or
in the aggregate, a Material Adverse Effect, (i) to the Seller's knowledge, no
event has occurred which would constitute a default (or any event which, with
the giving of notice or lapse of time or both, would constitute a default) under
any term or provision of any of the Material Contracts and (ii) each of the
Material Contracts is the legal, valid and binding obligation of the Seller or a
Subsidiary, as applicable, enforceable in accordance with its terms, except as
may be limited by bankruptcy, reorganization, insolvency, moratorium, government
contracting or other laws relating to or affecting the enforcement of creditors'
rights and remedies generally and except as enforcement may be limited by
general principles of equity.
2.12 Compliance With Laws. Except as disclosed on Schedule 2.12, or as would not
have, individually or in the aggregate, a Material Adverse Effect, the business
of the Seller and of each of the Subsidiaries is in compliance with all
applicable laws, statutes, ordinances, rules, regulations, orders and other
requirements of all federal governmental authorities, and of all states,
municipalities and other political subdivisions and agencies thereof, having
jurisdiction over the Seller or the Subsidiaries.
2.13 Employees. Except to the extent set forth in Schedule 2.13, or as would not
have, individually or in the aggregate, a Material Adverse Effect:
(a) The Seller and each Subsidiary is in material compliance with all federal,
state and local laws, statutes, ordinances, rules, regulations, orders and other
requirements relating to the employment of labor;
(b) There is no pending or threatened charge, complaint, allegation, application
or other process or claim against the Seller or any Subsidiary before any
federal, state or local or other governmental or administrative agency relating
to employment matters for the Seller or any Subsidiary; and
(c) No Transferred Employees are covered by any collective bargaining agreement,
nor, to the knowledge of the Seller, as of the date hereof, is there any effort
being made by any union to organize the Transferred Employees.
2.14 Litigation. Except as set forth in Schedule 2.14, or as would not have
individually or in the aggregate a Material Adverse Effect:
(a) There is no pending or, to the knowledge of the Seller, threatened action,
suit, arbitration proceeding, unfair labor practice proceeding, investigation or
inquiry before any court or governmental or administrative body or agency, or
any private arbitration tribunal, against, relating to or affecting the Seller
or the Subsidiaries, or the transactions contemplated by this Agreement, and
(b) There is not in effect any order, judgment or decree of any court or
governmental or administrative body or agency affecting the business of the
Seller or of any of the Subsidiaries.
2.15 Environmental Compliance.
Except as set forth on Schedule 2.15, or as would not have, individually or in
the aggregate, a Material Adverse Effect,
(a) Seller is operating the business of Seller and the Subsidiaries (the
"Business") in material compliance with all applicable local, state and federal
environmental, health and safety laws, statutes, regulations and ordinances
relating to or otherwise imposing liability or standards of conduct concerning
pollution, protection of the environment or human health and safety, including,
but not limited to, the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. ss.ss.9601 et seq. ("CERCLA"), the Resource
Conservation and Recovery Act, 42 U.S.C. ss.ss.6901 et seq., the Clean Water
Act, 33 U.S.C. ss.ss.1251 et seq., and the environmental laws and regulations of
the states in which the Business operates as each such law, statute, regulation
or ordinance has been amended from time to time ("Environmental Laws and
Regulations").
(b) Neither Seller nor the Subsidiaries have accepted for destruction, and do
not store, any hazardous substance or hazardous material in the Leased Premises
except for de-minimis amounts of items such as office or cleaning supplies used
in the ordinary course of business.
(c) Neither Seller or the Subsidiaries has ever disposed of, released or caused
the release from, at, under or onto the Leased Premises of an amount of any
hazardous substance or hazardous material into the environment which release or
disposal would constitute a violation of, require reporting or notification to
any governmental agency pursuant to, or require investigation or clean-up under
any Environmental Laws and Regulations. To Seller's knowledge, no disposal,
release or burial of any hazardous substance or hazardous material has occurred
at any facility or site to which hazardous substances or hazardous materials
from or generated by the Business may have been taken at any time in the past.
(d) Seller is not a potentially responsible party nor has not received any
notice that it is a potentially responsible party, notice of responsibility,
notice of violation or request for information from any government agency or
other Person under any Environmental Laws and Regulations with respect to the
Business or the Leased Premises. Seller does not own, lease, rent or otherwise
utilize any underground storage tanks in connection with the Business, and, to
Seller's knowledge, there are no tanks, containers, cylinders, drums or cans
buried, stored or deposited in or at the Leased Premises.
(e) Seller has delivered to Buyer copies of all environmental assessments,
surveys and reports in Seller's possession or control related to the Leased
Premises, all of which are identified in Schedule 2.15(a).
2.16 Taxes. Except as disclosed on Schedule 2.16, the Seller and the
Subsidiaries have timely filed all material tax returns which the Seller and/or
the Subsidiaries (as the case may be) are required to file with respect to all
federal, state, local, foreign or other governmental, income, franchise, gross,
receipts, payroll, F.I.C.A., unemployment, withholding, real property, personal
property, sales, payroll and disability taxes imposed on the Seller with respect
to any of the Purchased Assets or the Subsidiaries, including interest and
penalties, if any, in respect thereof (collectively, "Taxes"), and have paid or
provided for all such Taxes shown to be due thereon. Except as set forth on
Schedule 2.16, to the Seller's knowledge, no action or proceeding is pending or
threatened by any governmental authority for any audit, examination, deficiency,
assessment or collection from the Seller or the Subsidiaries of any material
Taxes with respect to the Seller or the Subsidiaries, no unresolved claim for
any deficiency, assessment or collection of any material Taxes has been asserted
against the Seller or the Subsidiaries, and all resolved assessments of Taxes
have been paid or are reflected in the Financial Statements.
2.17 Brokers and Finders. Except as disclosed in Schedule 2.17, the Seller has
not engaged or authorized any broker, finder, investment banker or other third
party to act on behalf of the Seller, directly or indirectly, as a broker,
finder, investment banker or in any other like capacity in connection with this
Agreement or the transactions contemplated hereby.
2.18 Cross-References on Schedules. To the extent any matter is disclosed on one
Schedule it shall be considered disclosed on all Schedules attached hereto.
2.19 No Warranties. Except as specifically set forth otherwise in this
Agreement, all of the assets of the Seller or Subsidiaries are purchased by the
Buyer in an "AS IS" CONDITION, "WITH ALL FAULTS, INCLUDING BUT NOT LIMITED TO
BOTH LATENT AND PATENT DEFECTS." NO WARRANTIES, EXPRESS OR IMPLIED, ARE MADE BY
THE SELLER, AND THE BUYER WAIVES ALL SUCH WARRANTIES, OTHER THAN AS SET FORTH
EXPRESSLY IN THIS AGREEMENT, REGARDING THE TITLE, CONDITION AND USE OF THE
ASSETS OF THE SELLER, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. In connection with the
Buyer's investigation of the Seller's business the Buyer has received from
Seller and the Seller's agents certain estimates, projections, budgets, plans
and other forecasts for the Seller's business (the "Projections"). The Buyer
acknowledges that while such Projections were prepared in good faith and are
based upon assumptions believed to be reasonable, there are uncertainties
inherent in attempting to make the Projections that the Buyer is familiar with
such uncertainties, that the Buyer is taking full responsibility for making its
own evaluation of the adequacy and accuracy of all Projections, so furnished to
it, and that the Buyer will not assert any claim against the Seller, or any of
the Seller's' affiliates, directors, officers, employees, agents, stockholders,
affiliates, consultants, investment bankers or representatives, or hold the
Seller or any such persons liable with respect thereto.
2.20 Intentionally omitted.
2.21 Intentionally omitted.
2.22 Real Property.
(a) The Seller does not own any fee interest in any real property.
The Subsidiaries own the fee interests in the real property
set forth on Schedule 2.22(a).
(b) Schedule 2.22 (b) sets forth a true, correct and complete list
of all real property leases, subleases or licenses pursuant to
which the Seller or any Subsidiary is a lessor, lessee,
sublessor, sublessee, licensor or licensee of real property,
which list includes the street address, the identity of the
lessors, lessees, sublessors, sublessees, licensors or
licensees, the term thereof (referencing applicable extension
or renewal periods), the rent payment terms and the current
use). The Seller has delivered to the Buyer true, correct and
complete copies of each lease, sublease or license to which
any Subsidiary is a party, as amended through the date hereof.
The real property interests described or listed on Schedule
2.22(b) constitutes all of the leasehold interests in real
property leased or otherwise held for use by the Seller or any
Subsidiary. With respect to each lease, sublease and license
to which any Subsidiary is a party, to Seller's knowledge,
except as set forth on Schedule 2.22(b):
(i) such lease, sublease and license is in full force and effect;
(ii) no party thereto is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute
a breach or default or permit termination, modification, or
acceleration thereunder;
(iii) there are no disputes, oral agreements or forbearance programs
in effect as to any such lease, sublease or license; and
(iv) none of the Subsidiaries has assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest therein.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller:
3.1 Organization and Power; Foreign Qualification. The Buyer is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of California. The Buyer is duly qualified to transact
business and is in good standing in every jurisdiction in which the character of
its business makes such qualification necessary, except for such jurisdictions
where the failure to so qualify would not have a material adverse effect on the
business of the Buyer. The Buyer has all necessary corporate power and authority
to own, lease and operate its properties, and to carry on its business, as such
is now being conducted.
3.2 Authorization and Enforceability of Agreements. The Buyer has all requisite
limited liability company power and authority to enter into this Agreement and
to perform its obligations hereunder. This Agreement has been duly and validly
authorized by and approved by all requisite limited liability company action on
the part of the Buyer. This Agreement has been duly executed and delivered by
the Buyer and constitutes the legal, valid and binding obligation of the Buyer,
enforceable in accordance with its terms, except as may be limited by
bankruptcy, reorganization, insolvency, moratorium or other laws relating to or
affecting the enforcement of creditors' rights and remedies generally and except
as enforcement may be limited by general principles of equity. No further
approvals or consents by, or filings with, any federal, state, municipal,
foreign or other court or governmental or administrative body, agency or other
third party is required in connection with the execution and delivery by the
Buyer of this Agreement, or the consummation by the Buyer of the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
does not violate or conflict with the organizational documents or instruments of
the Buyer.
3.3 Investment Representations
(a) The Buyer is an "accredited investor" as such term is defined in Rule 501
under Regulation D of the Securities Act of 1933, as amended (the "Securities
Act").
(b) The Buyer acknowledges that it is acquiring the capital stock of the
Subsidiaries for its own account and not with a view to, or present intention
of, distribution thereof in violation of the Securities Act or any applicable
state securities laws, and the capital stock of the Subsidiaries will not be
disposed of in contravention of the Securities Act or applicable state
securities laws. The Buyer also acknowledges that no public market now exists
for the capital stock of the Subsidiaries and that a public market for such
stock will not develop.
(c) The Buyer acknowledges that the capital stock of the Subsidiaries has not
been registered under the Securities Act or any state securities laws and,
therefore, cannot be sold, and must be held indefinitely, unless subsequently
registered under the Securities Act and state securities laws or unless an
exemption from such registration is available.
(d) The Buyer acknowledges that its investment in the capital stock of the
Subsidiaries involves a high degree of risk and represents that it is able to
bear the economic risk of such investment for an indefinite period of time.
ARTICLE 4
COVENANTS
4.1 Covenants Pending Closing. The Seller agrees that from the date hereof to
the Closing Date, except (i) in the ordinary course of the business of the
Seller's or any of the Subsidiaries, (ii) to the extent disclosed in Schedule
4.1, or (iii) to the extent that the Buyer shall otherwise give its written
consent, the Seller will, and will cause each of the Subsidiaries to:
(a) operate substantially as now operated and only in the ordinary course and,
to the extent of and consistent with such operation, use reasonable efforts to
preserve intact the present business organization and the relationships with
persons having business dealings with the Seller and each of the Subsidiaries;
(b) maintain the books, accounts and records of the Seller and each of the
Subsidiaries, in the usual, regular and ordinary manner and consistent with past
practice;
(c) refrain from (i) disposing of or encumbering any of its properties and
assets, whether tangible or intangible other than in the ordinary course of
business, (ii) selling, issuing or repurchasing or redeeming any capital stock
of the Subsidiaries or (iii) making any dividends or distributions with respect
to the capital stock of any of the Subsidiaries;
(d) not cause to borrow any money, or incur, assume or guaranty or otherwise
become directly or indirectly responsible for the payment of any indebtedness or
obligation of any other person;
(e) not amend or modify in a manner materially adverse to the Seller or of any
Subsidiary, or terminate, any Contract; and
(f) not adopt any new Plan or any amendment to any Plan to provide any new or
additional plan, programs, contracts or arrangements involving direct or
indirect compensation to any of the Transferred Employees.
4.2 Consents and Approvals; Fulfillment of Conditions. The Seller and the Buyer
will use their reasonable efforts (i) to obtain all necessary consents and
approvals of other persons and governmental and regulatory authorities to the
consummation of the transactions contemplated by this Agreement, (ii) to obtain
all other consents and novations necessary or advisable in connection with the
transactions contemplated by this Agreement, and (iii) to perform, comply with
and fulfill all obligations, covenants and conditions required by this Agreement
to be performed, complied with and fulfilled by them prior to or at the Closing
Date. From time to time after the Closing Date (in intervals of no less than 30
days), as consents to assignments or novations are received, the Buyer shall
deliver to the Seller an assignment and assumption agreement substantially in
the form of Exhibit A, until all Contracts have been duly assigned to the Buyer.
All regulatory filings or consent payments shall be at the Buyer's expense.
4.3 Access. Prior to the Closing, the Seller agrees to permit the Buyer and its
employees, agents and representatives to have reasonable access to the
properties, assets, books and records, contracts and other documents of the
Seller and the Subsidiaries, on reasonable prior notice to and approval of the
Seller, during regular business hours, and to authorize the expressly authorized
representatives of the Seller to discuss the affairs of the Seller and the
Subsidiaries with the employees, agents and representatives of the Buyer;
provided that the Buyer shall not be permitted to conduct any environmental
investigations or contact any customers, suppliers, vendors or other employees
of the Seller and the Subsidiaries.
4.4 Disclosure of Breach Discovered. In the course of their due diligence
whether before, upon or following the date first above written and prior to the
Closing Date, should a party discover any fact or omission to disclose a
material fact that they believe to constitute a breach of a representation or
warranty hereunder, such party shall promptly disclose such fact or omission to
all other parties hereto. In the event that the discovering party proceeds with
signing this Agreement and/or a Closing despite actual knowledge of any such
fact or omission, for all purposes such actual knowledge shall result in a
waiver of the applicable breach of this Agreement.
4.5 Publicity. Prior to the Closing, the Buyer, and any of its agents or
affiliates, shall not directly or indirectly make any press release or other
public communication after the date hereof with respect to the transactions
contemplated hereby without the prior written consent of the Seller. The Buyer
acknowledges and agrees that the Seller is a subsidiary of a public company, and
that such public company will disclose the terms of this Agreement and
information regarding the transactions contemplated hereby in press releases and
public filings, including filing a copy of this Agreement, when and as it deems
appropriate for compliance with applicable laws, rules or regulations including
the rules and regulations of the Securities and Exchange Commission or the
Nasdaq National Market.
4.6 Discharge of Liabilities. The Buyer shall fully, faithfully and promptly
discharge each of the Assumed Liabilities as and when due and dischargeable,
according to the terms of the respective Assumed Liability.
4.7 Maintenance of Records. The Buyer shall: (i) protect, preserve and maintain
all books and other records of the Seller and the Subsidiaries (the "Records")
for ten years after the Closing using the same duty of care as the Buyer uses
for its own records, (ii) not dispose of any Record earlier than the time period
stated in clause (i) without first giving the Seller at least three months
advance written notice of such destruction and obtaining the Seller's written
consent thereto, and (iii) grant the Seller access to the Records at any
reasonable time, and from time to time, upon request by the Seller. Seller or
its affiliates may keep copies of such financial records.
4.8 Confidentiality. The terms of the Confidentiality Agreement dated July 28,
2004 between Seller and Buyer are incorporated by reference and shall continue
in full force and effect in accordance with its terms.
4.9 Noncompetition and Nonsolicitation Agreement.
(a) The Seller covenants that for a two-year period from the Closing Date it
will not, directly or indirectly, without the prior written consent of the
Buyer, purchase or acquire any interest in (whether by acquisition of assets or
any stock or equity ownership interest or by merger or consolidation or
otherwise) or operate a software licensing distribution business in the United
States (a "Competing Business"), provided that the restriction set forth above
shall not prohibit the Seller from purchasing or acquiring (i) less than five
percent (5%) (in the aggregate) of the issued and outstanding capital stock of
any publicly traded corporation or (ii) ownership or control of any corporation
or enterprise (or interest therein) which derives less than 15% of its total
revenues from a Competing Business.
(b) The Seller covenants that for a two year period from the Closing Date it
will not, directly or indirectly, without the prior written consent of the
Buyer, (i) solicit any customers or vendors of the Seller as of the Closing Date
located in the United States in an effort to obtain any such person as a
customer or vendor of a Competing Business or (ii) solicit any Transferred
Employee to terminate his or her employment relationship with the Buyer,
provided that general advertising or solicitations for employment shall not be a
breach of this agreement.
4.10 Transition Services. The Seller agrees that for a 90-day period after
Closing, it shall provide transition services reasonably requested by the Buyer
to the Buyer, provided that the Seller shall not be obligated to incur any
expense or obligation in connection with providing such transition services.
ARTICLE 5
CONDITIONS TO THE OBLIGATIONS OF THE BUYER
The obligations of the Buyer hereunder are subject to the fulfillment
or satisfaction at or prior to the Closing of each of the following conditions
(any one or more of which may be waived by the Buyer but only in writing):
5.1 Representations and Warranties of the Seller. All representations and
warranties of the Seller contained in this Agreement shall be true and correct
in all material respects as of the Closing with the same effect as though such
representations and warranties were made at and as of the Closing (unless such
representation speaks as of an earlier date, in which case it shall be true and
correct as of such date); the Seller shall have performed and satisfied in all
material respects all covenants, conditions and agreements required or
contemplated by this Agreement to be performed prior to the Closing; and at the
Closing, there shall be delivered to the Buyer a certificate to such effect
signed by an authorized officer of each of the Seller.
5.2 Absence of Litigation or Investigation. No preliminary or permanent
injunction or other order of any court or governmental agency or instrumentality
shall have issued or been entered and remain in effect which prohibits the
consummation of the transactions contemplated by this Agreement.
5.3 Delivery of Documents. The documents described in Section 1.9(a)
hereof shall have been delivered to the Buyer.
5.4 No Material Adverse Change. There shall not have been a Material
Adverse Change since the date of this Agreement.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF THE SELLER
The obligations of the Seller hereunder are subject to the fulfillment
or satisfaction at or prior to the Closing of each of the following conditions
(any one or more of which may be waived by the Seller, but only in writing):
6.1 Representations and Warranties of the Buyer. All representations and
warranties of the Buyer contained in this Agreement shall be true and correct as
of the date made and shall be true and correct in all material respects as of
the Closing with the same effect as though such representations and warranties
were made at and as of the Closing (unless such representation speaks as of an
earlier date, in which case it shall be true and correct as of such date); the
Buyer shall have performed and satisfied in all material respects all covenants,
conditions and agreements required or contemplated by this Agreement to be
performed and satisfied by it at or prior to the Closing; and at the Closing,
the Buyer shall deliver to the Seller a certificate to such effect signed by an
authorized officer of the Buyer.
6.2 Absence of Litigation or Investigation. No preliminary or permanent
injunction or other order of any court or governmental agency or instrumentality
shall have issued or been entered and remain in effect which prohibits the
consummation of the transactions contemplated by this Agreement.
6.3 Purchase Price. The Buyer shall at the Closing deliver the wire transfer to
the Seller of the Purchase Price, if any, in the form of immediately available
funds.
6.4 Employees. The Buyer shall have made offers to all Transferred
Employees, as provided in Section 1.7 above.
6.5 Delivery of Documents. The documents described in Section 1.9(b)
hereof shall have been delivered to the Seller.
ARTICLE 7
SURVIVAL; INDEMNIFICATION
7.1 Survival. The representations and warranties made by the Seller in this
Agreement shall survive until the first anniversary of the Closing Date except
that the representations in Sections 2.1, 2.3 and 2.16 shall survive the
applicable statute of limitations. The representations and warranties made by
the Buyer in this Agreement shall survive until the first anniversary of the
Closing Date.
7.2 Indemnity by the Seller. The Seller shall indemnify and hold harmless the
Buyer from and against, any costs, expenses or damages (other than the Buyer's
administrative costs and expenses and excluding consequential damages and lost
profits) ("Loss") that the Buyer shall incur or suffer, but subject at all times
to Sections 7.5 and 7.6 hereof, arising out of or resulting from (A) any breach
by the Seller of (i) any representation and warranty contained in this
Agreement; (ii) any agreement or covenant contained in this Agreement or (B) the
amount by which any Assumed Liability exceeds the amount reflected in the
calculation of the Final Purchase Price or (C) any Excluded Liabilities. Claims
under Sections 7.2(B) or (C) shall not be subject to the limitations set forth
in Section 7.5.
7.3 Transfer Taxes. The Seller shall be liable for and shall pay all excise,
sales, use, transfer (including real property transfer or gains), stamp,
documentary, filing, recordation and other similar taxes which may be imposed in
connection with the transactions contemplated by this Agreement, together with
any interest, additions or penalties with respect thereto ("Transfer Taxes").
Each party hereto hereby agrees to file all necessary documentation in
connection with the payment and reporting of Transfer Taxes.
7.4 Indemnity by The Buyer. The Buyer shall indemnify, hold harmless, defend and
protect the Seller from and against, any Loss that the Seller shall incur or
suffer, but subject at all times to Section 7.6 hereof, arising out of or
resulting from (A) any breach by the Buyer of (i) any representation and
warranty contained in this Agreement (ii) any agreement or covenant under or
pursuant to this Agreement that survived the Closing, (B) any Assumed Liability,
(C) the obligations of the Buyer set forth in Section 1.7 or (D) from the
Buyer's conduct of the software licensing distribution business and the use of
the Purchased Assets after the Closing Date.
7.5 Limitations on Recoverable Losses. Claims for payment of the Buyer's Losses
(other than claims for payment under Section 7.2(B) or (C)), (i) may be made
only with respect to claims arising during the survival period, (ii) must be
made, if at all, by giving the written Claim Notice (as defined in Section 7.6
hereof) to the Seller during the survival period, as applicable, with respect to
such claim, (iii) may be made only to the extent that the aggregate amount of
the Buyer's recoverable Losses shall exceed $250,000 (and then only for such
excess); and (iv) shall not exceed $5,000,000 in the aggregate for the
representations and warranties contained in Article 2 hereof excluding Sections
2.1, 2.3 and 2.16. Claims for payment of the Seller's Losses, (i) may be made
only with respect to claims arising during the survival period, (ii) must be
made, if at all, by giving the written Claim Notice (as defined in Section 7.6
hereof) to the Buyer during the survival period, as applicable, with respect to
such claim, (iii) may be made only to the extent that the aggregate amount of
the Seller's recoverable Losses shall exceed $250,000 (and then only for such
excess); and (iv) shall not exceed five $5,000,000 in the aggregate.
7.6 Claims for Indemnification; Disputes.
(a) Claims for Indemnification. Any party hereto (individually or with others,
collectively, the "Indemnities") shall give the Seller or the Buyer, as the case
may be (the "Indemnitor"), prompt written notice (the "Claim Notice") of any
claim (including the receipt of any demand) or the commencement of any action
with respect to which indemnity may be sought by the Indemnitee (individually, a
"Claim" and collectively, the "Claims"); provided, however, that if the
Indemnitee fails to give such Claim Notice prior to the expiration of the
applicable survival period or other applicable period, all rights of the
Indemnitee to assert any such Claims shall terminate and be forever waived;
provided further that notice of a Third Party Claim (as defined below) for which
indemnification may be sought hereunder shall be given within 10 days of notice
to the Indemnitee of such Third Party Claim. The Claim Notice shall state (i)
the aggregate amount of the Losses as to which indemnification is being sought
(which amount may be estimated and updated from time to time, and which shall,
in the case of the Buyer's Losses, describe such amount both gross and net of
the Tax benefit to the Buyer); (ii) the components of the amount of Losses for
which indemnification is being sought (which components may be estimated and
updated from time to time); and (iii) a general description of the grounds upon
which the Claim for indemnification is being made.
(b) Control of Litigation; Mutual Cooperation. If a Claim is based upon a claim
asserted by a third party against the Indemnitee (a "Third Party Claim") the
Indemnitor may at its option assume the defense of such claim including, without
limitation, the employment of counsel reasonably satisfactory to the Indemnitee
and if the Indemnitor assumes the defense, all fees and expenses of counsel
retained by the Indemnitee shall be payable by the Indemnitee. Regardless of
which party is controlling the defense of the Third Party Claim (i) the
Indemnitor and the Indemnitee shall act in good faith; (ii) no settlement of the
Third Party Claim may be agreed to without the written consents of the
Indemnitor and the Indemnitee, which consents shall not be unreasonably
withheld; (iii) the reasonable fees and expenses of counsel retained to defend
the Third Party Claim, expert witness fees and other costs incurred in such
action shall be deemed to be included in such Losses and shall be payable by the
Indemnitor to the extent and under the limitations provided in this Article VII;
and (iv) the party controlling the defense of the Third Party Claim shall
deliver, or cause to be delivered, to the other party copies of all
correspondence, pleading, motions, briefs, appeals or other written statements
relating to or submitted in connection with the defense of the Third Party
Claim, and timely notices of, and the right to participate in (as an observer),
any hearing or other court proceeding relating to the Third Party Claim.
7.7 Exclusive Remedy. Each party hereto acknowledges and agrees that, from and
after the Closing Date, its sole and exclusive remedy with respect to any and
all claims relating to the subject matter of this Agreement shall be pursuant to
the indemnification provisions set forth in this Article VII or elsewhere in
this Agreement.
ARTICLE 8
TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date, as follows, and in no other manner:
(a) By agreement of the Buyer on the one hand, and the Seller on the other hand,
approved by the respective Boards of Directors of the Buyer and the Seller.
(b) By the Buyer if (i) at any time there has been a material misrepresentation,
breach of warranty or breach of covenant on the part of the Seller in any of the
representations, warranties or covenants under this Agreement which breach is
not curable, or, if curable, is not cured within 10 days after written notice of
such breach is given to the Seller; or (ii) any of the conditions set forth in
Article 5 hereof shall not have been met in all material respects by August 31,
2004.
(c) By the Seller if (i) there has been a material misrepresentation, breach of
warranty or breach of covenant on the part of the Buyer in any of the
representations, warranties or covenants under this Agreement which breach is
not curable, or if curable, is not cured within 10 days after written notice of
such breach is given to the Buyer; or (ii) any of the conditions set forth in
Article 6 hereof shall not have been met in all material respects by August 31,
2004 or (iii) an Acquisition Proposal (as defined below) is received by the
Seller or the Seller's parent that the board of directors of the Seller's parent
determines is more favorable to the stockholders of the Seller or of the
Seller's parent than the transactions contemplated by this Agreement; provided
that if the Seller terminates this Agreement under this clause (iii), it shall
promptly pay to the Buyer $100,000, which shall be the Buyer's sole recovery in
the event of such termination.
For purposes of this Agreement, "Acquisition Proposal" means any inquiry,
proposal or offer from any person relating to any direct or indirect acquisition
or purchase of all or substantially all of the assets or shares of capital stock
of the Seller or the Subsidiaries, or any merger, consolidation, business
combination, sale of substantially all assets, sale of equity, recapitalization,
liquidation, dissolution or similar transaction involving the Seller, the
Subsidiaries or the Seller's parent, other than the transactions contemplated by
this Agreement.
Nothing in this Agreement shall prohibit the Seller, or the Seller's parent,
from responding to an Acquisition Proposal or furnishing information to or
entering into discussions with a person making an Acquisition Proposal.
8.2 Effect of Termination. In the event that this Agreement shall be terminated
pursuant to Section 8.1, all obligations of the parties hereto under this
Agreement shall terminate without further liability or obligation of either
party to another, except for the obligations set forth in Sections 4.8 and 9.1,
provided, however, that the parties shall remain obligated for any breach of
this Agreement.
ARTICLE 9
GENERAL PROVISIONS
9.1 Expenses.
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(a) Except as otherwise provided in this Agreement, all expenses incurred
pursuant to this Agreement and the transactions contemplated hereby shall be
paid by the party incurring the expense.
(b) All costs of transferring the Purchased Assets in accordance with this
Agreement, including recordation, transfer and documentary taxes and fees, and
any excise, sales or use taxes, shall be paid by the Buyer.
9.2 Further Assurances. Each party hereto agrees to use such party's
commercially reasonable efforts to cause the conditions to such party's
obligations herein set forth to be satisfied at or prior to the Closing insofar
as such matters are within its control. Each of the parties agrees to execute
and deliver any and all further agreements, documents or instruments necessary
to effectuate this Agreement and the transactions referred to herein or
contemplated hereby or reasonably requested by any other party to evidence its
rights hereunder.
9.3 Notices. Any notices hereunder shall be deemed sufficiently given by one
party to another only if in writing and if and when delivered or tendered by
personal delivery or as of five (5) business days after deposit in the United
States mail in a sealed envelope, registered or certified, with postage prepaid
or twenty-four (24) hours after deposit with an overnight courier, addressed as
follows:
If to the Buyer: D&H Services, LLC
00000 Xxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx
If to the Seller: Merisel Americas, Inc.
000 Xxxxxxxxxxx Xxxxxxxxx
Xx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxxx
or to such other address as the party addressed shall have previously designated
by written notice to the serving party, given in accordance with this Section
9.3. A notice not given as provided above shall, if it is in writing, be deemed
given if and when actually received by the party to whom it is given. Any party
may unilaterally change any one or more of the addresses to which a notice to
the party or its representative is to be delivered or mailed, by written notice
to the other party hereto given in the manner stated above.
9.4 Successors and Assigns. This Agreement shall be binding upon and shall inure
to the benefit of each of the parties hereto and their successors and assigns.
Notwithstanding the foregoing, the rights and obligations of the parties
hereunder are not assignable to another person without the prior written consent
of all other parties hereto.
9.5 Entire Agreement; Modifications; Waiver. This Agreement and the agreements
ancillary hereto, supersede any and all agreements heretofore made, written or
oral, relating to the subject matter hereof, and constitute the entire agreement
of the parties relating to the subject matter hereof. This Agreement may be
amended only by an instrument in writing signed by the Buyer on the one hand and
the Seller on the other hand. No waiver shall be binding unless executed in
writing by the party making such waiver.
9.6 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. If any provision is held to be invalid or unenforceable,
such provision shall be construed by the appropriate judicial body by limiting
or reducing it to the minimum extent necessary to make it legally enforceable.
9.7 Governing Law. This Agreement shall be construed and enforced in accordance
with, and governed by, the laws of the State of California, without regard to
its conflict of laws provisions.
9.8 Bulk Sales Compliance. The Buyer and the Seller waive compliance with the
provisions of the applicable statutes relating to bulk transfers or bulk sales.
9.9 Interpretation. As used anywhere in this Agreement, any representation or
warranty given to the knowledge of the Seller shall mean to the actual knowledge
of the chief executive officer and chief financial officer of the Seller and a
party's "actual knowledge" shall refer to the actual knowledge of such persons.
9.10 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
9.11 Recitals, Schedules and Exhibits. The recitals, schedules and
exhibits to this Agreement are incorporated herein and, by
this reference, made a part hereof as if fully set forth at length herein.
9.12 Section Headings. The section headings used herein are inserted for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
"BUYER" D& H Services LLC, a California limited liability company
By: /s/Xxxx X. Xxxxx
-------------------------------------
Name: Xxxx X. Xxxxx
Title: President
"SELLER" MERISEL AMERICAS, INC., a Delaware corporation
By:/s/Xxxxxxx Xxxxxxxxxx
--------------------------------------
Name: Xxxxxxx Xxxxxxxxxx
Title: Vice President-Finance
