<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 31, 1994
------------------------------
MERISEL, INC.
- - - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
- - - -------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
0-17156 95-4172359
- - - -------------------------- ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
200 Continental Boulevard, El Segundo, California 90245-0984
- - - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 615-3080
----------------------------
N/A
- - - -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 7. Financial Statements and Exhibits.
(c) Exhibits
10.1 Asset Purchase Agreement, dated January 31, 1994, among
ComputerLand, Merisel FAB, and, for purposes of Section 2.2
thereof, the Company.
10.3 Distribution and Services Agreement dated January 31, 1994 between
ComputerLand and Merisel FAB.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MERISEL, INC.
By: /s/ TIMOTHY N. JENSON
-----------------------
Timothy N. Jenson
Vice President
Date: October 4, 1994
3
<PAGE>
EXHIBIT 10.1
================================================================================
ASSET PURCHASE AGREEMENT
DATED AS OF JANUARY 31, 1994,
AMONG
COMPUTERLAND CORPORATION,
MERISEL FAB, INC.
AND,
FOR PURPOSES OF SECTION 2.2,
MERISEL, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF
LIABILITIES AND RELATED MATTERS ............................ 2
1.1. Transfer of Assets.......................................... 2
1.2. Assets Not Being Transferred................................ 3
1.3. Liabilities Being Assumed................................... 6
1.4. Liabilities Not Being Assumed............................... 6
1.5. Seller's Continued Performance of Certain Agreements........ 7
1.6. Use of Name................................................. 7
1.7. Instruments of Conveyance and Transfer, Etc................. 8
1.8. Further Assurances; Etc..................................... 8
1.9. Assignment of Contracts and Rights.......................... 8
1.10. Collection of Receivables, Royalties, Etc.................. 10
1.11. Franchisee Audits........................................... 10
ARTICLE II PURCHASE PRICE; ALLOCATION.................................. 11
2.1. Purchase Price; Payment..................................... 11
2.2. Adjustable Portion of Purchase Price........................ 11
2.3. Allocation of Purchase Price................................ 20
ARTICLE III REPRESENTATIONS AND WARRANTIES.............................. 20
3.1. Representations and Warranties of the Seller................ 20
3.2. Certain Qualifications and Limitations Relating
to Representations and Warranties of the Seller............. 27
3.3. Representations and Warranties of the Buyer................. 28
ARTICLE IV [INTENTIONALLY OMITTED]..................................... 29
ARTICLE V CONDITIONS PRECEDENT TO CLOSING............................. 30
5.1. Conditions to Each Party's Obligations...................... 30
5.2. Conditions to Obligations of the Buyer...................... 31
ARTICLE VI CLOSING..................................................... 34
ARTICLE VII INDEMNIFICATION............................................. 34
7.1. Indemnification by the Seller............................... 34
7.2. Indemnification by the Buyer................................ 35
7.3. Assertion of Claims......................................... 35
7.4. Notice and Defense of Third Party Claims.................... 36
7.5. Survival of Representations, Warranties and Covenant........ 37
7.6. Limitations on Indemnification.............................. 37
7.7. Remedies Exclusive.......................................... 38
</TABLE>
- i -
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE VIII ADDITIONAL POST-CLOSING AGREEMENTS ........................... 38
8.1 Mutual Protection of Goodwill in Trademarks, Etc. ............ 38
8.2. Seller's Restrictive Covenant................................. 39
8.3. Access........................................................ 40
8.4. Renewals and Assignments of Frachise Agreements............... 42
8.5. Confidentiality Matters....................................... 42
8.6. Sale of Certain Notes and Equity - Right of First Offer....... 43
8.7. Change of Name................................................ 43
8.8. Vendor Consents............................................... 43
8.9. No Solicitation of Employees.................................. 44
8.10. Financial Statements.......................................... 44
ARTICLE IX [INTENTIONALLY OMITTED]....................................... 44
ARTICLE X EMPLOYMENT MATTERS............................................ 44
10.1. Obligations of Buyer.......................................... 44
10.2. Obligations of Seller......................................... 45
ARTICLE XI MISCELLANEOUS................................................. 46
11.1. Expenses; Transfer Taxes, Etc................................. 46
11.2. Entire Agreement.............................................. 46
11.3. Descriptive Headings.......................................... 46
11.4. Notices....................................................... 46
11.5. Counterparts.................................................. 47
11.6 Governing Law................................................. 47
11.7. Benefits of Agreement......................................... 47
11.8. Pronouns...................................................... 49
11.9. Severability.................................................. 49
11.10. Authorization................................................. 49
11.11. Amendment, Modification and Waiver............................ 49
11.12. Confidentiality Agreement..................................... 50
</TABLE>
- ii -
<PAGE>
ATTACHMENTS
-----------
<TABLE>
<CAPTION>
ANNEXES
- - - -------
<S> <C> <C>
Annex 1.1(a) - Trademarks
Annex 1.1(h) - Additional Purchased Assets
Annex 1.1(i) - Patents
Annex 1.1(j) - Notes
Annex 1.2(t) - Additional Excluded Assets
Annex 1.3(c) - Assumed Obligations
Annex 2.3 - Allocation of Purchase Price
Annex 5.1(g) - Repurchase Agreements
SCHEDULES*
- - - ---------
Schedule 2.2(b)(i) - Seller's 11-Month Inventory Cost
Schedule 3.1(b) - Authority
Schedule 3.1(c) - Governmental Consents
Schedule 3.1(d) - Financial Statements
Schedule 3.1(e) - Equity Investments
Schedule 3.1(f) - Franchisee Indebtedness
Schedule 3.1(g) - Claims
Schedule 3.1(h) - Reseller Contracts
Schedule 3.1(i) - Intellectual Property Rights
Schedule 3.1(j) - Litigation
Schedule 3.1(k) - Compliance
Schedule 3.1(l) - Seller's Brokers
Schedule 3.1(m) - Absence of Changes
Schedule 3.1(n) - Product Warranty Claims
Schedule 3.1(o) - Franchise Matters
Schedule 3.1(p) - Employee Benefits
Schedule 3.3(d) - Buyer's Financing Commitments
Schedule 3.3(e) - Buyer's Brokers
Schedule 7.6 - Trademark Matters
Schedule 8.2 - Companies Excluded From Restrictive Covenant
Schedule 8.3(a) - Seller's Contracts Restricting Access
Schedule 8.3(b) - Buyer's Contracts Restricting Access
Schedule 11.7(a)(ii) - Prohibited Transferees
Schedule 11.7(a)(iii) - Permitted Transferees
</TABLE>
____________________
* The Company shall furnish supplementally a copy of any omitted Schedule to the
Securities and Exchange Commission upon request.
-iii-
<PAGE>
DEFINITIONS
-----------
The following terms which may appear in more than one Section
of this Agreement are defined in the following Sections:
<TABLE>
<CAPTION>
Section or
Term Other Location
- - - ---- -----------------
<S> <C>
Ad Fund Agreement.............. 1.1(e)
Affiliate...................... 2.2(a)
Audited Financial Statements... 4.11
Authorizations................. 3.1(k)
Base Volume.................... 2.2(a)
Baseline Period................ 2.2(a)
Bill of Sale and Assumption.... 1.7
Business Day................... 11.4
Buyer.......................... Caption
Buyer Datago Purchaser......... 2.2(a)
Buyer Franchisee............... 2.2(a)
Buyer Repurchase Agreements.... 5.1(g)
Buyer Subject Business......... 2.2(a)
Buyer Indemnitees.............. 7.1
Claims......................... 3.1(g)
Closing........................ Article VI
Closing Date................... Article VI
Commencement Date.............. 2.2(a)
ComputerLand Store............. 2.2(a)
Confidential Information....... 8.5(b)
Confidentiality Agreement...... 4.7
Contracts...................... 1.1
Copyright Assignment........... 1.7
Datago Agreements.............. 1.1(c)
Datago Conversion Agreements... 1.1(d)
Datago Purchasers.............. 1.1(c)
Designated Territory........... 1.1(a)
Earnout Amount................. 2.2(d)
Earnout Period................. 2.2(a)
Eligible Customer.............. 2.2(a)
Eligible Vendor................ 2.2(a)
Eligible Volume................ 2.2(a)
Exchange Act................... 11.7
Excluded Assets................ 1.2
Excluded Obligations........... 1.4
Financial Statements........... 3.1(d)
First Earnout Period........... 2.2(a)
First Year Volume.............. 2.2(a)
Franchise Agreements........... 1.1(b)
Franchisees.................... 1.1(b)
GAAP........................... 2.2(a)
Guaranty Agreement............. Recital
HSR Act........................ 3.1(c)
Indemnified Party.............. 7.4
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
SECTION OR
TERM OTHER LOCATION
- - - ---- --------------
<S> <C>
Indemnifying Party........................................... 7.3
Inventory Cost............................................... 2.2(a)
Investments.................................................. 8.6
Laws......................................................... 3.1(k)
License Agreement............................................ 1.6
Losses....................................................... 7.1
Material Adverse Effect...................................... 3.2(c)
Merisel...................................................... Recital
Merisel Americas............................................. 5.1(d)
Merisel Group................................................ 2.2(g)
Open Distribution............................................ 2.2(a)
Open Distribution Vendors.................................... 2.2(a)
Operative Contracts.......................................... 3.1(h)
Other Distribution Business.................................. 2.2(a)
Outside Accountants.......................................... 2.2(a)
Proceeding................................................... 7.4(a)
Products..................................................... 2.2(a)
Patent Assignment............................................ 1.7
Patents...................................................... 1.1(i)
Products..................................................... 2.2(a)
Purchased Assets............................................. 1.1
Reseller Contracts........................................... 3.1(h)
Restriction Period........................................... 8.2(a)
Restrictive Covenant......................................... 2.1
Retained Businesses.......................................... Recital
Second Earnout Period........................................ 2.2(a)
Second Year Volume........................................... 2.2(a)
Seller....................................................... Caption
Seller Indemnitees........................................... 7.2
Seller Repurchase Agreements................................. 5.1(g)
Seller Receivables........................................... 1.10
Services Agreement........................................... 5.1(e)
Stock Purchase Agreement..................................... 5.1(h)
Subject Business............................................. Recital
Survival Date................................................ 7.5
Third Party Resellers........................................ 1.1(c)
Trademark Assignment......................................... 1.7
Trademarks................................................... 1.1(a)
Volume Purchase Agreement.................................... 5.1(d)
</TABLE>
- v -
<PAGE>
ASSET PURCHASE AGREEMENT dated as of January 31, 1994,
among COMPUTERLAND CORPORATION, a Delaware corporation
(the "Seller"), MERISEL FAB, INC., a Delaware
corporation (the "Buyer"), and, for purposes of Section
2.2 hereof, MERISEL, INC., a Delaware corporation
("Merisel").
The Seller is engaged in the sale, distribution and servicing of
microcomputer systems and related products and services throughout the world.
Through its United States Franchise and Distribution Division, the Seller is
engaged in the business (the "Subject Business") of granting franchises to
dealers of microcomputer systems and products located in the Designated
Territory (as defined in Section 1.1(a)) and conducting the wholesale
distribution of microcomputer systems and products to such franchisees and to
independent dealers located in the Designated Territory. The Seller desires to
sell, transfer, convey and assign to the Buyer, and the Buyer desires to
purchase and acquire from the Seller, certain assets and rights of the Seller
relating to the Subject Business, subject to the assumption by the Buyer of
certain obligations and liabilities of the Seller, in accordance with the terms
and subject to the conditions set forth in this Agreement. For convenience of
reference, the Seller's businesses other than the Subject Business are referred
to herein as the "Retained Businesses".
The Buyer is a wholly-owned subsidiary of Merisel, which has been
organized by Merisel for the purpose of acquiring the Subject Business from the
Seller. In connection therewith, and as an inducement for the Seller to execute
and deliver this Agreement with the Buyer, Merisel is executing and delivering
to the Seller simultaneously herewith a Guaranty Agreement (the "Guaranty
Agreement") with respect to the payment and performance by the Buyer of all
Guaranteed Obligations (as defined therein), including, without limitation, the
obligations of the Buyer under Sections 2.1(b) and 2.2 hereof.
NOW THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereby agree as follows:
-1-
<PAGE>
ARTICLE I
TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF
LIABILITIES AND RELATED MATTERS
1.1. Transfer of Assets. On the terms and subject to the conditions
------------------
of this Agreement, at the Closing, the Seller shall sell, transfer, convey and
assign to the Buyer, and the Buyer shall purchase and acquire from the Seller,
all of the Seller's right, title and interest in, to and under the following
(and only the following) assets, properties and rights relating to the Subject
Business (other than any such assets, properties or rights which constitute
Excluded Assets (as defined in Section 1.2)), as the same shall exist
immediately prior to the Closing:
(a) solely with respect to, and for use in, the 50 states of the
United States of America and the District of Columbia (collectively
referred to herein as the "Designated Territory"), the name and trademark
"ComputerLand" and the other trademarks, tradenames, service marks and
logos set forth on Annex 1.1(a) (collectively, the "Trademarks"), including
------------
all issued or pending registrations and applications for registrations
relating thereto and all goodwill appurtenant to any of the Trademarks
within the Designated Territory and the right to license and assign the
name and trademark "ComputerLand", the other Trademarks and the Patents (as
defined below) anywhere within the Designated Territory;
(b) all franchise agreements, including all amendments, addendums
and attachments thereto, and all collateral or related agreements with
respect thereto of the categories listed on Schedule 3.1(h) (collectively,
---------------
the "Franchise Agreements"), between the Seller and its franchisees (the
"Franchisees") located in the Designated Territory (a complete list of
which Franchise Agreements as of the date of this Agreement is included in
Schedule 3.1(h));
---------------
(c) subject to Section 1.9(b), all Datago distribution
agreements, including all amendments, addendums and attachments thereto,
and all collateral or related agreements with respect thereto of the
categories listed on Schedule 3.1(h) (collectively, the "Datago
---------------
Agreements"), between the Seller and its Datago dealers (the "Datago
Purchasers"; and the Franchisees and the Datago Purchasers being
collectively referred to herein as the "Third Party Resellers") located in
the Designated Territory (a complete list of which Datago Agreements as of
the date of this Agreement is included in Schedule 3.1(h));
---------------
-2-
<PAGE>
(d) all agreements (the "Datago Conversion Agreements") between
the Seller and any of its Franchisees or former Franchisees relating to the
conversion of such Franchisees to Datago Purchasers (a complete list of
which Datago Conversion Agreements as of the date of this Agreement is
included in Schedule 3.1(h));
---------------
(e) the Ad Fund Trust Account Agreement (the "Ad Fund Agreement")
relating to the advertising fund established for the Franchisees under the
Franchise Agreements and all cash balances held for the benefit of the
Franchisees thereunder to the extent of the Seller's interest therein;
(f) all signs in the possession of any of the Franchisees which
are owned by the Seller, all forms, labels, catalogs, brochures, art work,
photographs and advertising material in the Seller's possession to the
extent used exclusively in the Subject Business, including the Seller's
ACCESS advertising materials used exclusively in the Subject Business, and
all copyrights therein with respect to the Designated Territory;
(g) all training and marketing manuals used exclusively in the
Subject Business and all franchise and Datago operating manuals and all
copyrights therein with respect to the Designated Territory;
(h) the furniture, equipment, supplies and other assets set forth
on Annex 1.1(h);
------------
(i) solely with respect to, and for use in, the Designated
Territory, the patents set forth on Annex 1.1(i) (collectively, the
------------
"Patents"); and
(j) those promissory notes listed on Annex 1.1(j) (collectively,
------------
the "Notes"), and the agreements listed on Annex 1.1(j) relating to the
------------
Notes.
The foregoing assets, properties and rights of the Seller to be sold,
transferred, conveyed and assigned to the Buyer pursuant to this Section 1.1 are
hereinafter collectively referred to as the "Purchased Assets". The Franchise
Agreements, the Datago Agreements, the Datago Conversion Agreements and the Ad
Fund Agreement are hereinafter collectively referred to as the "Contracts".
1.2. Assets Not Being Transferred. Anything contained in Section 1.1
----------------------------
to the contrary notwithstanding, no assets, properties or rights (whether real,
personal or mixed, tangible or intangible) of the Seller, other than the
Purchased Assets, are being sold, transferred, conveyed and assigned to the
Buyer
-3-
<PAGE>
under this Agreement. Without limiting the foregoing, the following are
specifically excluded from the Purchased Assets:
(a) all of Seller's right, title and interest in and to the
"ComputerLand" name, the other Trademarks and the Patents anywhere in the
world outside of the Designated Territory, including all issued and pending
registrations and applications for registration relating thereto, all
goodwill appurtenant to any of the Trademarks outside the Designated
Territory and the right to license and assign the "ComputerLand" name, the
other Trademarks and the Patents anywhere in the world outside of the
Designated Territory, including, without limitation, Puerto Rico, Guam and
Saipan;
(b) all franchise, distribution or other agreements between the
Seller and any Franchisee or dealer located anywhere in the world other
than in the Designated Territory;
(c) all inventories, parts, work in process, supplies and
shipping containers used by the Seller in the conduct of the Subject
Business;
(d) all cash and cash equivalents of the Subject Business
existing prior to the Closing;
(e) all accounts and notes receivable relating to the Subject
Business generated prior to the Closing;
(f) all equity investments in any Franchisee which are owned by
the Seller;
(g) all satellite dishes owned or leased by the Seller and used
in the Seller's satellite television network;
(h) all assets of the Seller relating to the ComputerLand
Learning Network, other than the name "ComputerLand Learning Center";
(i) all prepaid expenses, advances and deposits made in the
conduct of the Subject Business prior to the Closing;
(j) all purchase orders of the Seller and all other contracts
and agreements between the Seller and its vendors;
(k) all National Accounts Participating Dealer Agreements, MASTER
Agreements and Termination and Release Agreements in effect as of the
Closing between the Seller and any Franchisee, any former franchisee of the
Seller or
-4-
<PAGE>
any Datago Purchaser, including, without limitation, all manuals and
materials furnished by the Seller to Franchisees relating to the Seller's
National Accounts Program;
(l) all Participating Store Agreements for the National Service
Agreements Program in effect as of the Closing between the Seller and any
Franchisee, all National Service Agreements and all manuals and materials
furnished by the Seller to Franchisees relating to the Seller's National
Service Program;
(m) all CLTV Participation Agreements in effect as of the Closing
between the Seller and any Third Party Resellers with respect to the
Seller's satellite television network, and all related program manuals and
materials furnished by the Seller to Third Party Resellers, other than the
trademark "ComputerLand CLTV";
(n) all assets of the Seller related to the Seller's Help Desk
services, including, without limitation, all agreements for help desk
services entered into by Third Party Resellers and all manuals and
materials furnished to Third Party Resellers or customers thereof relating
to the Seller's Help Desk service;
(o) the Seller's proprietary store management system software
program, all other computer software developed, owned or used by the Seller
and all software license agreements relating to any of the foregoing in
effect as of the Closing between the Seller and the Third Party Resellers,
other than the license agreements between the Seller and the Franchisees
for ILS (as defined in the Services Agreement);
(p) all assets and rights (including, without limitation,
contracts) of the Seller used in the Retained Businesses;
(q) all rights in and to any claims against any Third Party
Resellers or any other third party arising out of or relating to
transactions or events occurring prior to the Closing;
(r) except as provided by Section 1.1(f) and the License
Agreement, all rights in and to any signs owned by the Seller, whether or
not such signs bear any of the Trademarks;
(s) all rights in and to any demonstration personal computers in
the possession of customers of the Subject Business; and
-5-
<PAGE>
(t) those other assets of the Seller listed on Annex 1.2(t).
------------
The foregoing assets, properties and rights of the Seller which are not to be
sold, transferred, conveyed and assigned to the Buyer are herein collectively
referred to as the "Excluded Assets".
1.3. Liabilities Being Assumed. On the terms and subject to the
-------------------------
conditions of this Agreement, simultaneously with the sale, transfer, conveyance
and assignment to the Buyer of the Purchased Assets, the Buyer shall assume, and
hereby agrees to perform, pay and satisfy when due, the following liabilities
and obligations of the Seller:
(a) all liabilities and obligations under, arising out of or
relating to the Contracts, except for liabilities and obligations arising
out of or relating to transactions or events occurring prior to the
Closing, including, without limitation, any breach or other violation by
the Seller of any of the Contracts occurring prior to the Closing, whether
or not any claim for such breach or violation has been asserted at or prior
to the Closing;
(b) all liabilities arising out of or relating to (i) any of the
guarantees set forth on Annex 1.3(b) hereto with respect to liabilities of
------------
the primary obligor arising on or after the Closing and (ii) any of the
lease obligations set forth on Annex 1.3(b) hereto, except that the Buyer
------------
shall have no obligation to pay rent under any such lease obligation in
excess of the amount of rent payable to the Buyer by the tenant or
subtenant with respect thereto;
(c) those liabilities and obligations relating to employment
matters assumed by the Buyer pursuant to Section 10.1; and
(d) all liabilities and obligations under, arising out of or
relating to the agreements listed on Annex 1.1(j), except for liabilities
------------
and obligations relating thereto arising out of or relating to transactions
or events occurring prior to the Closing.
The foregoing liabilities and obligations of the Seller being assumed by the
Buyer are hereinafter collectively referred to as the "Assumed Obligations".
1.4. Liabilities Not Being Assumed. Except for the Assumed
-----------------------------
Obligations, the Buyer expressly does not, and shall not, assume or be deemed to
assume, under this Agreement or otherwise by reason of the transactions
contemplated hereby, any other
-6-
<PAGE>
liabilities, obligations or commitments of the Seller or the Subject Business of
any nature whatsoever, whether known or unknown, or fixed or contingent,
including, without limitation, any liabilities, obligations or commitments
relating to the ownership, interest in, use or operation of any of the Purchased
Assets or the Subject Business prior to the Closing and those liabilities and
obligations relating to employment matters retained by the Seller pursuant to
Section 10.2 (collectively, the "Excluded Obligations").
1.5. Seller's Continued Performance of Certain Agreements. The Buyer
----------------------------------------------------
acknowledges and agrees that following the Closing the Seller may elect, subject
to any obligations contained in the Services Agreement, to perform under, and
shall be entitled to receive all amounts due under, (a) all National Accounts
Participating Dealer Agreements and all MASTER Agreements between the Seller and
any Franchisee, (b) all Participating Store Agreements for the National Service
Agreements Program between the Seller and any Franchisee and all National
Service Agreements, (c) all Help Desk services to be provided under any Help
Desk contracts entered into between any Third Party Resellers and any customer
thereof prior to the Closing and all Help Desk services pursuant to direct calls
from customers of Third Party Resellers and (d) all CLTV Participation
Agreements between the Seller and Third Party Resellers relating to the Seller's
satellite television network. In connection therewith, the Buyer shall use its
reasonable efforts to assist the Seller in collecting any amounts due under such
agreements and shall promptly forward to the Seller any such amounts received by
the Buyer, with such endorsements of the Buyer as may be necessary for the
Seller to receive such payments; provided, that the Buyer shall not be obligated
--------
to incur any expenses in connection with rendering such assistance.
1.6. Use of Name. (a) At the Closing, the Seller and the Buyer
-----------
shall enter into a License Agreement (the "License Agreement"), pursuant to
which, among other things, the Buyer shall permit the Seller to use, without
charge, the "ComputerLand" name and the other Trademarks (other than the
"Datago" name) in the Designated Territory in connection with the operation of
the Seller's company-owned locations existing as of the Closing for the six-
month period following the Closing, and the Buyer shall be restricted from using
the "ComputerLand" name and the other Trademarks in certain specified
metropolitan areas within the Designated Territory, all in accordance with the
terms thereof.
(b) Anything contained herein to the contrary notwithstanding,
the Buyer acknowledges that the Seller has granted a non-exclusive, non-
transferable restricted license of the Seller's right, title and interest in and
to the use of the name "ComputerLand Express" to Micro Express, Inc. pursuant to
the Asset Purchase Agreement dated as of August 31, 1993, between
-7-
<PAGE>
the Seller and Micro Express, Inc. Nothing contained in this Agreement or in
the License Agreement shall be deemed to affect such license; provided, that the
--------
Seller shall take such actions, at the Buyer's expense, as may be reasonably
requested by the Buyer to protect the Buyer's rights in the "ComputerLand" name.
1.7. Instruments of Conveyance and Transfer, Etc. At the Closing,
--------------------------------------------
the Seller and the Buyer shall execute and deliver a bill of sale and assumption
agreement (the "Bill of Sale and Assumption"), a trademark assignment (the
"Trademark Assignment"), a copyright assignment (the "Copyright Assignment") and
a patent assignment (the "Patent Assignment"), and the Seller shall execute and
deliver such other endorsements, assignments and instruments of transfer as
shall be reasonably necessary to transfer the Purchased Assets to the Buyer.
1.8. Further Assurances; Etc. (a) The Seller shall, at any time and
------------------------
from time to time after the Closing, upon the written request of the Buyer, do,
execute, acknowledge and deliver, and cause to be done, executed, acknowledged
or delivered, such reasonable further acts, deeds, assignments, transfers,
conveyances, or assurances as may be reasonably required for (i) the better
transferring, assigning, conveying, granting, assuring and confirming to the
Buyer, or for aiding and assisting in the collection of or reducing to
possession by the Buyer, the Purchased Assets and (ii) the fulfillment of the
purposes of this Agreement. The Buyer shall, at any time and from time to time
following the Closing, at the request of the Seller, execute, acknowledge and
deliver, and cause to be done, executed, acknowledged and delivered, such
reasonable further acts, deeds, assumptions or assurances as may be reasonably
required for (A) the better assuming by the Buyer of the Assumed Obligations and
(B) the fulfillment of the purposes of this Agreement. Any expenses incurred by
the Buyer or the Seller in complying with this Section 1.8 shall be shared
equally by the Buyer and the Seller. The Seller shall promptly pay to the Buyer
any rent that the Buyer becomes obligated to under any lease obligation listed
on Annex 1.3(b) in excess of the amount of rent payable to the Buyer by the
------------
tenant or subtenant with respect thereto.
(b) The Seller shall promptly pay or deliver to the Buyer any amounts
or items which shall be received by the Seller following the Closing which
constitute Purchased Assets and any moneys, checks or other instruments of
payment to which the Buyer is entitled after the Closing under the Contracts.
The Buyer shall promptly pay or deliver to the Seller any amounts or items which
shall be received by the Buyer following the Closing which constitute Excluded
Assets.
1.9. Assignment of Contracts and Rights. (a) Anything contained in
----------------------------------
this Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement
-8-
<PAGE>
or an attempted agreement to transfer or assign any Contract or any claim or
right or any benefit arising thereunder or resulting therefrom if an attempted
transfer or assignment thereof, without the consent of any other party thereto,
would constitute a breach thereof or in any way affect the rights of the Buyer
thereunder. The Seller and the Buyer shall use reasonable efforts to obtain the
consent of any such other party to the transfer or assignment thereof to the
Buyer in all cases in which such consent is required; provided, however, that
-------- -------
neither the Buyer nor the Seller shall be required to incur any further
obligations or liabilities in obtaining any such consent, except for ordinary
and necessary out-of-pocket expenses incurred in connection therewith, which
expenses shall be borne equally by the Buyer and the Seller. In connection
therewith, the Seller shall not modify or amend any of the terms of any Contract
in order to obtain the consent from such other party to the transfer or
assignment of such Contract without the prior written consent of the Buyer,
which consent shall not be unreasonably withheld.
(b) Anything contained in this Agreement to the contrary
notwithstanding, if the Datago Purchasers listed on Schedule 3.1(b) shall not
---------------
consent to the transfer or assignment by the Seller to the Buyer of the Datago
Agreements to which such Datago Purchasers are a party, then, as an adjustment
of the consideration paid and to be paid by the Buyer for the Purchased Assets,
(i) such Datago Agreements shall be deemed excluded from the definition of
"Purchased Assets", "Datago Agreements" and "Contracts", (ii) the Seller shall
continue to fulfill its obligations under the Datago Agreements with such non-
consenting Datago Purchasers and shall enforce, at the expense of the Seller,
its rights with respect to post-closing periods under such Agreements as in
effect on the date hereof (or as modified with the prior written consent of the
Buyer, which consent shall not be unreasonably withheld), (iii) in enforcing
such rights, the Seller shall prosecute any action to a final judgment of a
court of competent jurisdiction (but such obligation to prosecute shall not
include an obligation to prosecute any appeal thereof) or a settlement of such
action (which settlement shall require the consent of the Buyer, which consent
shall not be unreasonably withheld), (iv) if, in enforcing its rights, the
Seller recovers any amount from any such non-consenting Datago Purchaser
relating to any post-closing periods, such recovery shall be paid over to the
Buyer net of the Monthly Distribution Fee contemplated by clause (vi) below, (v)
the Seller shall provide to the Buyer the economic benefits that the Buyer would
have received under such Datago Agreements and the Services Agreement if such
non-consenting Datago Purchasers had consented thereto, (vi)
the Buyer shall provide to the Seller the Monthly Distribution Fee under the
Services Agreement which it would have otherwise paid if the Datago Agreements
of such non-consenting Datago Purchasers had been assigned to the Buyer and
(vii) sales of products that are made by the Seller as required by this Section
1.9(b) shall be included as sales made by the Merisel Group, or
-9-
<PAGE>
any member thereof, for purposes of Section 2.2 hereof (to the extent that such
products are Products (as defined in Section 2.2 hereof)) and the Services
Agreement.
1.10. Collection of Receivables, Royalties, Etc. (a) From and after
------------------------------------------
the Closing, the Buyer shall cooperate with the Seller and use its best efforts
to collect (which cooperation shall include the Buyer's assistance in delivering
invoices to Third Party Resellers), in a manner consistent with the Seller's
practices and policies with respect to the collection of receivables, all
accounts receivable, royalties and other fees owed to the Seller by any
Franchisee or any Datago Purchaser for sales of products by the Seller to such
Franchisee or Datago Purchaser which occurred within [*] days prior to the
Closing Date or with respect to any obligation to pay royalties under any
Franchise Agreement arising within [*] days prior to the Closing Date (all such
amounts being referred to as "Seller Receivables").
(b) Without limiting Section 1.10(a), in the event any Franchisee or
Datago Purchaser fails to pay in full by March 31, 1994 all Seller Receivables
owed by such Franchisee or Datago Purchaser to the Seller, the Buyer shall, upon
the Seller's request, withhold shipment of products to each such Franchisee and
Datago Purchaser until all such Seller Receivables are paid in full by such
Franchisee or Datago Purchaser; provided, however, that if any such Franchisee
-------- -------
or Datago Purchaser shall have expressed in writing a bona fide dispute with
---- ----
respect to its obligation to pay any Seller Receivable, then the Buyer shall not
be obligated to withhold shipments to such Franchisee or Datago Purchaser (it
being understood and agreed that no alleged dispute relating to any Seller
Receivables based on any obligation to make royalty payments with respect to any
obligation arising within 90 days prior to the Closing Date from any Franchisee
shall relieve the Buyer from its obligation to withhold shipment under this
Section 1.10(b)).
1.11. Franchisee Audits. During the 24-month period after the
-----------------
Closing, the Buyer shall conduct audits of the records of those Franchisees
selected by the Seller and for such periods ending on or prior to the Closing as
the Seller shall identify to the Buyer; provided, however, that the Buyer shall
-------- -------
not be obligated to conduct more than one audit per Franchisee with respect to
any period; provided further, however, that such audits shall be conducted by
-------- ------- -------
the Buyer in a manner that is consistent with the methodology used by the Seller
in conducting audits of the Franchisees prior to the Closing. The Buyer shall
advise the Seller of the results of each such audit in writing within ten days
of the completion thereof. The increase of any
_______________
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934,
as amended.
-10-
<PAGE>
amount owing by any Franchisee to the Seller determined as a result of any such
audit shall be for the benefit of the Seller. All expenses incurred by the
Buyer in conducting audits of the records of Franchisees for periods prior to
the Closing shall be paid for promptly by the Seller (it being understood that
the cost to the Seller of such audits shall not exceed the cost thereof to the
Seller prior to the Closing); provided, however, that if the Buyer shall conduct
-------- -------
an audit of any Franchisee for any period following the Closing at the same time
as the Buyer shall have conducted a pre-Closing audit of such Franchisee, then
the Buyer's expenses incurred in conducting such audit shall be allocated
proportionately based on the amount of time of the pre-Closing and post-Closing
periods being audited.
ARTICLE II
PURCHASE PRICE; ALLOCATION
2.1. Purchase Price; Payment. The purchase price to be paid for the
-----------------------
Purchased Assets and the restrictive covenant of the Seller set forth in Section
8.2 hereof (the "Restrictive Covenant") shall consist of the following:
(a) $80,000,000, PLUS $187,400 (for the personal property
----
referred to in Annex 1.1(h)), PLUS $15,000, payable at the Closing by wire
------------ ----
transfer of immediately available funds to a bank account designated by the
Seller; and
(b) from zero to $30,000,000 payable following the Closing in
accordance with Section 2.2.
2.2. Adjustable Portion of Purchase Price. (a) As used in this
------------------------------------
Section 2.2, the following terms have the corresponding meanings:
"Affiliate" of Merisel or the Buyer means (i) any person or
---------
entity that owns, directly or indirectly, 50% or more of the voting
securities of Merisel or the Buyer, (ii) any corporation 50% or more of the
voting securities of which are directly or indirectly owned by Merisel, the
Buyer or any of their respective Affiliates, and/or (iii) any
unincorporated entity that is controlled by Merisel, the Buyer or any of
their respective Affiliates, where "control" means the power to direct the
management and policies of the entity controlled.
"Base Volume" means the aggregate Inventory Cost of all Products
-----------
sold during the Baseline Period by the Seller and all members of the
Merisel Group (including all MASTER Sales (as defined in the Services
Agreement) by or for the benefit of the Seller during the Baseline Period)
to
-11-
<PAGE>
any entity that was a Franchisee or Datago Purchaser at the time of such
sale or was otherwise a franchisee or Datago purchaser of the Seller at the
time of such sale, as determined in accordance with Section 2.2(b) (or to
any entity that was a customer of any such entity in the case of MASTER
Sales), and as adjusted after the Closing Date in accordance with Section
2.2(i).
"Baseline Period" means the 12-month period ending January 31,
---------------
1994.
"Buyer Datago Purchaser" means and includes (i) any Datago
----------------------
Purchaser and (ii) any other person or entity, other than a Buyer
Franchisee, that purchases Products pursuant to a Datago Agreement or any
other similar agreement or arrangement.
"Buyer Franchisee" means and includes (i) any Franchisee and (ii)
----------------
any other person or entity that owns or operates any ComputerLand Store,
pursuant to a franchise agreement or any other similar agreement or
arrangement.
"Buyer Subject Business" means the business of selling, leasing,
----------------------
renting and/or servicing computer hardware, software and/or related
products and services, as conducted by the Buyer after the Closing.
"Commencement Date" means, with respect to any Open Distribution
-----------------
Vendor, that date which is 30 days prior to the date on which such Open
Distribution Vendor first engages in Open Distribution.
"ComputerLand Store" means and includes any current or future
------------------
retail computer store, business center or other location using the trade
name "ComputerLand", alone or in conjunction with any other name or mark.
"Earnout Amount" has the meaning ascribed thereto in Section
--------------
2.2(d).
"Earnout Period" means the period from the Closing Date through
--------------
January 31, 1996, inclusive.
"Eligible Customer" means and includes (A) any Buyer Franchisee
-----------------
and (B) any Buyer Datago Purchaser; provided, however, that after the
-------- -------
Commencement Date applicable to an Open Distribution Vendor, "Eligible
--------
Customer" shall also include any person or entity that was a Buyer Datago
--------
Purchaser on such Commencement Date, whether or not such person or entity
continues to be a Buyer Datago Purchaser thereafter.
-12-
<PAGE>
"Eligible Vendor" means and includes [*].
---------------
"Eligible Volume" means, for any period, the aggregate Inventory
---------------
Cost of (i) all Products sold by all members of the Merisel Group during
such period to all Eligible Customers (including all MASTER Sales by or for
the benefit of the Seller during such period to any customer of any
Eligible Customer) and (ii) the aggregate Inventory Cost of all Products
purchased and resold by the Buyer in any period under the Services
Agreement to the extent not included in the preceding clause (i). Eligible
Volume is subject to adjustment as provided in Section 2.2(h).
"First Earnout Period" means the 12-month period ending January
--------------------
31, 1995.
"First Year Volume" means Eligible Volume for the First Earnout
-----------------
Period.
"GAAP" means generally accepted accounting principles in the
----
United States applied in a manner consistent with the usual financial and
accounting practices of the Seller or Merisel, as the case may be.
"Inventory Cost" means, for any product, the invoice price
--------------
charged by the vendor of such product to the Seller, the Buyer, Merisel or
any Affiliate of Merisel, as applicable, plus customs duties, taxes and
currency exchange costs, if any, but without reduction for any marketing
development funds or prompt payment discounts provided by the vendor with
respect to such product, determined in accordance with GAAP, as adjusted to
reflect any price protection relating to such product, determined in
accordance with GAAP.
"Merisel Group" shall mean Merisel, the Buyer and their
-------------
respective Affiliates.
"Open Distribution" occurs with respect to any Open Distribution
-----------------
Vendor when (i) such Open Distribution Vendor adds Merisel or any of its
Affiliates (in addition to the Buyer) as a primary distribution source in
the Designated Territory authorized to distribute all of the Products of
such Open Distribution Vendor that the Buyer is, as of the Commencement
Date, authorized to distribute, on substantially the same terms and
conditions as such Products are distributed by the Buyer as of the
Commencement Date (including terms and conditions imposed by the Open
Distribution Vendor) and (ii) all Buyer Franchisees and
_______________
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934,
as amended.
-13-
<PAGE>
Buyer Datago Purchasers are authorized to purchase Products sold by such
Open Distribution Vendor from Merisel or any of its Affiliates (in addition
to the Buyer) under substantially the same terms and conditions imposed by
the Open Distribution Vendor.
"Open Distribution Vendors" means and includes [*].
-------------------------
"Other Distribution Business" means the business of selling,
---------------------------
leasing, renting and/or servicing computer hardware, software and/or
related products, as conducted by any member of the Merisel Group (other
than the Buyer) during the Earnout Period, other than through the Buyer
Subject Business.
"Outside Accountants" means any "big six" accounting firm,
-------------------
jointly selected by the Seller and the Buyer, that shall not have been
retained by the Seller or Merisel within 24 months of the date on which
such firm is to be utilized under this Section 2.2.
"Products" means and includes any products supplied by an
--------
Eligible Vendor and sold under any brand name owned or used by such
Eligible Vendor.
"Second Earnout Period" means the 12-month period ending January
---------------------
31, 1996.
"Second Year Volume" means Eligible Volume for the Second Earnout
------------------
Period.
(b)(i) Within 60 days after the Closing Date, the Seller shall
certify the aggregate Inventory Cost of all Products sold by the Seller to any
entity that was a Franchisee or Datago Purchaser at the time of such sale or was
otherwise a franchisee or Datago purchaser of the Seller at the time of such
sale during the Baseline Period (including all MASTER Sales by or for the
benefit of the Seller during the Baseline Period). Any dispute regarding all or
any portion of the amount set forth in the certificate delivered by the Seller
pursuant to this Section 2.2(b)(i) that cannot be resolved by the Buyer and the
Seller within 30 days after delivery of such certificate shall be resolved by
the Outside Accountants, whose determination shall be binding and conclusive
upon all parties hereto. The Seller shall provide such information to the
Outside Accountants relating to the calculation of the amount set forth in the
certificate delivered by the Seller pursuant to this Section 2.2(b)(i) as shall
be reasonably requested by the Outside Accountants. The
_______________
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934,
as amended.
-14-
<PAGE>
costs of any determination by the Outside Accountants pursuant to this Section
2.2(b)(i) shall be borne equally by the Buyer and the Seller. Any certificate
delivered by the Seller pursuant to this Section 2.2(b)(i) and not disputed by
the Buyer in writing within such 30 days shall be conclusive absent manifest
error.
(ii) Within 60 days after the Closing Date, Merisel shall certify the
aggregate Inventory Cost of all Products sold by all members of the Merisel
Group to any entity that was a Franchisee or Datago Purchaser at the time of
such sale or was otherwise a franchisee or Datago purchaser of the Seller at the
time of such sale during the Baseline Period. Any dispute regarding all or any
portion of the amount set forth in the certificate delivered by Merisel pursuant
to this Section 2.2(b)(ii) that cannot be resolved by Merisel and the Seller
within 30 days after delivery of such certificate shall be resolved by the
Outside Accountants, whose determination shall be binding and conclusive upon
all parties hereto. Merisel shall provide such information to the Outside
Accountants relating to the calculation of the amount set forth in the
certificate delivered by Merisel pursuant to this Section 2.2(b)(ii) as shall be
reasonably requested by the Outside Accountants. The costs of any determination
by the Outside Accountants pursuant to this Section 2.2(b)(ii) shall be borne
equally by the Buyer and the Seller. Any certificate delivered by Merisel
pursuant to this Section 2.2(b)(ii) and not disputed by the Seller in writing
within such 30 days shall be conclusive absent manifest error.
(iii) The amounts certified by the Seller and Merisel pursuant to
Sections 2.2(b)(i) and 2.2(b)(ii), respectively, as finally resolved in
accordance with such Sections, together with the amount set forth on Schedule
--------
2.2(b)(i), shall be the Base Volume for all purposes hereof.
- - - ---------
(c) On or prior to each of April 30, 1995 and April 30, 1996, the
Buyer shall deliver to the Seller a certificate executed by an officer of the
Buyer setting forth Eligible Volume for the First Earnout Period and the Second
Earnout Period, respectively, each of which certificates shall set forth in
reasonable detail the basis for the calculation of Eligible Volume for the
relevant period, including subtotals for each Eligible Vendor. The Seller shall
have 30 days after receipt of either of the foregoing certificates to dispute
the amount shown thereon, so long as the amount in dispute involves a minimum of
$1 million. If the Seller does not so dispute the amount shown on a certificate
delivered pursuant to this Section 2.2(c) (the "Certificate"), then such amount
shall be Eligible Volume for the period in question and shall be binding on all
parties hereto. If the Seller disputes the amount shown on any certificate
delivered pursuant to this Section 2.2(c), then the amount of Eligible Volume
for the period in question shall be determined by the Outside Accountants. The
Buyer shall provide such information to the Outside Accountants relating to the
-15-
<PAGE>
calculation of Eligible Volume for the period in question as shall be reasonably
requested by the Outside Accountants. The Outside Accountants shall confirm the
amount of Eligible Volume for such period, and such confirmation shall be
binding and conclusive on the Seller and the Buyer. If Eligible Volume for any
period, as determined by the Outside Accountants, shall be an amount that is
greater than the amount on the Certificate by at least $1 million, then the
costs and expenses of the Outside Accountants in determining Eligible Volume for
such period shall be borne by the Buyer; otherwise, such costs and expenses
shall be borne by the Seller.
(d) Within two Business Days after the final determination of Eligible
Volume pursuant to Section 2.2(c), the Buyer shall pay to the Seller by wire
transfer of immediately available funds to an account designated by the Seller
an amount (the "Earnout Amount") determined as follows:
If (A) the net percentage point change determined by comparing the First
Year Volume to the Base Volume PLUS (B) the net percentage point change
----
determined by comparing the Second Year Volume to the Base Volume shall be
equal to or greater than zero, the Buyer shall pay to the Seller $6,000,000
PLUS an amount equal to $200,000 TIMES the net sum of such percentage point
---- -----
changes, including a pro rata portion of $200,000 for the portion of such
--- ----
increase that is less than a whole percentage point, subject to adjustment
as provided in Section 5.7 of the Services Agreement.
The Buyer shall pay to the Seller, in addition to the Earnout Amount, (1)
interest on the Earnout Amount, accruing from February 28, 1996 through and
including the date of payment, at an annual rate equal to the rate published on
February 28, 1996 in the national edition of The Wall Street Journal as the
-----------------------
prime rate in effect on such date plus 2% per annum and (2) all costs of
collection, including reasonable attorneys' fees, incurred by the Seller in
collecting under or enforcing the provisions of this Section 2.2(d). In no
event shall the Earnout Amount exceed $30,000,000 PLUS (x) interest due thereon
----
and (y) costs of collection referred to above. The obligations of the Buyer
under this Section 2.2 shall not be limited by the provisions of Section 7.6
hereof, nor shall the provisions of Section 7.7 hereof apply to the rights of
the Seller in collecting under or enforcing the provisions of this Section 2.2.
-16-
<PAGE>
(e) By way of example:
(A) Base Volume = 100
First Year Volume = 120
Second Year Volume = 130
Net Percentage Point Increase = 50 (i.e., the sum of
20, or the 120 over 100,
and 30, or the increase
of 130 over 100)
Payment: $6,000,000 plus 50 times $200,000 = $16,000,000
(B) Base Volume = 100
First Year Volume = 140
Second Year Volume = 140
Net Percentage Point Increase = 80 (i.e., the sum of
40, or the 140 over 100,
and 40, or the increase
of the next 140 over 100)
Payment: $6,000,000 plus 80 times $200,000 = $22,000,000
(C) Base Volume = 100
First Year Volume = 160
Second Year Volume = 60
Net Percentage Point Increase = 20 (i.e., the sum of
60, or 160 over 100, and
negative 40, or the
decrease of 100 to 60)
Payment: $6,000,000 plus 20 times $200,000 = $10,000,000
(D) Base Volume = 100
First Year Volume = 50
Second Year Volume = 100
Net Percentage Point Increase = negative 50 (i.e., the
sum of negative 50, or
the decrease of 100 to
50, and 0, or the
increase of 100 over 100)
Payment: 0
(f) Each of the Buyer and the Seller shall keep accurate records which
shall be sufficient for the computation of Eligible Volume for all relevant
periods hereunder and, upon reasonable advance notice, shall make such records
available to the other and such other's independent public accountants for
inspection during normal business hours. The expenses of any
-17-
<PAGE>
such inspection shall be borne by the inspecting party unless such inspection
reveals that Eligible Volume for any period certified hereunder was inaccurate
by $1 million or more and resulted in or would have resulted in an incorrect
payment to or by the inspecting party.
(g) The parties acknowledge that if any Open Distribution Vendor
engages in Open Distribution, the Subject Business and the Other Distribution
Business may compete with one another in connection with some or all of the
Products of such Open Distribution Vendor. In that regard, during the Earnout
Period the Merisel Group will not engage in any practice if it is reasonably
established that the principal purpose of such practice is (i) to reduce or
minimize the Earnout Amount or (ii) to render the Buyer Subject Business
uncompetitive vis-a-vis the Other Distribution Business in a manner that is not
reasonably justifiable. Without limiting the generality of the foregoing, the
Merisel Group will conduct the Buyer Subject Business and the Other Distribution
Business in accordance with the following general guidelines, consistent with
reasonable and prudent business practices:
(iii) The Merisel Group shall not cause or permit the Other
Distribution Business to adopt or pursue any programs or policies, or any
general terms and conditions with respect to the sale of Products, that
alone or in the aggregate, could reasonably be expected to result in
incremental sales of such Products being made for net consideration below
the marginal cost to the Other Distribution Business of such Products
unless such sale is justifiable in light of competitive business conditions
or is for the purpose of achieving higher rebate levels or liquidating
excess inventory;
(iv) The Merisel Group shall not prevent or prohibit the Buyer
Subject Business from adopting or pursuing any programs or policies, or
setting any pricing or other terms and conditions with respect to the
purchase or sale of Products, that the management of the Buyer Subject
Business reasonably believes to be in the best interests of the Buyer
Subject Business, except to the extent that (A) any such programs,
policies, pricing or other terms or conditions, alone or in the aggregate,
could reasonably be expected to result in incremental sales of Products
being made for net consideration below the marginal cost to the Buyer
Subject Business of such Products or (B) such programs, policies, pricing
or other terms or conditions are not likely to provide the Buyer Subject
Business with a competitive return on investment, taking into account,
without limitation, the risks associated with such programs, policies,
terms and conditions, the impact on the cost structure of the Buyer Subject
Business and the capital investment made and to be made in the Buyer
Subject Business
-18-
<PAGE>
(including, without limitation, the purchase price payable by Buyer
hereunder and the financing costs associated with operating the Buyer
Subject Business); and
(v) For purposes of the guideline set forth in clause (i) above,
for any period in which Applicable Revenue (as defined in the Services
Agreement) is reasonably projected to be in excess of Baseline Revenue (as
defined in the Services Agreement) for such period, the Merisel Group shall
assume that the marginal cost to the Other Distribution Business of any
incremental sale of such Products is at least [*] above the vendor cost of
the Products sold (without giving effect to any programs, policies, pricing
or other terms or conditions adopted by the Other Distribution Business
after the date hereof that would reasonably be expected to increase such
marginal cost).
(h) Anything contained herein to the contrary notwithstanding, if, for
any period in which any Open Distribution Vendor engages in Open Distribution,
any member of the Merisel Group breaches any of its obligations under Section
2.2(g), the Inventory Cost of those Products of such Open Distribution Vendor
sold by any member of the Merisel Group in connection with the Other
Distribution Business as a result of such violation will be included in Eligible
Volume for such period for all purposes of this Section 2.2. The legal fees and
expenses incurred by any party in connection with any legal action involving an
alleged breach by the Buyer and/or the Merisel Group, or any member thereof, of
Section 2.2(g) shall be borne by the party who shall not prevail in such
dispute.
(i) In the event that, at any time during the Earnout Period, there is
a material increase, decrease or change in the product lines of any Eligible
Vendor sold under the name of such Eligible Vendor, as a result of any merger,
acquisition, divestiture, reorganization or other event, Merisel, the Buyer and
the Seller shall cooperate with one another in good faith and use their
respective best efforts to agree on an appropriate modification of the products
included in measuring the Base Volume and Eligible Volume, so that the
comparisons between Base Volume and Eligible Volume provided for in this Section
2.2 shall better serve the purposes of this Section 2.2.
(j) Anything contained herein to the contrary notwithstanding, during
the Earnout Period the Buyer shall not assign or delegate to any other person or
entity any rights or interests of the Buyer in, to or under any franchise
agreement, distribution agreement or other similar instrument or agreement
between the Buyer and any Buyer Datago Purchaser or Buyer
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-19-
<PAGE>
Franchisee without the prior written consent of the Seller, and any such
assignment or delegation (or attempted assignment or delegation) shall be void
ab initio; provided, however, that the Buyer may make such an assignment or
- - - -- ------ -------- -------
delegation to any member of the Merisel Group without the consent of the Seller
so long as all amounts that otherwise would have been included in Eligible
Volume (assuming that such member of the Merisel Group was the Buyer) shall
continue to be so included; provided further, however, that the Seller shall not
-------- ------- -------
unreasonably withhold its consent to any other such assignment or delegation so
long as arrangements are made, to the reasonable satisfaction of the Seller, to
provide for the inclusion in Eligible Volume of all amounts that otherwise would
have been included in Eligible Volume (assuming that such assignee or delegatee
was the Buyer).
(k) Except as provided in Section 5.7 of the Services Agreement, the
obligations of the Buyer and Merisel under this Section 2.2, including, without
limitation, the obligation to pay the Earnout Amount and other amounts due under
this Section 2.2, shall be absolute and unconditional, without any right of
offset whatsoever.
2.3. Allocation of Purchase Price. The Purchase Price shall be
----------------------------
allocated among the Purchased Assets and the Restrictive Covenant in accordance
with the allocation set forth on Annex 2.3 hereto and the Seller and the Buyer
---------
shall prepare their Federal, state and local income tax returns employing such
allocation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Seller. The Seller
--------------------------------------------
represents and warrants to the Buyer as follows:
(a) Organization; Good Standing; Qualification and Power of the
-----------------------------------------------------------
Seller. The Seller is a corporation duly organized, validly existing and in
- - - ------
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate the Purchased Assets and
to carry on the Subject Business as now being conducted, to enter into this
Agreement, the Bill of Sale and Assumption, the Trademark Assignment, the
Copyright Assignment, the Patent Assignment, the License Agreement, the Volume
Purchase Agreement (as defined in Section 5.1(d)), the Sublease (as defined in
Section 5.1(f)), the Services Agreement, the Stock Purchase Agreement (as
defined in Section 5.1(h)) and all other instruments related to any of the
foregoing, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The Seller is duly qualified
and in good standing to do business in all
-20-
<PAGE>
jurisdictions in which the failure to be so qualified and in good standing to do
business would have a Material Adverse Effect.
(b) Authority. The execution, delivery and performance of this
---------
Agreement, the Bill of Sale and Assumption, the Trademark Assignment, the
Copyright Assignment, the Patent Assignment, the License Agreement, the Volume
Purchase Agreement, the Sublease, the Services Agreement, the Stock Purchase
Agreement and all other instruments related to any of the foregoing, and the
consummation of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary corporate action on the part of the
Seller. This Agreement has been and the Bill of Sale and Assumption, the
Trademark Assignment, the Copyright Assignment, the Patent Assignment, the
License Agreement, the Volume Purchase Agreement, the Sublease, the Stock
Purchase Agreement and the Services Agreement will be duly and validly executed
and delivered by the Seller, and when validly executed and delivered by the
Buyer will be valid and binding obligations of the Seller, enforceable in
accordance with their respective terms, subject, as to the enforcement of
remedies, to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws affecting creditors' rights generally
and, with respect to the remedy of specific performance, equitable doctrines
applicable thereto. Except as set forth on Schedule 3.1(b), neither the
---------------
execution, delivery or performance of this Agreement, the Bill of Sale and
Assumption, the Trademark Assignment, the Copyright Assignment, the Patent
Assignment, the License Agreement, the Volume Purchase Agreement, the Sublease,
the Services Agreement, the Stock Purchase Agreement or all other instruments
related to any of the foregoing, nor the consummation by the Seller of the
transactions contemplated hereby or thereby, nor compliance by the Seller with
any provision hereof or thereof will (i) conflict with or result in a breach of
the Seller's Restated Certificate of Incorporation or By-laws, (ii) violate,
conflict with, result (with or without notice or the passage of time, or both)
in a breach of or constitute (with or without notice, the passage of time, or
both) a default under (or cause or give rise to any right of termination,
cancellation, modification, imposition of fees or penalties or acceleration) the
terms of any of the Contracts, which individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect, (iii) require any
consent, authorization or approval of any third party, including, without
limitation, any consent to the assignment of any of the Contracts, other than
those which if not obtained would not have a Material Adverse Effect, (iv)
violate any Federal, state, local or foreign law, statute, rule, regulation,
order, writ, judgment, injunction, award or decree of any court, administrative
agency or governmental body applicable to the Seller, any of the Purchased
Assets or the Subject Business, the violation of which would have a Material
Adverse Effect or would prohibit consummation of the transactions contemplated
hereby, (v) affect any license, permit or other
-21-
<PAGE>
governmental authorization or approval or any other right, privilege, agreement
or contract in a manner which could reasonably be expected to have a Material
Adverse Effect or (vi) result in or require the creation or imposition of any
Claim upon the Purchased Assets or the Subject Business.
(c) No Consent or Approval Required. Except with respect to the
-------------------------------
filing of a pre-merger notification report under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and expiration of the
applicable waiting period thereunder (which expiration, as to this Agreement but
not the Stock Purchase Agreement, occurred on November 15, 1993), and except as
otherwise disclosed on Schedule 3.1(c), no consent, authorization, approval,
---------------
permit, license, exemption by or other order of, declaration to or filing with
any Federal, state, local or foreign governmental authority is required (i) to
be obtained by the Seller in connection with the execution, delivery and
performance by the Seller of the transactions contemplated by this Agreement,
the Bill of Sale and Assumption, the Trademark Assignment, the Copyright
Assignment, the Patent Assignment, the License Agreement, the Volume Purchase
Agreement, the Sublease, the Stock Purchase Agreement and the Services
Agreement, other than those which if not obtained or made would not have a
Material Adverse Effect or (ii) to prevent the termination, cancellation,
modification, amendment or waiver of any right, privilege, license, agreement or
contract of the Seller with respect to the Subject Business which, if
terminated, canceled, modified, amended or waived, could reasonably be expected
to have a Material Adverse Effect.
(d) Financial Information. Schedule 3.1(d) sets forth the audited
--------------------- ---------------
statements of revenues and operating expenses of the Subject Business for the
fiscal years ended September 30, 1992 and 1993 (collectively, the "Financial
Statements"). The Financial Statements, including the notes thereto, were
prepared in accordance with the books and records of the Seller in accordance
with GAAP and present fairly, in all material respects, the revenues and
operating expenses of the Subject Business for the periods indicated.
(e) Equity Investments in Franchisees. Except as otherwise set forth
---------------------------------
on Schedule 3.1(e), the Seller does not own, directly or indirectly, any capital
---------------
stock, partnership interest, joint venture interest or other ownership or
proprietary interest in any Franchisee. The Seller does not own, directly or
indirectly, any capital Stock, partnership interest, joint venture interest or
other ownership or other proprietary interest in any Datago Purchaser.
(f) Notes Receivable from Franchisees. Schedule 3.1(f) sets forth a
--------------------------------- ---------------
list of each promissory note issued by any Franchisee to the Seller that is
outstanding as of the date hereof.
-22-
<PAGE>
(g) Title to and Sufficiency of Purchased Assets. The Seller owns and
--------------------------------------------
has good, valid and transferrable title to all of the Purchased Assets, free and
clear of all security interests, judgments, liens, pledges, claims, licenses or
other encumbrances (collectively, "Claims"), except for (i) those Claims set
forth on Schedule 3.1(g) and (ii) liens for current taxes not yet due and
---------------
payable. Except as set forth in Schedule 3.1(g) and except for (A) corporate,
---------------
administrative and support services heretofore provided to the Subject Business
by personnel employed by, and utilizing resources of, the Retained Businesses,
and (B) compliance by the Buyer with applicable Federal and state franchise
laws, including, without limitation, any regulatory filings required to be made
by the Buyer in order to offer franchises in the Designated Territory, and
assuming that the Buyer hires and has available to it immediately after the
Closing the services of the employees of the Subject Business, the Purchased
Assets, together with the services to be provided by the Seller pursuant to the
Services Agreement, are sufficient to permit the Buyer to operate the Subject
Business immediately after the Closing in a manner substantially similar to the
manner in which it is operated by the Seller immediately prior to the Closing;
provided, however, that nothing contained herein shall constitute a
- - - -------- -------
representation and warranty by the Seller that the Buyer will achieve
substantially equivalent operating results in its ownership and management of
the Subject Business.
(h) Contracts. Schedule 3.1(h) sets forth the following
--------- ---------------
(collectively, the "Operative Contracts"): (i) each Franchise Agreement, Datago
Agreement and Datago Conversion Agreement in effect on the date of this
Agreement, including any written modifications, amendments or waivers with
respect thereto (collectively, the "Reseller Contracts"); (ii) each supply
agreement with any vendor pursuant to which the Seller purchases goods for
resale to Third Party Resellers in effect on the date of this Agreement; (iii)
each agreement or commitment containing a covenant limiting the freedom of the
Seller (with respect to the Subject Business) to compete with any person, firm,
corporation, partnership, joint venture or other enterprise or engage in any
line of business in effect on the date of this Agreement; and (iv) each other
contract, commitment or agreement of any nature regardless of amount or subject
matter, which is material to the financial condition, results of operations,
properties, assets, liabilities (absolute, accrued, contingent or otherwise) or
business of the Seller (with respect to the Subject Business) in effect on the
date of this Agreement. Except as set forth on Schedule 3.1(h), (A) the Seller
---------------
has performed in all material respects all obligations required to be performed
by it to date and is not in breach of or default under (nor, to the Seller's
knowledge, is the Seller alleged to be in default, nor has any event occurred
which, immediately, or upon the giving of notice or the passage of time or both,
would constitute a default) under any Operative Contract where such failure to
perform, breach or default, when taken together with all other
-23-
<PAGE>
existing failures to perform, breaches and defaults by the Seller under any
Operative Contracts or such other instruments, agreements or contracts, could
reasonably be expected to have a Material Adverse Effect, (B) to the Seller's
knowledge, no other party is in default under any Operative Contract where such
default, when taken together with all other defaults by other parties to any
Operative Contracts or such other instruments, agreements or contracts, could
reasonably be expected to have a Material Adverse Effect, (C) each Operative
Contract is a valid and binding obligation of the Seller, enforceable against
the Seller in accordance with its terms subject, as to enforcement of remedies,
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws affecting creditors' rights generally and, with
respect to the remedy of specific performance, equitable doctrines applicable
thereto and (D) the Seller has not previously assigned or transferred any of its
right, title or interest in and to any of the Contracts to any third party.
Except as set forth on Schedule 3.1(h), the Seller has made available to the
---------------
Buyer true and complete copies of all Operative Contracts and all contracts
referred to in Sections 1.2(k) through (o). Each of the Seller and, to the
knowledge of the Seller, the Trustee (as defined in the Ad Fund Agreement) has
complied in all material respects with their obligations under the Ad Fund
Agreement and is not in breach or default under (nor, to the Seller's knowledge,
is the Seller or the Trustee alleged to be in default under) the Ad Fund
Agreement.
(i) Intellectual Property Rights. Except for the logo "Network
----------------------------
Centers of Excellence", which is not being transferred to the Buyer, the
Trademarks, the copyrights constituting a portion of the Purchased Assets (the
"Copyrights") and the Patents constitute all of the material names, trademarks,
tradenames, service marks, logos, copyrights and patents presently used by the
Seller in the Subject Business. Except as set forth on Schedule 3.1(i), (A) the
---------------
Seller has the right to use the Trademarks in the conduct of the Subject
Business in the Designated Territory, to sell and license the same in the
Designated Territory to third parties and to bring actions for the infringement
in the Designated Territory thereof and to prevent others from making, using or
selling articles which infringe on the Patents, (B) there is no pending claim
against the Seller alleging that any of the Trademarks or the Patents infringe
on any intellectual property rights of any party nor, to the Seller's knowledge,
is any such claim threatened, (C) to the Seller's knowledge, no party is
infringing on the rights of the Seller in the Trademarks or the Patents in the
Designated Territory, (D) except pursuant to the Reseller Contracts and as
described in Section 1.6(b), the Seller has not granted any license or right to
use any Trademark or Patent in the Designated Territory, (E) the Seller has no
knowledge of any claim by any other person that such other person is the legal
owner of any interest in any of the Trademarks or the Patents and (F) each of
-24-
<PAGE>
the Trademarks is in use by the Seller in the Designated Territory.
(j) Litigation, Etc. Except as set forth on Schedule 3.1(j),
---------------- ---------------
there are no (i) actions, suits, claims, investigations or legal or
administrative or arbitration proceedings pending or, to the Seller's knowledge,
threatened, against the Seller with respect to the Subject Business or the
Purchased Assets, whether at law or in equity, or before or by any Federal,
state, municipal or other governmental authority or (ii) judgments, decrees,
injunctions or orders of any court or governmental authority against the Seller
which affect the Purchased Assets or the Subject Business.
(k) Compliance; Governmental Authorizations. Except as set
---------------------------------------
forth on Schedule 3.1(k), the Seller, in its conduct of the Subject Business,
---------------
(i) has complied in all material respects with all applicable Federal, state and
local laws, ordinances, regulations, rules, statutes and orders (collectively,
"Laws") applicable to its conduct of the Subject Business, the noncompliance
with which could reasonably be expected to have a Material Adverse Effect, and
(ii) has not received any written notice or complaint from any Federal, state or
local governmental authority alleging that the Seller's conduct of the Subject
Business is in violation of any Law.
(l) Brokers. Except as set forth on Schedule 3.1(l), the Seller
------- ---------------
has not engaged any broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated hereby.
(m) Absence of Certain Changes. Except as set forth on Schedule
-------------------------- --------
3.1(m), since September 30, 1993, the Seller (solely in respect of the Subject
- - - ------
Business and the Purchased Assets) has not:
(i) suffered any Material Adverse Effect;
(ii) suffered any theft, damage, destruction or casualty
loss, which materially adversely affects the Subject Business or the
Purchased Assets;
(iii) sold, leased, transferred or otherwise disposed of any
Purchased Asset except in the ordinary course of business, consistent with
past practice;
(iv) permitted any Purchased Asset to be subject to any
Claim the imposition of which could reasonably be expected to have a
Material Adverse Effect;
(v) entered into, terminated, canceled, modified (in a
manner materially adverse to the Seller), relinquished
-25-
<PAGE>
or waived or received notice of, or request for, termination, cancellation,
modification, relinquishment or waiver of any substantial right or claim of
the Subject Business or any Contract;
(vi) been subject to any labor dispute, material work
stoppage or threat thereof by or with respect to employees of the Subject
Business;
(vii) settled on its own behalf any material action or
proceeding; or
(viii) made any agreement to take any of the actions
described in this Section 3.1(m) .
(n) Product Warranties. Except as set forth on Schedule 3.1(n),
------------------ ---------------
there is no pending claim against the Seller (with respect to the Subject
Business) on account of product warranties or with respect to the sale by the
Seller of defective or inferior products that would have a Material Adverse
Effect, and to the knowledge of the Seller, there is no such threatened claim
that could reasonably be expected to have a Material Adverse Effect.
(o) Franchise Matters. (i) Schedule 3.1(o) contains a copy of
----------------- ---------------
the Seller's Franchise Offering Circular as most recently filed with the
California Department of Corporations, together with all exhibits thereto (the
"California Offering Circular"). Each of the franchise offering circulars,
together with the exhibits thereto, other than the franchise agreements attached
as exhibits thereto, used by the Seller on the date hereof in the Designated
Territory are substantially similar in all material respects to the California
Offering Circular. Schedule 3.1(o) sets forth a true and complete list of all
---------------
formal filings made by the Seller after December 31, 1992 with any state or
Federal regulatory authority with respect to franchising matters. True and
complete copies of any formal orders of state or Federal regulatory authorities
issued after December 31, 1992 with respect to such filings are attached to
Schedule 3.1(o).
- - - ---------------
(ii) Schedule 3.1(o) hereof sets forth a list of all
---------------
Franchise Agreements, Datago Agreements and Datago Conversion Agreements
terminated or not renewed and any notices of such termination or non-renewal
received by the Seller during the 12 months ending on the date of this
Agreement.
(p) Employee Benefits. Schedule 3.1(p) contains a list of each
----------------- ---------------
employee benefit plan of general applicability made available to employees of
the Subject Business by the Seller as of the date hereof.
-26-
<PAGE>
3.2. Certain Qualifications and Limitations Relating to
--------------------------------------------------
Representations and Warranties of the Seller. The representations and
- - - --------------------------------------------
warranties of the Seller set forth in Section 3.1 hereof are subject to Article
VII and the following limitations and qualifications:
(a) No Other Representations and Warranties. Neither the Seller
---------------------------------------
nor any of its officers, directors, stockholders, employees or agents makes any
representation or warranty (express or implied) to the Buyer or any other party
relating to the transactions contemplated hereby, except as specifically made in
Section 3.1 hereof and the Schedules related thereto or in any agreement
delivered pursuant to this Agreement. Without limiting the foregoing, except as
specifically made in Section 3.1, neither the Seller nor any of its officers,
directors, stockholders, employees or agents makes any representation or
warranty with respect to (i) the Confidential Information Memorandum dated June
1993 or other materials or supplements circulated in connection therewith or
(ii) any estimates, projections, forecasts, operating plans or budgets
concerning financial or other information relating to the Subject Business
delivered or made available to the Buyer or otherwise obtained by the Buyer. The
Buyer acknowledges and agrees that (a) it has been furnished with or been given
adequate access to such information concerning the Purchased Assets, the Assumed
Obligations and the Subject Business as it has requested and (b) it has made its
own independent investigation of the Purchased Assets, the Assumed Obligations,
the Subject Business and the representations and warranties of the Seller set
forth in Section 3.1. No investigation by the Buyer shall affect or be deemed to
modify any representation or warranty made by the Seller in this Agreement (or
any other agreement or instrument contemplated hereby).
(b) Definition of Knowledge. As used in Section 3.1, the term
-----------------------
"to the Seller's knowledge" shall mean the actual knowledge of the persons set
forth on Schedule 3.2(b) and such knowledge as would be obtained by such persons
---------------
in exercising reasonable diligence in the ordinary course of their employment by
the Seller, including, without limitation, their review of the accuracy of the
Seller's representations and warranties set forth in this Agreement.
(c) Definition of Material Adverse Effect. As used in Section
-------------------------------------
3.1, the term "Material Adverse Effect" shall mean a material adverse effect on
the Purchased Assets or on the business, results of operations, financial
condition or prospects of the Subject Business, in each case taken as a whole.
(d) Disclosure Generally; Amendment of Schedules. If, and
--------------------------------------------
to the extent that, any information required to be furnished in any section or
subsection of the Schedules relating to the representations and warranties set
forth in Section 3.1 is
-27-
<PAGE>
set forth in this Agreement, any other section or subsection of such Schedules
or any exhibit or annex hereto, such information shall be deemed to be disclosed
in the section or subsection of the Schedules which require such disclosure.
The inclusion of any information in such Schedules or any part thereof shall not
be deemed to be an admission or indication of the materiality thereof or to
create a standard of disclosure generally.
3.3. Representations and Warranties of the Buyer. The Buyer
-------------------------------------------
represents and warrants to the Seller as follows:
(a) Organization; Good Standing; Qualification and Power of the
-----------------------------------------------------------
Buyer. The Buyer is a corporation duly organized, validly existing and in good
- - - -----
standing under the laws of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, to enter into this Agreement, the Bill of Sale and
Assumption, the License Agreement, the Sublease, the Services Agreement and all
other instruments related to any of the foregoing, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby.
(b) Authority. The execution, delivery and performance of this
---------
Agreement, the Bill of Sale and Assumption, the License Agreement, the Sublease,
the Services Agreement and all other instruments related to any of the
foregoing, and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on the part of the Buyer. This Agreement has been and the Bill of Sale and
Assumption, the License Agreement, the Sublease, and the Services Agreement will
be duly and validly executed and delivered by the Buyer, and when validly
executed and delivered by the Seller will be valid and binding obligations of
the Buyer, enforceable in accordance with their respective terms, subject, as to
the enforcement of remedies, to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws affecting creditors'
rights generally and, with respect to the remedy of specific performance,
equitable doctrines applicable thereto. Neither the execution, delivery or
performance by the Buyer of this Agreement, the Bill of Sale and Assumption, the
License Agreement, the Sublease, the Services Agreement or all other instruments
related to any of the foregoing, nor the consummation by the Buyer of the
transactions contemplated hereby or thereby, nor compliance by the Buyer with
any provision hereof or thereof will (i) conflict with or result in a breach of
the articles of incorporation or by-laws of the Buyer, (ii) violate, conflict
with, result (with or without notice or the passage of time, or both) in a
breach of or constitute (with our without notice, the passage of time, or both)
a default under (or cause or give rise to any right of termination, cancellation
or acceleration) under the terms of any material contract or indenture to which
the Buyer is a party
-28-
<PAGE>
which could reasonably be expected to impair the ability of the Buyer to
consummate the transactions contemplated hereby or perform its obligations
hereunder or have a Material Adverse Effect, (iii) require any consent,
authorization or approval of any third party, other than those which if not
obtained would not have a Material Adverse Effect, (iv) violate any provision of
any Federal, state, local or foreign law, statute, rule or regulation or order,
writ, judgment, injunction, award or decree of any court, administrative agency
or governmental body applicable to the Buyer or would prohibit consummation of
the transactions contemplated hereby or (v) have a Material Adverse Effect.
(c) No Consent or Approval Required. Except with respect to the
-------------------------------
filing of a pre-merger notification report under the HSR Act and expiration of
the applicable waiting period thereunder (which expiration, as to this Agreement
but not the Stock Purchase Agreement, occurred on November 15, 1993), no
consent, authorization, approval, permit, license, exemption by or other order
of, declaration to or filing with any Federal, state or local governmental
authority is required (i) to be obtained by the Buyer for the execution,
delivery and performance of the transactions contemplated by this Agreement, the
Bill of Sale and Assumption, the License Agreement, the Sublease or the Services
Agreement, other than those which if not obtained would not have a Material
Adverse Effect, or (ii) to prevent the termination, cancellation, modification,
amendment or waiver of any right, privilege, license, agreement or contract of
the Buyer which, if terminated, canceled, modified, amended or waived, could
reasonably be expected to have a Material Adverse Effect.
(d) Financing. The Buyer has, or has commitments from financing
---------
sources to provide, sufficient funds to pay to the Seller at the Closing by wire
transfer of immediately available funds the cash payment contemplated by Section
2.1(a). In connection therewith, Schedule 3.3(d) includes true and correct
---------------
copies of all such commitments .
(e) Brokers. Except as set forth on Schedule 3.3(e), neither
------- ---------------
the Buyer, Merisel nor any of their respective officers, directors, employees
or agents has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated hereby.
ARTICLE IV
[INTENTIONALLY OMITTED]
-29-
<PAGE>
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
5.1. Conditions to Each Party's Obligations. The obligation of the
--------------------------------------
Seller to sell the Purchased Assets, and of the Buyer to purchase the Purchased
Assets and assume the Assumed Obligations, are subject to the satisfaction of
the following conditions unless waived (to the extent such conditions can be
waived) by the Seller or the Buyer, as applicable:
(a) Legal Action. No temporary restraining order, preliminary
------------
injunction or permanent injunction or other order preventing the consummation of
transactions contemplated hereby shall have been issued by any Federal or state
court and remain in effect. Each party agrees to use its best efforts to have
any such injunction or order lifted.
(b) Legislation. No Federal, state or local statute, rule or
-----------
regulation or ordinance shall have been enacted which prohibits, restricts or
delays the consummation of the transactions contemplated hereby or any of the
conditions to the consummation of such transactions.
(c) License Agreement. The License Agreement shall have been
-----------------
duly executed and delivered by the Seller and the Buyer.
(d) Volume Purchase Agreement. The Seller and Merisel Americas,
-------------------------
Inc., a Delaware corporation ("Merisel Americas"), shall have duly executed and
delivered a volume purchase agreement (the "Volume Purchase Agreement"),
pursuant to which Merisel Americas shall supply certain products to the Seller.
(e) Services Agreement. The Seller and the Buyer shall have
------------------
duly executed and delivered a distribution and services agreement (the "Services
Agreement"), pursuant to which the Seller shall provide to the Buyer certain
distribution and logistics services.
(f) Sublease. The Seller and the Buyer shall have duly executed
--------
and delivered a sublease (the "Sublease"), pursuant to which the Seller shall
provide to the Buyer certain office space .
(g) Repurchase Agreements. The Buyer shall have entered into
---------------------
repurchase agreements (the "Buyer Repurchase Agreements") with each of the
finance companies listed on Annex 5.1(g), which finance companies and the Seller
------------
are currently parties to those repurchase agreements listed on Annex 5.1(g) (the
------------
"Seller Repurchase Agreements").
-30-
<PAGE>
(h) Stock Purchase Agreement. The Seller and Merisel shall have
------------------------
duly executed and delivered a stock purchase agreement (the "Stock Purchase
Agreement"), pursuant to which the Seller shall purchase from Merisel and
Merisel shall sell to the Seller shares of Common Stock of Merisel.
5.2. Conditions to Obligations of the Buyer. The obligation of the
--------------------------------------
Buyer to purchase the Purchased Assets and assume the Assumed Obligations is
subject to the satisfaction of the following conditions unless waived (to the
extent such conditions can be waived) by the Buyer:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Seller set forth in Section 3.1 shall be true and correct in
all material respects as of the Closing as though made at and as of the Closing,
and the Buyer shall have received a certificate from the Seller signed by an
authorized officer of the Seller to that effect (it being understood that the
Seller shall have the right to make additions, deletions or modifications to the
Schedules relating to the representations and warranties set forth in Section
3.1 after the date hereof but prior to the Closing; provided, that if any such
--------
additions, deletions or modifications result in the failure of the Seller to
satisfy the condition set forth in this paragraph (a), then the Buyer shall not
be obligated to purchase the Purchased Assets or to assume the Assumed
Obligations, but the Buyer shall not have any claim against the Seller with
respect to the additions, deletions or modifications so disclosed to the Buyer).
(b) Performance of Obligations of the Seller. The Seller shall
----------------------------------------
have performed in all material respects all obligations required to be performed
by it under this Agreement prior to the Closing, and the Buyer shall have
received a certificate from the Seller signed by an authorized officer of the
Seller to that effect.
(c) Authorization. All action necessary to authorize the
-------------
execution, delivery and performance of this Agreement, the Bill of Sale and
Assumption, the Trademark Assignment, the Copyright Assignment, the Patent
Assignment, the License Agreement, the Volume Purchase Agreement, the Sublease,
the Stock Purchase Agreement and the Services Agreement by the Seller and the
consummation of the transactions contemplated hereby and thereby shall have been
duly and validly taken by the Seller and the Buyer shall have received all such
counterpart originals, certified or other copies of such documents as the Buyer
may reasonably request.
(d) Bill of Sale and Assumption; Conveyance Instruments.
---------------------------------------------------
The Seller shall have duly executed and delivered to the Buyer the Bill of Sale
and Assumption, the Trademark Assignment, the Copyright Assignment, the Patent
Assignment and
-31-
<PAGE>
such other instruments of conveyance and transfer as shall be reasonably
requested by the Buyer to effect the transfer of the Purchased Assets.
(e) Opinion of Counsel to the Seller. The Buyer shall have
--------------------------------
received the opinion dated the date of the Closing of O'Sullivan Graev &
Karabell, counsel to the Seller, in form and substance reasonably satisfactory
to counsel to the Buyer.
(f) Government Consents, Authorizations, Etc. All material
-----------------------------------------
consents, authorizations, orders or approvals of, and filings or registrations
with or expiration of waiting periods imposed by, any Federal, state or local
governmental body which are required for or in connection with the execution and
delivery by the Seller of this Agreement, the Bill of Sale and Assumption, the
License Agreement, the Volume Purchase Agreement, the Sublease and the Services
Agreement, and the consummation of the transactions contemplated thereby, and
the transfer to the Buyer of the Purchased Assets, shall have been obtained or
made.
(g) Third Party Consents. Consents from the following persons
--------------------
shall have been obtained: Federal Express, IBM Credit Corporation and Rosewood
Associates.
(h) Vendor Letters. The Buyer shall have received letters from
--------------
each of IBM, Compaq, Apple and Hewlett Packard relating to sales of products
sold by such vendors after the Closing in form and substance reasonably
satisfactory to the Buyer.
(i) Ad Fund Agreement. The Buyer shall have received that
-----------------
portion of the corpus of the trust under the Ad Fund Agreement held for the
benefit of the Franchisees to the extent of the Seller's interest therein, and a
new trustee thereunder, designated by the Buyer, shall have been appointed.
5.3. Conditions to Obligations of the Seller. The obligation of the
---------------------------------------
Seller to sell the Purchased Assets to the Buyer is subject to the satisfaction
of the following conditions unless waived (to the extent such conditions can be
waived) by the Seller:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Buyer set forth in Section 3.3 shall be true and correct in
all material respects as of the Closing as though made at and as of the Closing,
and the Seller shall have received a certificate from the Buyer signed by an
authorized officer of the Buyer to that effect (it being understood that the
Buyer shall have the right to make additions, deletions or modifications to the
Schedules relating to the representations and warranties set forth in Section
3.3 after the date hereof but prior to the Closing; provided, that if any such
--------
additions, deletions or modifications result in the failure of
-32-
<PAGE>
the Buyer to satisfy the condition set forth in this paragraph (a), then the
Seller shall not be obligated to sell the Purchased Assets, but the Seller shall
not have any claim against the Buyer with respect to the additions, deletions or
modifications so disclosed to the Seller).
(b) Performance of Obligations of the Buyer. The Buyer shall
---------------------------------------
have performed in all material respects all obligations required to be performed
by it under this Agreement prior to the Closing, and the Seller shall have
received a certificate from the Buyer signed by an authorized officer of the
Buyer to that effect.
(c) Authorization. All action necessary to authorize the
-------------
execution, delivery and performance of this Agreement, the Bill of Sale and
Assumption, the License Agreement, the Sublease and the Services Agreement by
the Buyer and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by the Buyer and the Seller shall
have received all such counterpart originals or certified or other copies of
such documents as the Seller may reasonably request.
(d) Bill of Sale and Assumption; Assumption Instruments. The
---------------------------------------------------
Buyer shall have duly executed and delivered to the Seller the Bill of Sale and
Assumption and such other instruments of assumption as shall be reasonably
requested by the Seller to effect the assumption by the Buyer of the Assumed
Obligations.
(e) Opinion of Counsel to the Buyer. The Seller shall have
-------------------------------
received an opinion dated the date of the Closing of Riordan & McKinzie, counsel
to the Buyer, in form and substance reasonably satisfactory to counsel to the
Seller.
(f) Government Consents, Authorizations, Etc. All material
-----------------------------------------
consents, authorizations, orders or approvals of, and filings or registrations
with or expiration of waiting periods imposed by, any Federal, state or local
governmental body which are required for or in connection with the execution and
delivery by the Buyer of this Agreement, the Bill of Sale and Assumption, the
License Agreement, the Volume Purchase Agreement, the Sublease and the Services
Agreement and the consummation of the transactions contemplated thereby shall
have been obtained or made.
(g) Third Party Consents. Consents from the following
--------------------
persons shall have been obtained: Federal Express, IBM Credit Corporation and
Rosewood Associates.
(h) Guaranty Agreement. The Guaranty Agreement shall have
------------------
been duly executed and delivered to the Seller and
-33-
<PAGE>
shall be in full force and effect in accordance with the terms thereof.
ARTICLE VI
CLOSING
The closing (the "Closing") for the consummation of the transactions
contemplated by this Agreement, is taking place at the offices of ComputerLand
Corporation, 5964 West Las Positas, Pleasanton, California 94566-8575 on the
date hereof (the "Closing Date") and shall be deemed effective immediately
following the close of the Business Day (as defined in the Services Agreement)
on the Closing Date.
ARTICLE VII
INDEMNIFICATION
7.1. Indemnification by the Seller. Subject to the terms and
-----------------------------
conditions of this Agreement, the Seller shall indemnify and hold harmless the
Buyer and its successors and assigns (the "Buyer Indemnitees") from and against
any and all losses, damages, costs, obligations, liabilities and expenses
(including reasonable attorneys' fees) (collectively, "Losses") incurred by any
Buyer Indemnitee as a result of any of the following:
(a) the breach of any representation and warranty of the Seller
set forth in Section 3.1 of this Agreement;
(b) the breach of any covenant or agreement required to be
performed by the Seller under this Agreement, other than the covenants and
agreements set forth in Section 2.2;
(c) any liability arising out of any Excluded Obligation;
(d) any liability arising out of any Excluded Asset or the
Retained Businesses;
(e) any brokerage or finder's fees arising out of the
transactions contemplated hereby owing or claimed to be owing to any party
engaged by the Seller; and
(f) any liability arising out of any of the Buyer Repurchase
Agreements which relate to the sale of products prior to the Closing;
-34-
<PAGE>
provided, however, that "Losses" shall be calculated net of (i) insurance
- - - -------- -------
proceeds actually received, (ii) amounts actually recovered in respect of
indemnification claims (other than any indemnification claims arising under this
Section 7.1), (iii) tax deductions, credits or other benefits actually received
or (iv) other amounts actually recovered pursuant to a cross-claim or
counterclaim arising from or in connection with the circumstances that give rise
to such Losses pursuant to a final adjudication.
7.2. Indemnification by the Buyer. Subject to the terms and
----------------------------
conditions of this Agreement, the Buyer shall indemnify and hold harmless the
Seller and its successors and assigns (the "Seller Indemnitees") from and
against any and all Losses incurred by any Seller Indemnitee as a result of any
of the following:
(a) the breach of any representation and warranty of the Buyer
set forth in Section 3.3;
(b) the breach of any covenant or agreement required to be
performed by the Buyer under this Agreement, other than the covenants and
agreements set forth in Section 2.2;
(c) any liability arising out of any Assumed Obligation;
(d) any brokerage or finder's fees arising out of the
transactions contemplated hereby owing or claimed to be owing to any party
engaged by the Buyer; and
(e) any liability arising out of any of the Seller Repurchase
Agreements which relate to the sale of products after the Closing;
provided, however, that "Losses" shall be calculated net of (i) insurance
- - - -------- -------
proceeds actually received, (ii) amounts actually recovered in respect of
indemnification claims (other than any indemnification claims arising under this
Section 7.2), (iii) tax deductions, credits or other benefits actually received
or (iv) other amounts actually recovered pursuant to a cross-claim or
counterclaim arising from or in connection with the circumstances that give rise
to such Losses pursuant to a final adjudication.
7.3. Assertion of Claims. No claim, demand, suit or cause of action
-------------------
shall be brought under Section 7.1 or 7.2 unless the Buyer Indemnitee or the
Seller Indemnitee, as the case may be, gives the indemnifying party (the
"Indemnifying Party") written notice of the existence of any such claim, demand,
suit or cause of action and the amount thereof, to the extent known, and
provides to the extent available all written documentation
-35-
<PAGE>
relating thereto on or prior to the Survival Date, if any, applicable to any
representation forming the basis of a claim, demand, suit or cause of action
under Section 7.1 or 7.2.
7.4. Notice and Defense of Third Party Claims. (a) Any action, suit
----------------------------------------
or proceeding (a "Proceeding") brought by a third party against a Buyer
Indemnitee or Seller Indemnitee, as the case may be (the "Indemnified Party"),
with respect to which the Buyer or Seller may have an indemnification obligation
under this Article VII, shall be defended (including all proceedings on appeal
or for review which counsel for the defendant shall deem appropriate) by the
Indemnifying Party, unless otherwise agreed to in writing by the Indemnifying
Party, using counsel reasonably satisfactory to the Indemnified Party; provided,
--------
however, that the Indemnifying Party shall not have the right to assume the
- - - -------
defense of any Proceeding if (i) such Proceeding seeks an injunction,
restraining order, declaratory relief or other nonmonetary relief and, if
decided adversely, such Proceeding could have a Material Adverse Effect on the
Indemnified Party or (ii) the named parties to any such Proceeding (including
any impleaded parties) include both the Indemnified Party and the Indemnifying
Party and (A) the Indemnified Party shall have been advised by counsel that
there are one or more legal or equitable defenses available to it which are
different from or additional to those available to the Indemnifying Party and
(B) in the reasonable opinion of counsel for the Indemnified Party, counsel for
the Indemnifying Party could not adequately represent the interests of the
Indemnifying Party because such interests could be in conflict with those of the
Indemnifying Party; provided,however, that the Indemnifying Party shall not be
-------- -------
liable for the fees and expenses of more than one counsel for the Indemnified
Party. In addition, if the Indemnifying Party shall not assume the defense of
any Proceeding within a reasonable time after receipt of notice of such
Proceeding from the Indemnified Party, the Indemnified Party shall (upon further
notice to the Indemnifying Party) have the right to assume the defense of such
Proceeding.
(b) If the Indemnifying Party shall assume the defense of a
Proceeding (under circumstances in which the proviso to the Section 7.4(a) is
not applicable), the Indemnifying Party shall not be responsible for any legal
or other defense costs subsequently incurred by the Indemnified Party in
connection with the defense thereof. If the Indemnifying Party does not
exercise its right to assume defense of a Proceeding (but is not otherwise
restricted from so assuming such defense by the first proviso to Section
7.4(a)), it shall nevertheless be entitled to participate in such defense with
its own counsel and the fees and expenses of both counsel to the Indemnified
Party and the Indemnifying Party shall be aggregated and borne by the
Indemnifying Party. If the Indemnifying Party does not assume the defense of a
Proceeding because it is restricted from assuming such defense by the first
proviso to Section 7.4(a), it shall nevertheless be entitled to
-36-
<PAGE>
participate in such defense with its own counsel and the fees and expenses of
both counsel to the Indemnified Party and the Indemnifying Party shall be
aggregated and borne 50% by the Indemnifying Party and 50% by the Indemnified
Party.
(c) Regardless of which party is controlling the defense of any
Proceeding, the controlling party shall keep the other party fully informed of
such Proceeding at all stages thereof, whether or not it is so represented, the
party not controlling the defense of such Proceeding shall make available to the
other party all books and records of such party relating to such Proceeding and
the parties hereto shall render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of such Proceeding.
(d) The party controlling the defense of any Proceeding shall not
make any settlement of any action, suit or proceeding without the written
consent of the other party which, consent shall not be unreasonably withheld.
7.5. Survival of Representations, Warranties and Covenants. (a)
-----------------------------------------------------
Subject to the further provisions of this Article VII, the representations and
warranties of the Seller contained in Section 3.1 and the representations and
warranties of the Buyer contained in Section 3.3 shall survive the Closing and
shall terminate at the end of the 18th month after the date of the Closing;
provided, however, that (i) the representations and warranties of the Seller set
- - - -------- -------
forth in the first sentence of Section 3.1(g) hereof shall survive the Closing
and remain in full force and effect until the fifth anniversary of the Closing
and (ii) the representations and warranties of the Seller set forth in Sections
3.1(a), (b), (c), (h), (i) and (o) hereof shall survive the Closing and remain
in full force and effect until the 30th month anniversary of the Closing (each
of the foregoing termination dates, a "Survival Date"). Any representation or
warranty which would otherwise terminate after a Survival Date shall survive
until the final adjudication or settlement of any claim for the breach thereof
if notice of any inaccuracy or breach thereof, including a reasonably detailed
description of such alleged inaccuracy or breach, shall have been given in
writing to the Seller or the Buyer, as the case may be, on or prior to a
Survival Date.
(b) Except as otherwise expressly provided in this Agreement, all
covenants contained in this Agreement shall survive the Closing and remain in
full force and effect without time limit.
7.6. Limitations on Indemnification. Anything contained herein to
------------------------------
the contrary notwithstanding, the Seller shall not be obligated under Section
7.1(a) for the payment of Losses incurred by any Buyer Indemnitee unless and
until, and
-37-
<PAGE>
only to the extent that, the aggregate amount of all Losses incurred by all
Buyer Indemnitees with respect to which the Seller is obligated to provide
indemnification pursuant to Section 7.1(a) exceeds the amount by which
$1,000,000 is greater than the aggregate amount, if any, incurred by the Buyer
in connection with those matters set forth on Schedule 7.6; provided, however,
------------ -------- -------
that in no event shall Losses for which the Seller shall be liable under Section
7.1(a) exceed in the aggregate $25,000,000. Anything contained herein to the
contrary notwithstanding, the Buyer shall not be obligated under Section 7.2(a)
for the payment of Losses incurred by any Seller Indemnitee unless and until,
and only to the extent that, the aggregate amount of all Losses incurred by all
Seller Indemnitees with respect to which the Buyer is obligated to provide
indemnification pursuant to Section 7.2(a) exceeds $1,000,000; provided,
--------
however, that in no event shall Losses for which the Buyer shall be liable under
- - - -------
Section 7.2(a) exceed in the aggregate $25,000,000.
7.7. Remedies Exclusive. The rights of the parties to
------------------
indemnification under this Article VII shall be the sole and exclusive
contractual right or remedy in connection with any Losses arising from or in
connection with this Agreement.
ARTICLE VIII
ADDITIONAL POST-CLOSING AGREEMENTS
8.1. Mutual Protection of Goodwill in Trademarks, Etc. (a) The
-------------------------------------------------
Buyer acknowledges the validity, value and goodwill in the "ComputerLand" name
and the Seller's proprietary rights therein with respect to the Seller's use
thereof anywhere in the world other than the Designated Territory. All parties
acknowledge that no right, title and interest with respect to the Trademarks and
the goodwill appurtenant thereto shall be retained by the Seller in the
Designated Territory. In order to protect such validity, value and goodwill, to
the extent the Buyer uses the "ComputerLand" name, the Buyer shall use the
"ComputerLand" name and any mark confusingly similar with the "ComputerLand"
name in a commercially reasonable manner at all times and shall protect its
rights in each such name in the same manner in which Merisel has previously
protected its rights in the proprietary trade names, service marks and
trademarks of Merisel. The Buyer shall not challenge or interfere with the
Seller's use or ownership of the "ComputerLand" name or use or seek to register
or otherwise establish rights in the "ComputerLand" name, or any confusingly
similar name, anywhere in the world other than in the Designated Territory.
(b) The Seller acknowledges the validity, value and goodwill in the
Trademarks and the Buyer's proprietary rights therein within the Designated
Territory following the Closing.
-38-
<PAGE>
In order to protect such validity, value and goodwill, to the extent the Seller
uses one or more of the Trademarks, or any mark confusingly similar with one or
more of the Trademarks, outside of the Designated Territory, the Seller shall
use such terms in a commercially reasonably manner at all times and shall
protect its rights in such names in the same manner in which the Seller has
previously protected its rights in the Trademarks anywhere in the world and in
the same manner in which the Seller protects its rights in any other proprietary
trade names, service marks and Trademarks owned by the Seller. The Seller shall
not challenge or interfere with the Buyer's use or ownership of any of the
Trademarks or use or seek to register or otherwise attempt to establish rights
in any mark confusingly similar with any of the Trademarks anywhere within the
Designated Territory.
8.2. Seller's Restrictive Covenant. (a) Except in connection with
-----------------------------
the performance of the agreements set forth in Section 1.5 hereof, from the
Closing until the 36th monthly anniversary of the Closing (the "Restriction
Period"), the Seller shall not, directly or indirectly, engage in the sale or
distribution of microcomputers or similar products to third party resellers of
such products located anywhere in the Designated Territory; provided, however,
-------- -------
that the foregoing restriction shall not apply to:
(i) sales of any products to (A) any company that purchases such
products primarily for internal use, (B) any company that is engaged
in the resale of such products to third parties that are (1)
affiliates of such company or (2) otherwise engaged in an independent
business relationship with such company or an affiliate of such
company where the resale of such products is an ancillary activity of
such business relationship (e.g., an independent insurance broker that
acquires such products from a reseller division or subsidiary of an
insurance company or a hotel franchisee that acquires such products
from a reseller division or subsidiary of the hotel franchisor), (C)
any financial leasing company, (D) any rental company, (E) any company
engaged in the original equipment manufacturing of microcomputer
products, (F) any company set forth on Schedule 8.2 or (G) any company
------------
whose primary business involves either of the following activities:
(x) the purchase of products as agent for ultimate end-users
where such end-users are billed directly by the Seller for such
products; or
(y) the purchase of products which are integrated into end-
users' systems where such company retains title to such products;
or
(ii) sales of spare parts to any person or entity.
-39-
<PAGE>
As used in this Section 8.2, any legal entity or division thereof shall
constitute a "company" if such legal entity or division shall be the direct
purchaser of such products from the Seller. In addition, the Seller shall not,
during the Restriction Period, (1) perform any distribution services (including
configuration services) substantially similar to those provided to the Buyer
under the Services Agreement for computer resellers, aggregators or
distributors, (2) act as a franchisor with respect to franchisees that compete
with the Subject Business in any manner or (3) initiate any program if it is
reasonably established that the principal purpose of such program is to permit
the Seller to cause a third party reseller to change its method of doing
business so as to enable the Seller to be eligible to claim the benefit of
clause (G)(x) or (y) above. Anything contained in this Agreement to the
contrary notwithstanding, the Seller's performance under the Services Agreement
shall not be deemed a breach of this Section 8.2. In the event the Buyer and
the Seller shall enter into negotiations regarding the extension of the
Distribution Period (as defined in the Services Agreement), then it is the
intention of the Seller and the Buyer to discuss the extension of the
Restriction Period as part of conducting such negotiations.
(b) The Seller has carefully considered the nature and extent of the
restrictions set forth herein and acknowledges that the same are reasonable with
respect to scope, duration and territory. It is the desire and intent of the
Seller and the Buyer that the provisions of this Section 8.2 be enforced to the
fullest extent permissible under the laws and public policies of each
jurisdiction in which enforcement thereof is sought. Accordingly, if any
provision of this Section 8.2 shall be adjudicated to be invalid or
unenforceable, such provision, without any action on the part of the Seller or
the Buyer, shall be deemed amended to delete therefrom or to modify provisions
thereof so as to restrict (including, without limitation, a reduction in
duration, geographical area or prohibited business activities) the portion
adjudicated to be invalid or unenforceable, such deletion or modification to
apply only with respect to the operation of such provision in the particular
jurisdiction in which such adjudication is made, and such deletion or
modification to be made only to the extent necessary to cause the provision as
amended to be valid and enforceable. It is further acknowledged that any
monetary remedy for any breach of the Seller's covenant set forth in Section
8.2(a) will be inadequate and that the Buyer will be entitled to temporary and
permanent injunctive relief against the Seller in addition to any other relief
or remedies to which the Buyer may be entitled, without the necessity of proving
actual damages.
8.3. Access. (a) To the extent permitted by applicable law or
------
existing contractual arrangement, the Seller shall, upon request, permit the
Buyer and its representatives, at reasonable times during normal business hours
and in a reasonable
-40-
<PAGE>
manner which is not disruptive to the operations of the Seller, to inspect and
to make copies of (at the expense of the Buyer) all records of the Seller
relating to the Subject Business prior to the Closing, including, without
limitation, sales and royalty records, accounting records and employee records.
The Seller shall use its reasonable efforts to avoid entering into agreements
prohibiting or restricting the Buyer's access to the records of the Subject
Business. The Seller represents and warrants to the Buyer that, except with
respect to vendor agreements and agreements set forth on Schedule 8.3(a), there
---------------
are no existing contractual restrictions on the ability of the Seller to provide
access to such records to the Buyer. Any information provided pursuant to this
Section 8.3(a) shall be treated in accordance with Section 8.5. The Seller
shall not dispose of such records during the five-year period commencing with
the Closing without the Buyer's prior written consent, which consent shall not
be unreasonably withheld. Following the expiration of such five-year period,
the Seller may dispose of such records at any time following 90 days' prior
written notice to the Buyer. During such 90-day period, the Buyer shall have
the right, at the Buyer's sole expense, to take possession of all or any part of
such records at a time to be agreed upon by the Seller and the Buyer. In
addition to the foregoing, the Seller shall provide to the Buyer copies of, and
the Buyer shall have the nonexclusive right to use within the Designated
Territory, (i) all mailing addresses of and any other data relating to the
Franchisees and Datago Purchasers, (ii) all vendor lists relating to the Subject
Business and (iii all forms, catalogs, brochures, advertising materials,
training and marketing manuals and franchise and Datago operating manuals
relating to the Subject Business, including, without limitation, ACCESS
materials and materials relating to the Agreements, Program and services
referred to in Sections 1.2(k) through (n).
(b) To the extent permitted by applicable law or existing contractual
arrangement, the Buyer shall, upon request, permit the Seller and its
representatives, at reasonable times during normal business hours and in a
reasonable manner which is not disruptive to the operations of the Buyer, to
inspect and to make copies of (at the expense of the Seller) all records of the
Buyer relating to the Buyer Subject Business. The Buyer shall use its
reasonable efforts to avoid entering into agreements prohibiting or restricting
the Seller's access to the records of the Buyer Subject Business. The Buyer
represents and warrants to the Seller that, except with respect to vendor
agreements and agreements set forth on Schedule 8.3(b), there are no existing
---------------
contractual restrictions on the ability of the Buyer to provide access to such
records to the Seller. Any information provided pursuant to this Section 8.3(b)
shall be treated in accordance with Section 8.5. The Buyer shall not dispose of
such records during the five-year period commencing with the Closing without the
Seller's prior written consent, which consent shall not be unreasonably
withheld. Following the expiration of such
-41-
<PAGE>
five-year period, the Buyer may dispose of such records at any time following 90
days' prior written notice to the Seller. During such 90-day period, the Seller
shall have the right, at the Seller's sole expense, to take possession of all or
any part of such records at a time to be agreed upon by the Seller and the
Buyer.
8.4. Renewals and Assignments of Franchise Agreements. From and
------------------------------------------------
after the Closing, the Buyer shall cause each Franchisee renewing or assigning a
Franchise Agreement to enter into a new franchise agreement with the Buyer and
to release the Seller from its obligations thereunder as a condition to such
renewal or assignment.
8.5. Confidentiality Matters. (a) At the Closing, the Seller shall
-----------------------
assign to the Buyer all of the Seller's right, title and interest in any
confidentiality agreements to the extent such agreements pertain to the sale of
the Subject Business entered into by the Seller in connection with the sale of
the Subject Business and, if available, shall deliver to the Buyer the executed
originals of such agreements. The Seller shall not amend, modify or supplement,
or grant any consent or waiver under or with respect to, any of such
confidentiality agreements without the Buyer's prior written consent.
(b) From and after the Closing, each of the Buyer and the Seller
shall maintain the confidentiality of all confidential or proprietary
information of the other party, including marketing, advertising and promotional
methods, agreements with vendors, manufacturers, distributors and other
suppliers, Franchise Agreements, Datago Agreements, customer lists, pricing
policies, financial information, sales volume, inventory procedures and amounts,
logistic systems, computer programs (including source code and object code),
ideas, concepts, processes, research and development and other information
related to the business or customers of such other party (collectively,
"Confidential Information"). Neither party will use (except in connection with
this Agreement or the transactions contemplated hereby), transfer, release,
publish or disclose, directly or indirectly, any Confidential Information of the
other party, without such other party's prior written consent, except as
required by law. Confidential Information does not include any information that
(i) becomes generally known or available to the public, through no fault of such
party, (ii) was known by such party, without any obligation of confidentiality,
prior to the date hereof or (iii) is lawfully obtained by such party after the
date hereof from a third party not bound by any obligation of confidentiality to
the other party. Each party understands that the other party will not have an
adequate remedy at law for a breach or threatened breach by such party of the
terms of this Section and therefore agrees that in the event of such a breach or
threatened breach, the other party may obtain an injunction or
-42-
<PAGE>
restraining order to enjoin such breach or threatened breach, in addition to any
other available remedy.
8.6. Sale of Certain Notes and Equity - Right of First Offer. In the
-------------------------------------------------------
event the Seller desires to sell any of its right and interest in and to the
notes receivable set forth on Schedule 3.1(f) or the equity interests set forth
---------------
on Schedule 3.1(e) (collectively, the "Investments") at any time during the one-
---------------
year period following the Closing Date, the Seller shall first offer to sell any
such Investment to the Buyer pursuant to a written notice (the "Offer Notice")
setting forth the proposed purchase price for such Investment and all other
material terms relating to such sale. The Buyer shall have the right to accept
such offer by providing written notice (a "Notice of Acceptance") of its
acceptance thereof to the Seller at any time within 15 days following the
Buyer's receipt of the Offer Notice. The closing of the purchase and sale of
any Investment to the Buyer pursuant to this Section 8.6 shall occur within 30
days of the Buyer's delivery to the Seller of a Notice of Acceptance on the
terms set forth in the Offer Notice. If the Buyer does not deliver a Notice of
Acceptance to the Seller within the aforementioned 15-day period, the Seller
shall have the right to sell such offered Investment to any party within the
six-month period following the Seller's delivery to the Buyer of the Offer
Notice upon terms no less favorable to another buyer than those set forth in the
Offer Notice delivered to the Buyer. In the event such sale is not consummated
within such six-month period or if the purchase price or other material terms of
such proposed sale are more favorable than those set forth in the Offer Notice,
the offered Investment shall again be offered to the Buyer pursuant to this
Section 8.6 if the one-year first offer period has not expired. The parties
shall use their best efforts and act in good faith in order to carry out the
intent of this Section 8.6, and shall enter into such agreements and execute
such instruments of transfer as shall be necessary and appropriate to effect the
sale, if any, contemplated by the provisions of this Section 8.6. Nothing
contained in this Section 8.6 shall prevent the Seller from amending or waiving
any provision of the Investments or any agreement or instrument relating to the
Seller's rights under the Investments.
8.7. Change of Name. The Seller shall change its corporate name to a
--------------
name which does not include "ComputerLand", "Datago" or any name similar thereto
by filing an amendment to the Seller's Restated Certificate of Incorporation
with the Delaware Secretary of State within 90 days after the Closing.
8.8. Vendor Consents. After the Closing, at the written request of
----------------
the Buyer, the Seller shall cooperate with the Buyer and work in good faith with
the Buyer to obtain the consents of the vendors and Datago Purchasers
contemplated by Schedule 3.1(b) identified in writing by the Buyer and which
---------------
were not obtained on or prior to the Closing; provided, however, that
-------- -------
-43-
<PAGE>
neither the Buyer nor the Seller shall be required to incur any obligations or
liabilities in obtaining any such consent, except for ordinary and necessary
out-of-pocket expenses incurred in connection therewith, which expenses shall be
borne equally by the Buyer and the Seller.
8.9. No Solicitation of Employees. Except as provided in Article X,
----------------------------
from the date hereof through December 31, 1995, neither the Buyer nor the Seller
shall solicit the employees of the other or any other person who was employed by
the other within six months of his or her termination of such employment.
8.10. Financial Statements. After the Closing, at the written
--------------------
request of the Buyer, and at the Buyer's expense, the Seller shall cooperate
with the Buyer and its accountants to prepare, modify or provide additional
information with respect to any financial statements or schedules relating to
the Subject Business.
ARTICLE IX
[INTENTIONALLY OMITTED]
ARTICLE X
EMPLOYMENT MATTERS
10.1. Obligations of Buyer. Effective as of the Closing, the Buyer
--------------------
shall extend offers of employment to all employees of the Seller employed in
conducting the Subject Business immediately prior to the Closing on general
terms of employment, including base salary, commission, bonus, benefits and
similar arrangements, substantially comparable to those under which such
employees were employed by the Seller immediately prior to the Closing on an
aggregate basis (recognizing that individual differences in specific terms of
employment may exist), except for one employee of the Subject Business on leave
on the Closing Date, to whom the Buyer shall offer such employment upon return
from such leave. The Buyer shall reimburse the Seller promptly upon written
demand for any payroll amounts paid by the Seller to any employee of the Subject
Business who shall accept the Buyer's offer with respect to any period after the
date hereof. The Buyer shall credit the employees employed in conducting the
Subject Business who shall accept the Buyer's offer with the full length of
their period of service with the Seller for purposes of determining their
eligibility to participate in, and the calculation of benefits under, the
employee benefit plans of the Buyer and for purposes of calculating severance
obligations of the Buyer to such employees; provided, however, that for purposes
-------- -------
of calculating the eligibility of employees of the Subject Business to
participate in the 401(k) plan maintained by the Merisel Group,
-44-
<PAGE>
no employee of the Subject Business shall be credited with more than five years
of service upon being hired by the Buyer. In connection therewith, the Buyer
shall be responsible for and shall pay all claims for severance made by the
employees employed in conducting the Subject Business who shall accept the
Buyer's offer and shall be responsible for accrued and unpaid vacation of such
employees to the extent of the amount of the payment for such accrued and unpaid
vacation received from the Seller pursuant to Section 10.2(b). The Buyer shall
be responsible for all benefit claims of the employees employed in conducting
the Subject Business who shall accept the Buyer's offer arising after the
Closing relating to periods after to the Closing, including severance payments,
COBRA coverage, workmen's compensation, unemployment compensation and other
government mandated benefits. The Buyer acknowledges that the Seller makes no
representation that any of its employees will accept the Buyer's offer of
employment. The Buyer shall have no liability with respect to the employment or
termination of employment of any of the Seller's employees who do not accept the
Buyer's offer of employment so long as such employees are not successful in
asserting that their employment by the Seller had been constructively terminated
solely by virtue of the offer of employment made by the Buyer. The Buyer
represents and warrants to the Seller that employees of the Merisel Group who
are attributed with at least five years of service by the Merisel Group shall be
fully vested under the 401(k) plan maintained by the Merisel Group.
10.2. Obligations of Seller. The Seller shall (a) deliver to the
---------------------
Buyer no later than three days prior to the Closing a list of all employees of
the Seller then employed in conducting the Subject Business, (b) deliver to the
Buyer within 30 days after the Closing Date a check in an amount which shall
represent the Seller's calculation of all accrued and unpaid vacation pay on or
prior to the Closing due to the employees of the Subject Business who accept the
Buyer's offer and who are identified by the Buyer to the Seller prior to the
15th day after the Closing and (c) be responsible for all liabilities that have
accrued with respect to periods ending prior to the Closing with respect to the
employees of the Subject Business, except for severance obligations to the
employees of the Subject Business who accept the Buyer's offer and accrued and
unpaid vacation owed to such employees in the amount referred to in clause (b)
above. The Seller acknowledges that, after the Closing, the Buyer shall have
the right, subject to the Buyer's obligations set forth in Section 10.1, to make
all decisions regarding employment matters based on its sole determination as to
the Buyer's business needs and performance of its employees.
-45-
<PAGE>
ARTICLE XI
MISCELLANEOUS
11.1. Expenses; Transfer Taxes, Etc. Except as set forth in this
------------------------------
Section 11.1 or otherwise in this Agreement, all fees, costs and expenses
incurred by any party to this Agreement in connection with, relating to or
arising out of the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including, without
limitation, attorneys', accountants' and other professional fees and expenses,
shall be borne by such party. The Buyer shall pay all (a) sales, use and excise
taxes and all registration, recording or transfer taxes which may be payable in
connection with the transactions contemplated by this Agreement and (b) costs
and expenses of the independent accountants of the Seller in preparing the
Financial Statements and delivering their report thereon, whether or not the
Closing shall occur.
11.2. Entire Agreement. This Agreement (including the Schedules and
----------------
Annexes attached hereto) contains the entire agreement among the parties hereto
with respect to the transactions contemplated hereby and supersedes all prior
agreements or understandings between the parties with respect thereto; provided,
--------
however, that the provisions of the Confidentiality Agreement shall remain in
- - - -------
full force and effect to the extent not inconsistent herewith.
11.3. Descriptive Headings. Descriptive headings are for convenience
--------------------
only and shall not control or affect the meaning or construction of any
provisions of this Agreement.
11.4. Notices. All notices or other communications which are
-------
required or permitted hereunder shall be in writing and sufficient if (a)
delivered personally or sent by telecopier, (b) sent by nationally-recognized
overnight courier or (c) sent by certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Buyer to:
Merisel FAB, Inc.
c/o Merisel, Inc.
200 Continental Boulevard
El Segundo, California 90245-0984
Attention: Michael D. Pickett
Co-Chairman, President and
Chief Executive Officer
Telecopier: (310) 615-1234;
-46-
<PAGE>
with a copy to:
Riordan & McKinzie
300 South Grand Avenue
29th Floor
Los Angeles, California 90071-3155
Attention: Robert G. Morrish, Esq.
Telecopier: (213) 229-8550;
if to the Seller, to:
ComputerLand Corporation
59611 West Las Positas
Pleasanton, California 94566-8575
Attention: Richard F. Vitkus
Senior Vice President and
General Counsel
Telecopier: (510) 734-4802;
with a copy to:
O'Sullivan Graev & Karabell
30 Rockefeller Plaza
New York, New York 10112
Attention: Lawrence G. Graev, Esq.
Telecopier: (212) 408-2467;
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such
communication shall be deemed to have been given (i) when delivered if
personally delivered or sent by telecopier, (ii) on the Business Day (as
hereinafter defined) after dispatch if sent by nationally-recognized, overnight
courier and (iii) three business days following the posted date, if sent by
mail. As used herein, "Business Day" means a day that is not a Saturday, Sunday
or a day on which banking institutions in California are not required to be
open.
11.5. Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
11.6. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California applicable to
contracts made and performed wholly therein.
11.7. Benefits of Agreement. The terms and provisions of this
---------------------
Agreement shall be binding upon and inure to the benefit of each of the parties
hereto and their respective successors and assigns. Except as provided in the
previous sentence, this Agreement shall not inure to the benefit of any persons
or
-47-
<PAGE>
entities not a party hereto. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assignable by any party hereto
without the prior written consent of the other party hereto, except for an
assignment to any secured lender in connection with the financing provided by
such lender to the assigning party or to the purchaser of substantially all the
assets of the party so assigning this Agreement; provided, however, that from
-------- -------
and after the date hereof until the earlier of (1) the second anniversary of the
date hereof and (2) the termination of the Distribution Period (as defined in
the Services Agreement), (a) in the case of the Seller, such purchaser shall not
be one of the following:
(i) any Eligible Vendor;
(ii) any of those entities set forth on Schedule 11.7(a)(ii) or any
--------------------
successor entities thereto;
(iii) except for those entities set forth on Schedule 11.7(a)(iii),
---------------------
any entity that derives [*] from the purchase and resale to end-users in
the Designated Territory of microcomputer products; and
(iv) any entity whose [*] at the time of the assignment is less than
[*]; and
(b) in the case of the Buyer, such purchaser shall not be one of the following:
(i) any Eligible Vendor;
(ii) any of those entities set forth on Schedule 11.7(a)(ii) or any
--------------------
successor entities thereto; and
(iii) any entity whose [*] at the time of the assignment is less than
[*].
For purposes of this Section 11.7, any transaction or series of transactions by
way of merger, consolidation or other business combination or purchase of
beneficial ownership (as defined in Rule 13d-3 of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), in which a "person" or "group" (within
the meaning of Section 13(d) and 14(d)(2) of the Exchange Act) becomes the
"beneficial owner" (as defined in Rule 13d-3 of the Exchange Act) of capital
stock representing 50% or more of the total voting power entitled to vote in the
election of the board of directors of the Seller, the Buyer, Merisel or such
other entity surviving the transaction, as the case may be, shall constitute an
assignment hereunder. Without limiting any other rights or remedies available
to (A) the Buyer at law or equity,
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-48-
<PAGE>
if an assignment by the Seller in violation of this Section 11.7 occurs, the
Buyer shall have no obligation to make the payments required by Section 2.1(c)
of this Agreement, such assignment shall, at the Buyer's option exercised within
45 days of such assignment, be deemed to be a Class C Event under the Services
Agreement and the Guaranty Agreement shall immediately terminate and Merisel
shall have no further liability thereunder (except for liabilities arising prior
to such termination which have not yet been discharged) and (B) the Seller at
law or equity, if an assignment by the Buyer in violation of this Section 11.7
occurs, the Monthly Distribution Fee (as defined in the Services Agreement)
otherwise payable by the Buyer to the Seller pursuant to the Services Agreement
from and after such assignment shall be increased by 150% and the Buyer shall
pay to the Seller $7,000,000 as liquidated damages.
11.8. Pronouns. As used herein, all pronouns shall include the
--------
masculine, feminine, neuter, singular and plural thereof whenever the context
and facts require such construction and the word "person" includes a corporation
or other entity or association as well as a natural person.
11.9. 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 invalidation 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 of
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.
11.10. Authorization. Effective as of the Closing Date, the Seller
-------------
appoints the Buyer its attorney-in-fact solely to open all mail of the Seller
relating to the Subject Business addressed to the locations of the facilities of
the Subject Business. Buyer will promptly send to Seller all mail not relating
to the Purchased Assets or the Subject Business, except personal mail of any
employee or former employee of the Subject Business.
11.11. Amendment, Modification and Waiver. This Agreement shall not
----------------------------------
be amended, modified, supplemented or otherwise altered except pursuant to an
instrument in writing signed by each of the parties hereto. The failure by any
party hereto to comply with any obligation, covenant, agreement or condition
contained herein may be expressly waived in writing by the party or parties
hereto adversely affected by such failure, but such waiver or failure shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. The delay in pursuing any remedy or in insisting upon full
-49-
<PAGE>
performance for any breach or failure of any covenant, condition or promise
shall not prevent a party from later pursuing any remedies or insisting upon
full performance for the same or any similar breach or failure.
11.12. Confidentiality Agreement. The letter agreement dated June
-------------------------
28, 1993 (the "Confidentiality Agreement"), relating to the confidentiality
obligations of Merisel with respect to information obtained by Merisel in
connection with the review of the Subject Business shall remain in full force
and effect in the event of the termination of this Agreement for any reason
whatsoever prior to the Closing.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
COMPUTERLAND CORPORATION
By: /s/ Ware Grove
--------------
Name: Ware Grove
Title: Vice President
MERISEL FAB, INC.
By: /s/ Timothy N. Jenson
---------------------
Name: Timothy N. Jenson
Title: Vice President
For purposes of Section
2.2 hereof only.
MERISEL, INC.
By: /s/ James L. Brill
------------------
Name: James L. Brill
Title: Vice President
28422.1
-50-
<PAGE>
EXHIBIT 10.3
===============================================================================
DISTRIBUTION AND SERVICES
AGREEMENT
BETWEEN
COMPUTERLAND CORPORATION
AND
MERISEL FAB, INC.
January 31, 1994
===============================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I DEFINITIONS AND INTERPRETATION............... 2
1.1. Defined Terms................................ 2
1.2. Accounting Terms............................. 19
1.3. Interpretation............................... 19
ARTICLE II DISTRIBUTION AND LOGISTICS SERVICES.......... 20
2.1. Overview; Sale of Products to Buyer; Resale
by Buyer to its Customers.................... 20
2.2. Order Procedures............................. 20
2.3. Seller's Inventory List; Relationships with
Vendors...................................... 23
2.4. Purchase Price to Buyer...................... 27
2.5. Payment for Products Shipped Hereunder....... 27
2.6. Payment by Customers......................... 29
2.7. Shipping and Delivery; Freight Charges....... 31
2.8. Invoices; Confirmations to Floor Planners.... 33
2.9. Distribution Fee; Advance Payments........... 35
2.10. Certification of Amounts; Calculation and
Payment of Net Payment Amounts............... 36
2.11. Marketing Development Funds; Co-op Funds..... 42
2.12. Restocking and Returns....................... 48
2.13. Compliance with Vendor Agreements............ 50
2.14. Audit and Inspection......................... 50
2.15. Disclaimer of Warranties; Risk of Loss;
Limitation of Liability...................... 52
2.16. Nonexclusivity............................... 53
2.17. Transfer of [*] and/or [*]................... 53
2.18. Price Protection............................. 55
2.19. Prompt Payment Discounts..................... 58
2.20. Repurchase Obligations with Floor Planners... 59
2.21. Performance Standards........................ 60
2.22. Allocation of Inventory...................... 61
2.23. Consignment of Inventory..................... 63
2.24. Recordkeeping and Accounting................. 64
2.25. Continuing Performance....................... 65
2.26. Disputed Amounts............................. 65
2.27. Disaster Recovery Services................... 65
</TABLE>
- - - ------------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act
of 1934, as amended.
- i -
<PAGE>
<TABLE>
<C> <S> <C>
2.28. Financial Statements and Other Reports.......... 66
2.29. Other Soft Dollars.............................. 68
2.30. E-Mail.......................................... 68
2.31. CAPS; Telecommunications Charges................ 69
2.32. Ledger Cards.................................... 69
2.33. Miscellaneous................................... 70
2.34. Additional Receivable Amount.................... 70
2.35. Configuration................................... 71
2.36. Baseline Adjustment Event....................... 71
ARTICLE III INFORMATION SERVICES............................ 72
3.1. Non-Exclusive License........................... 72
3.2. Dedicated Personnel............................. 74
ARTICLE IV ADDITIONAL SERVICES............................. 76
4.1. Availability of Additional Services............. 76
4.2. CLTV............................................ 76
4.3. National Accounts............................... 77
4.4. National Service Agreements..................... 78
4.5. Help Desk....................................... 79
4.6. MASTER and MASTER Plus.......................... 80
ARTICLE V REMEDIES........................................ 81
5.1. Overview........................................ 81
5.2. Definitions..................................... 81
5.3. Class A Events; Limitations on Aggregate
Liability....................................... 88
5.4. Class B Events.................................. 90
5.5. Class C Events; Buyer's Right to Terminate;
Special Transition Procedure.................... 90
5.6. Reimbursement of Excess Operating Costs......... 96
5.7. Treatment of Earnout under Purchase Agreement... 97
5.8. Covenant Regarding Third Party Consents;
Detailed Transition Plan........................ 97
5.9. Reimbursement of Certain Amounts and Related
Representation and Warranty..................... 97
5.10. Exclusivity of Remedies......................... 98
5.11. Amendment of Certain Agreements................. 99
5.12. Representation Regarding Special Term License... 99
ARTICLE VI CERTAIN EVENTS.................................. 99
6.1. Bankruptcy, Etc................................. 99
6.2. Material Default by Buyer....................... 101
6.3. Effect of Termination........................... 101
</TABLE>
ii
<PAGE>
<TABLE>
<C> <S> <C>
ARTICLE VII WINDING-DOWN................................. 101
7.1. Winding Down Period.......................... 101
7.2. Termination of Winding Down Period........... 102
ARTICLE VIII RESOLUTION OF DISPUTES....................... 102
8.1. Resolution by Parties........................ 102
8.2. Mediation.................................... 102
8.3. Expedited Mediation.......................... 104
ARTICLE IX MISCELLANEOUS................................ 104
9.1. Entire Agreement............................. 104
9.2. Descriptive Headings......................... 104
9.3. Notices...................................... 104
9.4. Counterparts................................. 106
9.5. Governing Law................................ 106
9.6. Amendment, Modification and Waiver........... 106
9.7. Severability................................. 106
9.8. Force Majeure................................ 106
9.9. Confidentiality.............................. 107
9.10. Construction................................. 108
9.11. No Assignment; Benefits of Agreement; No
Third Party Beneficiary...................... 109
9.12. First Month Estimates........................ 110
ARTICLE X MAINTENANCE OF EQUITY OWNERSHIP IN MERISEL... 111
10.1. Overview..................................... 111
10.2. Definitions.................................. 111
10.3. Maintenance of Equity Ownership.............. 111
10.4. Stock Splits, Combinations and Similar Events 112
10.5. Breach....................................... 112
</TABLE>
SCHEDULES*
Schedule 1.1-1 - Seller's Policies and Procedures
Regarding Alternate Branch Freight
Schedule 1.1-2 - Baseline Revenue (February - December
1993)
Schedule 1.1-3 - Method of Determining Inventory Cost
- - - -----------
* The Company shall furnish supplementally a copy of any omitted Schedule to
the Securities and Exchange Commission upon request
- iii -
<PAGE>
<TABLE>
<S> <C> <C>
Schedule 1.1-4 - Primary Distribution Centers
Schedule 1.1-5 - Method of Determining Royalties
Schedule 2.3(a) - Seller's Inventory List (as of Closing Date)
Schedule 2.3(b) - Vendor List
Schedule 2.3(h) - Monthly Sales Reports for December 1993
Schedule 2.7(b) - Shipping Policies
Schedule 2.7(e) - Seller's Current Policies Regarding
Estimating and Allocating Inbound
Freight and Insurance
Schedule 2.8 - Form of Invoice
Schedule 2.10(a) - Form of Buyer's Monthly Royalty Certificate
Schedule 2.10(b) - Form of Seller's Monthly Sales Certificate
Schedule 2.10(c) - Form of Seller's Monthly Distribution
Fee Certificate
Schedule 2.10(d) - Form of Seller's Quarterly Distribution
Fee Certificate
Schedule 2.10(e)(i) - Form of Seller's Monthly Net Payment
Amount Certificate
Schedule 2.10(e)(ii) - Form of Seller's Quarterly Net Payment
Amount Certificate
Schedule 2.12 - Seller's Return Policies
Schedule 2.18 - Seller's Price Protection Policies
Schedule 2.20 - Floor Planners (Forms of Repurchase
Agreements between Buyer and each Floor
Planner to be attached as exhibits)
Schedule 2.21 - Performance Standards
Schedule 2.22(b) - Allocation Method
Schedule 2.22(g) - Report on Allocation of Inventory
</TABLE>
- iv -
<PAGE>
<TABLE>
<S> <C> <C>
Schedule 2.24 - Accounting and Management Information
Schedule 2.28(c) - Seller's Historical Financial Statements
Schedule 3.1(a) - Integrated Logistics System
Schedule 3.2(a) - ILS Team (Initial Members and Aggregate
Base Salaries)
Schedule 3.2(c) - Mainframe Team
Schedule 4.6(a) - Customers Participating in MASTER after
the Closing Date
Schedule 4.6(a)-1 - MASTER Program
Schedule 5.6(a) - Form of Buyer's Quarterly Transition
Period Certificate
Schedule 5.12 - DCMS Third Party Materials
Schedule 8.1 - Designated Representatives for Informal
Dispute Resolution
</TABLE>
- v -
<PAGE>
DISTRIBUTION AND SERVICES AGREEMENT dated as of
January 31, 1994, between COMPUTERLAND CORPORATION, a
Delaware corporation ("Seller"), and MERISEL FAB, INC.,
a Delaware corporation ("Buyer").
A. Pursuant to that certain Asset Purchase Agreement dated as of
January 31, 1994 (the "Purchase Agreement"), between Seller and Buyer, Seller
has agreed to sell and assign to Buyer, and Buyer has agreed to purchase and pay
for, certain assets of Seller's United States Franchise and Distribution
Division (the "Subject Business"), on the terms and conditions set forth
therein. Buyer is a wholly-owned subsidiary of Merisel, Inc., a Delaware
corporation ("Merisel"). Following the Closing under the Purchase Agreement,
the Subject Business will be operated by Buyer.
B. In order to facilitate Buyer's operation of the Subject Business,
Buyer has requested that Seller continue to supply products and provide the
Logistics Services and other services described herein to Buyer for the Subject
Business for the Distribution Period, and Seller has agreed to provide such
products and services, in each case on the terms and conditions set forth
herein.
C. It is a condition precedent to the obligations of Seller and Buyer
under the Purchase Agreement that Seller and Buyer enter into this Agreement
concurrently with the Closing thereunder. This Agreement is the Services
Agreement provided for in Section 5.1(e) of the Purchase Agreement. The
obligations of Buyer under this Agreement are guaranteed by Merisel pursuant to
the Guaranty Agreement entered into between Merisel and Seller concurrently with
the Closing.
D. In addition to providing the Logistics Services and other services
to Buyer hereunder, after the Closing Date, Seller will continue to be engaged
in the businesses of selling, leasing, renting, licensing, otherwise marketing
and/or servicing computer hardware, software and related products to end-users,
and of providing related services to end-users and resellers. Except as
otherwise expressly provided in the Purchase Agreement, Seller may engage in
such other business or businesses as Seller may from time to time determine.
The business or businesses conducted from time to time by Seller after the
Closing Date are herein collectively called the "Retained Business".
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Buyer hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1. Defined Terms. As used herein, the following terms have the
-------------
corresponding meanings:
"ABF Differential" for any period means the arithmetic difference of
----------------
(i) [*] for such period minus (ii) [*] for such period; provided, however, that
----- -------- -------
if such difference is not a positive number, the ABF Differential for such
period shall be zero.
"Accounting Services" means the recordkeeping, accounting and report
-------------------
preparation services and functions described in Article II hereof.
"Actual Amount" has the meaning ascribed thereto in Section 2.36(b).
-------------
"Actual Fraction" has the meaning ascribed thereto in Section 2.36(c).
---------------
"Additional Receivable Amount" has the meaning ascribed thereto in
----------------------------
Section 2.34(a).
"Additional Royalty Amount" has the meaning ascribed thereto in
-------------------------
Section 2.10(a).
"Additional Services" has the meaning ascribed thereto in Section 4.1
-------------------
of this Agreement.
"Adjusted Freight" for any period means the sum of the following
----------------
amounts, in each case for such period: (i) Outbound Freight, plus (ii) Inbound
----
Freight, plus (iii) [*], minus (iv) [*] of the ABF Differential, minus (v)
---- ----- -----
Customer Freight Accruals.
"Adjusted Freight Percentage" for any period means the fraction,
---------------------------
expressed as a percentage, equal to (i) Adjusted Freight for such period divided
-------
by (ii) Applicable Revenue for such period.
- - - --
"Adjusted Gross Margin" for any period means a percentage equal to
---------------------
Gross Margin for such period, plus the [*] for such period, less the Adjusted
---- ----
Freight Percentage for such period, as the same may be adjusted pursuant to
Section 2.17(g) and/or Section 2.18(f), as applicable.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-2-
<PAGE>
"Adjusted MASTER Sales" for any period means (i) MASTER Inventory Cost
---------------------
for such period plus (ii) the MASTER Royalty Accrual for such period, in each
----
case as determined in accordance with GAAP.
"Advance Payment Amount" has the meaning scribed thereto in Section
----------------------
2.9(b).
"Affected Party" has the meaning ascribed thereto in Section 6.1(a).
--------------
"[*]" for any period means the aggregate amount of all actual freight
---
charges incurred directly or indirectly by Seller during such period in respect
of [*] (as determined from the carrier's invoice, without considering any
rebates, discounts or other credits to which Seller may be entitled in respect
thereof).
"[*]" for any period means all shipments of products sold by Seller to
---
Buyer hereunder (other than products manufactured or configured by Seller) that
were shipped during such period by Seller to the Customer ordering such products
from the [*] for such Customer. Anything contained herein to the contrary
notwithstanding, the term "[*]" shall not include any shipment of products by
Seller directly to any customer of a Customer.
"Applicable Revenue" for any period means the gross revenues of the
------------------
Subject Business recognized by Buyer or Seller, as applicable, for such period,
determined in accordance with GAAP, including Gross Sales, Royalties and any
Other Revenue, in each case for such period.
"Assumed Primary Freight" for any period means the aggregate amount of
-----------------------
all freight charges that would have been incurred directly or indirectly by
Seller during such period in respect of [*], if such shipments had been shipped
[*] as actually shipped from [*] for the Customer ordering such shipments, as
determined by Seller in good faith in accordance with the policies and
procedures set forth on Schedule 1.1-1 and the standard rates of the carrier
that would ordinarily have carried such shipment [*] from such [*] during such
period. As used herein, a carrier's "standard rates" for any shipment during
any period shall mean the rates to which Seller shall have been entitled in
respect of such shipment during such period under any contract between Seller
and such carrier or, if no such contract shall be in effect, the published rates
and/or tariffs of such carrier applicable to such shipment during such period.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-3-
<PAGE>
"Bankruptcy Code" has the meaning ascribed thereto in Section 6.1(a).
---------------
"Bankruptcy Event" has the meaning ascribed thereto in Section 6.1.
----------------
"Base Percentage" means [*], except that if, for any quarter during
---------------
the Distribution Period, (i) the Subject Business does not meet the [*] and (ii)
---
the Adjusted Gross Margin is less than [*], then the Base Percentage for such
quarter shall mean [*] less [*] of a basis point for each basis point that the
----
Adjusted Gross Margin is less than [*]; provided, however, that the Base
-------- -------
Percentage shall in no event be less than [*].
"Baseline Adjustment Event" means the occurrence of each of the
-------------------------
following events: (a) any existing [*] shall have been terminated prior to its
present expiration date by reason of a final decision by a court of competent
jurisdiction that the arrangement contemplated by [*] constitutes a breach of
such [*] (b) no appeal shall have been taken which is at the time pending with
respect to such decision, and the time for perfecting any such appeal shall have
expired, and (c) at any time hereafter [*] so relieved of its obligations under
---
such terminated [*] shall not have been a Customer of Buyer, and shall not have
been a customer of the Other Merisel Distribution Business (or shall be a
customer of the Other Merisel Distribution Business, but shall not have realized
any material increase in buying volumes from the levels in effect on the date
hereof).
"Baseline Period" means the period from February 1, 1993, through
---------------
January 31, 1994.
"Baseline Revenue" for any period means the Applicable Revenue
----------------
recognized by Seller for the comparable period during the Baseline Period. Such
amounts are set forth on Schedule 1.1-2 for each month from February through
December 1993. Within 60 days after the Closing Date, Seller shall certify to
Buyer in writing the Applicable Revenue recognized by Seller from January 1,
1994, through January 31, 1994, which Applicable Revenue shall constitute the
Applicable Revenue and Baseline Revenue, as applicable, for the month of January
1994, for all purposes hereof. Buyer shall have 60 days after receipt of the
certificate of Applicable Revenue for January 1994,to dispute in writing the
amounts provided by Seller on the certificate as Baseline Revenue for the month
of January 1994, If Buyer does not dispute the amounts so provided by Seller,
such certificate shall be conclusive absent manifest error. If Buyer disputes
the amount so provided by Seller, then the amount of Baseline Revenue for the
month of January 1994, shall be determined by the Outside
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-4-
<PAGE>
Accountants, as hereinafter defined, which determination shall be binding on
Seller and Buyer. Seller shall provide such information to the Outside
Accountants relating to the calculation of Baseline Revenue for such month as
shall be reasonably requested by the Outside Accountants. If Baseline Revenue
for January 1994, as determined by the Outside Accountants, shall exceed the
amount set forth on Seller's certificate by $1,000,000 or more, then the
aggregate costs and expenses of the Outside Accountants incurred in making such
determination shall be borne by Seller; otherwise such costs and expenses shall
be borne by Buyer. As used in this paragraph, the term Outside Accountants
means any of the "Big Six" national accounting firms, other than any such firm
then engaged by Buyer or Seller as its independent auditor, as Buyer and Seller
shall mutually agree; provided, however, that if Buyer and Seller cannot come to
-------- -------
such an agreement, the Outside Accountants shall be chosen by lot from such
eligible "Big Six" national accounting firms. Baseline Revenue is subject to
adjustment pursuant to Section 2.36 upon the occurrence of any Baseline
Adjustment Event.
"Basis Point" means one one-hundredth of a percentage point (i.e.,
----------- ---
.01%).
"Business Day" means a day (as defined in Section 1.3) that commences
------------
on a calendar day that is not a Saturday, Sunday or a calendar day on which
banking institutions in California are not required to be open.
"Buyer" has the meaning ascribed thereto in the preamble to this
-----
Agreement.
"Buyer Invoice" has the meaning ascribed thereto in Section 2.8(b).
-------------
"Buyer Pricing Information" has the meaning ascribed thereto in
-------------------------
Section 2.6(a).
"Buyer Prohibited Transferees" has the meaning ascribed thereto in
----------------------------
Section 9.11(b).
"Buyer Purchase Price" has the meaning ascribed thereto in Section
--------------------
2.4(a).
"Calculation Period" has the meaning ascribed thereto in Section
------------------
2.36(a).
"CAPS" means Seller's Customer Automated Processing System, as in
----
effect on the Closing Date with respect to the
-5-
<PAGE>
Subject Business, or such other electronic order entry system as Seller may from
time to time have in effect to take orders from Customers on Buyer's behalf
hereunder, in any such case to the extent described in the sentence immediately
following. As used in this Agreement, the term "CAPS" refers to the "front-end"
or user interface of Seller's electronic order entry system, and is not intended
to include either (i) the electronic order processing function of CAMBAR or any
other order processing function or system maintained by or on behalf of Seller,
to the extent that any such order processing function or system does not
materially affect either the functioning or the "look and feel" of such "front-
end" or user interface or (ii) the MASTER system or, when available, MASTER
Plus.
"Closing" means the closing of the purchase of the Subject Business by
-------
Buyer under the Purchase Agreement.
"Closing Date" means the date on which the Closing shall have
------------
occurred.
"ComputerLand Store" means (i) any current or future retail computer
------------------
store, business center or other location using the trade name "ComputerLand" or
one or more of the other Trademarks (as defined in the Purchase Agreement) and
(ii) any other current or future store, business center or other location that
sells, leases, rents, licenses, otherwise markets and/or services computer
hardware, software and/or related products and services pursuant to any
franchise agreement or other arrangement with Buyer, as in effect from time to
time.
"Confidential Information" has the meaning ascribed thereto in Section
------------------------
9.9(a).
"Confirmed Order" means any order received by Seller, on Buyer's
---------------
behalf, from any Customer hereunder, which order has been entered into CAPS and
is not subject to any credit hold imposed through Seller's Order Processing
System by Buyer or any Floor Planner. For all purposes of this Agreement,
Seller shall be deemed to have "received" a Confirmed Order at the time that
such order becomes a Confirmed Order (or if such order becomes a Confirmed Order
on a day that is not a Business Day, on the next Business Day).
"Co-op Funds" means credits in the form of cash, cash equivalents,
-----------
product or other consideration that may be earned by a dealer from vendors in
support of the dealer's selling activities to end-users (including any [*] or
[*] of such [*]), which credits may usually be realized by the dealer only after
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-6-
<PAGE>
performing certain programs or projects or having certain organization in
support of the applicable vendor's products.
"Cost-Plus Mark-Up" for any period means an amount equal to the
-----------------
arithmetic difference (which may be a positive or negative number) of (i) [*]
for such period, minus (ii) the sum of (A) the aggregate [*] of all products
-----
sold by Seller to Buyer hereunder during such period (other than any products
sold by Seller to Buyer during such period under Section 2.17(f) or Section
5.5(b)(i) that are not sold by Buyer to Customers during such period), plus (B)
----
[*] for such period, plus (C) the [*] to Buyer of all products sold by Buyer
----
during such period that were purchased by Buyer pursuant to Section 2.23.
"Customer" means any Franchisee or Datago Purchaser.
--------
"Customer Co-op Funds" has the meaning ascribed thereto in
--------------------
Section 2.11(g).
"Customer Freight Accruals" for any period means all amounts charged
-------------------------
to Customers by Buyer and accrued in accordance with GAAP for such period in
respect of any Outbound Freight (including ordinary outbound freight, Expedited
Delivery Freight and [*]), Inbound Freight or Insurance, including any amounts
so charged that are characterized as direct offsets of expenses.
"Customer Invoice" has the meaning ascribed thereto in Section 2.8(a).
----------------
"Customer Purchase Price" has the meaning ascribed thereto in Section
-----------------------
2.6(a).
"Daily Net Payment Amount" has the meaning ascribed thereto in Section
------------------------
2.8(b)(iii).
"Daily Net Payment Report" has the meaning ascribed thereto in
------------------------
Section 2.8(b).
"Datago Agreement" means any agreement from time to time in effect
----------------
between Buyer and any reseller that is not a Franchisee, pursuant to which such
reseller is authorized to be a Datago Purchaser, including the Datago
distribution agreements assigned to and assumed by Buyer pursuant to the
Purchase Agreement.
"Datago Purchaser" means any purchaser of products from time to time
----------------
from Buyer, other than any Franchisee or any purchaser of products from Seller
pursuant to the MASTER program, whether or not pursuant to a Datago Agreement.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-7-
<PAGE>
"[*] Baseline Revenue" has the meaning ascribed thereto in Section
--------------------
2.36(d).
"DC Watch" means a wide area network PC application showing daily and
--------
month-to-date shipping information for each Distribution Center.
"Deletion Notice" has the meaning ascribed thereto in Section
---------------
2.3(b)(ii).
"Designated Territory" has the meaning ascribed thereto in the
--------------------
Purchase Agreement.
"Determination Date" has the meaning ascribed thereto in Section
------------------
2.10(b).
"Disputed Shipment" has the meaning ascribed thereto in Section
-----------------
2.5(d).
"Distribution Center" means the Livermore DC or the Indianapolis DC,
-------------------
as applicable.
"Distribution Fee" has the meaning ascribed thereto in Section 2.9(a).
----------------
"Distribution Period" means the period commencing on February 1, 1994,
-------------------
and ending on January 31, 1996, or such other date as shall be expressly
provided herein; provided, however, that if there is a Winding Down Period, the
-------- -------
Distribution Period shall be extended through the Winding Down Period.
"Earned" has the meaning ascribed thereto in Section 2.11(d)(v)(A).
------
"Eligible Vendor" has the meaning ascribed thereto in the Purchase
---------------
Agreement.
"Excess Percentage" means [*].
-----------------
"Exchange Act" has the meaning ascribed thereto in Section 9.11(b).
------------
"Expedited Delivery" has the meaning ascribed thereto in Section
------------------
2.7(b).
"Expedited Delivery Freight" for any period means the total actual
--------------------------
freight charges incurred directly or indirectly by Seller during such period in
respect of any products sold by Seller to Buyer hereunder that are shipped by
Expedited Delivery
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-8-
<PAGE>
(as determined from [*], without considering any [*] to which [*] in respect
thereof).
"Extended Payment Obligation" shall mean any payment obligation by
---------------------------
Buyer to Seller pursuant to Section 2.8(b) that remains outstanding past the
Stipulated Due Date for such payment obligation.
"Extended Payment Termination Date" means the first to occur of (i)
---------------------------------
the Private Placement Closing Date, (ii) the termination of the Distribution
Period and (iii) the second anniversary of the Closing Date.
"Floor Planner Invoice" has the meaning ascribed thereto in Section
---------------------
2.8(c).
"Floor Planners" means the floor planners set forth on Schedule 2.20,
--------------
and any other floor planners designated in writing by Buyer with the prior
written consent of Seller (which consent shall not unreasonably be withheld or
delayed).
"force majeure" has the meaning ascribed thereto in Section 9.8.
-------------
"Franchise Agreement" means any franchise agreement from time to time
-------------------
in effect between Buyer and any Franchisee, including the franchise agreements
assigned to and assumed by Buyer pursuant to the Purchase Agreement.
"Franchisee" means any franchisee from time to time of a ComputerLand
----------
Store in the Designated Territory operating under a Franchise Agreement or any
other arrangement with Buyer.
"GAAP" means generally accepted accounting principles in the United
----
States, applied in a manner consistent with the usual financial and accounting
practices of Seller in effect as of the Closing Date (to the extent such
practices are in accordance with generally accepted accounting principles in the
United States).
"Gross Margin" for any period means the fraction, expressed as a
------------
percentage, equal to (i) the sum of [*] (net of any cost of sales associated
with such [*], as determined in accordance with GAAP) for such period divided by
------- --
(ii) Applicable Revenue for such period. Anything contained herein to the
contrary notwithstanding, if Buyer implements any programs or policies, or any
general terms and conditions with respect to the Subject Business, that alone or
in the aggregate would reasonably be expected to result in (i) a reduction in
Gross Margin (as
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-9-
<PAGE>
defined above) and (ii) a net increase in revenues or net decrease in costs that
---
would not otherwise be reflected in Gross Margin, then the definition of Gross
Margin shall be adjusted, in such manner as Buyer and Seller shall agree in good
faith, to reflect such net increase in revenues or net decrease in costs.
"Gross Sales" for any period means (i) the aggregate amount recognized
-----------
by Buyer as gross sales for such period in respect of sales to Customers of
products sold by Seller to Buyer hereunder (or shipped by Seller on behalf of
Buyer pursuant to Section 2.23), as adjusted pursuant to Section 2.17(b) and (c)
hereof, determined in accordance with GAAP, plus (ii) Adjusted MASTER Sales for
----
such period.
"Headquarter Funds" means credits in the form of cash, cash
-----------------
equivalents, product or other consideration that may be earned by Seller from
its vendors in support of Seller's distribution activities, which credits may
usually be realized by Seller only after performing certain programs or projects
or having certain organization in support of the applicable vendor's products.
"ILS" has the meaning ascribed thereto in Section 3.1(a).
---
"ILS Salary Cap" has the meaning ascribed thereto in Section 3.2(a).
--------------
"ILS Team" has the meaning ascribed thereto in Section 3.2(a).
--------
"Inbound Freight" has the meaning ascribed thereto in Section [*].
---------------
"Indianapolis DC" means Seller's warehouse and distribution center in
---------------
Indianapolis, Indiana.
"Insurance" has the meaning ascribed thereto in Section [*].
---------
"Interfering Party" has the meaning ascribed thereto in Section
-----------------
2.22(d).
"Inventory Cost" for any product means an amount equal to (i) the
--------------
invoice price charged by Seller's vendor for the product, plus (ii) customs
----
duties, taxes and currency exchange costs applicable thereto, if any, but
without reduction for any [*] or [*] relating thereto, as described in Schedule
1.1-3
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-10-
<PAGE>
hereto, and subject to adjustment for any Price Protection pursuant to Section
2.18.
"Inventory List" has the meaning ascribed thereto in Section 2.2(c).
--------------
"Inventory-On-Hand [*]" means any [*] credits in the form of cash,
---------------------
cash equivalents, product or other consideration made available by a vendor for
the benefit of Seller and/or any Customer in respect of products Seller and/or
such Customer, as applicable, has in inventory.
"Invoice Date" for any product means the date on which the Buyer
------------
Invoice for such product is generated by CAMBAR and issued electronically by
Seller pursuant to Section 2.8(b); provided, however, that if the Customer
-------- -------
ordering such product pursuant to Section 2.2 shall have indicated that its
purchase of such product is to be financed by a Floor Planner, then the Invoice
Date for such product shall mean the date on which the Floor Planner Invoice for
such product is generated by CAMBAR and issued electronically by Seller pursuant
to Section 2.8(c).
"[*]" for any period means all [*] Earned by Seller and attributable
---
to such period, to the extent that (i) Seller's right to receive such [*] is not
subject to any condition that Seller spend funds on any program or project, or
have certain organization in support of a vendor's products or (ii) Seller
earned such [*] as a result of having certain organization in its distribution
business in support of a vendor's products, and the Seller in its reasonable
judgment has determined such organization to be essential in its conduct of
business irrespective of the availability of any [*] program. For purposes of
this definition, Seller's "distribution business" means the Distribution
Centers, purchasing function, back-end and related departments operated by
Seller to support and perform the Logistics Services under this Agreement, as in
effect from time to time during the Distribution Period.
"Livermore DC" means Seller's warehouse and distribution center in
------------
Livermore, California.
"Logistics Services" means the Accounting Services, MIS Services and
------------------
Product Supply/Fulfillment Services.
"[*]" means any [*] credits in the form of cash, cash equivalents,
---
product or other consideration made available by [*] in respect of any products
purchased during the Distribution Period by [*], whether or not [*] shall have
any such [*] in [*] at the time such credits are made available.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-11-
<PAGE>
"Mainframe Team" has the meaning ascribed thereto in Section 3.2(c).
--------------
"Marketing Development Funds" or "MDF" means all [*] and [*].
--------------------------- ---
Marketing Development Funds do not include Co-op Funds or [*].
"MASTER Inventory Cost" for any period means the aggregate Inventory
---------------------
Cost of all products sold by Seller during such period under the MASTER program,
as determined in accordance with GAAP.
"MASTER Royalty" for any MASTER Sale means the "Royalty Fee" payable
--------------
in respect of such sale, as described on Schedule 4.6(a)-1.
"MASTER Royalty Accrual" for any period means the total amount of
----------------------
MASTER Royalties accrued during such period in respect of all MASTER Sales made
by Seller during such period.
"MASTER Royalty Collection Amount" for any period means the total
--------------------------------
amount of MASTER Royalties accrued in respect of all MASTER Sales for which
Seller shall have been paid during such period.
"MASTER Sales" means any sale of products by Seller to any customer of
------------
a Customer pursuant to the MASTER program described in Section 4.6.
"Material Allocation Default" has the meaning ascribed thereto in
---------------------------
Section 2.22(d).
"Material Default" means:
----------------
(i) in the case of Seller, a Class C Event, as defined in Section
5.2; and
(ii) in the case of Buyer, the failure by Buyer to pay to Seller
the Buyer Purchase Price for any products shipped by Seller hereunder, or
any other amount due to Seller under this Agreement, within three Business
Days after the receipt of notice from Seller stating the amount past due (a
"Payment Failure"), which Payment Failure continues uncured for a period of
30 consecutive days; provided, however, that if, subject to Section 2.5(d),
-------- -------
Buyer in good faith disputes that it is obligated to pay all or any portion
of any amount claimed by Seller hereunder, and Buyer has paid each amount
not disputed in good faith to Seller not later than three Business Days
after the receipt
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-12-
<PAGE>
of the notice referred to in this sentence applicable to such amount, and
(if the aggregate of all amounts in dispute exceed $1,000,000) has paid all
disputed amounts into escrow pursuant to Section 2.26, then, pending
resolution of such dispute pursuant to Article VIII hereof (whether
pursuant to negotiation, mediation or litigation), the failure of Buyer to
pay any amounts so disputed shall not constitute a Payment Failure for
purposes of this definition.
"Merisel" has the meaning ascribed thereto in paragraph A of the
-------
preamble to this Agreement.
"Minimum Growth Target" means the target that shall be met for any
---------------------
period during the Distribution Period if Applicable Revenue for such period is
at least [*] greater than Baseline Revenue for such period.
"MIS Services" means the data processing, data communications and
------------
telecommunications services and functions required for Seller to perform its
obligations under Article II hereof.
"Mis-Shipped Product" means any product that is shipped to any
-------------------
Customer (or any customer of a Customer) by Seller on Buyer's behalf hereunder,
but was not ordered by such Customer, or is received by such Customer in an
unsaleable condition, and that meets any of the following conditions:
(i) such product is complete (including all components and
manuals), unused, undamaged and otherwise in a saleable condition and in
its original, undamaged factory carton; or
(ii) such product and such carton are in the same condition as
received by such Customer; or
(iii) such product was mis-labeled by the vendor or manufacturer
thereof, and such product and such carton are in the same condition as
received by such Customer, except that the carton has been opened; or
(iv) the product description for such product made available by
Seller pursuant to Section 2.3(j) was materially inaccurate, and such
product and such carton are in the same condition as received by such
Customer, except that the carton has been opened; or
(v) Seller shall have made an error in configuring or
manufacturing such product, such that the product as
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-13-
<PAGE>
configured or manufactured shall not in all material respects conform to
the specifications ordered by such Customer, and such product and all
packaging relating thereto are in the same condition as received by such
Customer, except that such packaging has been opened.
provided, however, that such Customer shall have notified Buyer or Seller
- - - -------- -------
regarding such mis-shipment in accordance with the return policies set forth in
Schedule 2.12 (or such other policies as Buyer and Seller shall hereafter agree
in writing); and provided further, however, that the term "Mis-Shipped Product"
-------- ------- -------
shall not include any Defective Product.
"Monthly Distribution Fee" means, for each month during the
------------------------
Distribution Period, an amount equal to:
(a) (i) the lesser of (x) [*] for such month and (y) [*] for such
month times (ii) the [*] applicable to such month;
-----
plus
----
(b) if [*] for such month exceeds [*] for such month, (i) the
amount of such excess times (ii) the [*].
-----
"Net Payment Amount" has the meaning ascribed thereto in Section
------------------
2.10(e).
"Next Inventory Cost" for any product as of any date means an amount
-------------------
equal to (i) the invoice price that was or would have been charged by Seller's
vendor for such product, plus (ii) any customs duties, taxes and currency
----
exchange costs that were or would have been applicable thereto, in each case if
Seller purchased or were to have purchased such product on such date (whether or
not any actual purchase occurred on such date), but without reduction for any
[*] or [*], or for any Price Protection made available after such date, that
would be applicable thereto, determined in accordance with GAAP.
"[*]" for any period means all [*] for such period other than Liquid
---
[*].
"Obligatory Amount" has the meaning ascribed thereto in Section
-----------------
2.36(a).
"Other Merisel Distribution Business" means any business owned or
-----------------------------------
operated by Merisel and/or any of its subsidiaries or affiliates, other than
Buyer, that is engaged in whole or in part in the distribution of computer
hardware,
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-14-
<PAGE>
software and related products, whether as a distributor, aggregator, franchisor
or otherwise.
"Other Revenue" for any period means any Applicable Revenue for such
-------------
period other than Royalties and Gross Sales.
"Other Soft Dollars" means credits in the form of cash, cash
-------------------
equivalents, product or other consideration, other than Marketing Development
Funds, Price Protection, Prompt Payment Discounts, Co-op Funds or other amounts
specifically addressed herein, that may be earned by Buyer or Seller from any
vendor, to the extent that the fair value of such credits is manifestly
unreasonable in relation to the fair value of any products, services,
instruments or agreements provided or delivered to, or made in favor of, such
vendor by Buyer or Seller, as applicable, in exchange therefor.
"Outbound Freight" for any period means the aggregate amount of all
----------------
actual freight charges incurred directly or indirectly by Seller during such
period in respect of any products sold by Seller to Buyer hereunder, and
relating to the delivery of products from Seller (or from any vendor of Seller)
to any Customer (or to any customer of a Customer), as determined from the [*],
as applicable, [*] during such period from the carrier or vendor in respect of
any such freight charges; provided, however, that Outbound Freight shall not
-------- -------
include any Inbound Freight or Insurance. Outbound Freight includes, without
limitation, [*] and Expedited Delivery Freight.
"Performance Credit Amount" for any period means the aggregate amount
-------------------------
of all Performance Credits assessable against Seller in respect of such period
pursuant to Schedule 2.21.
"Performance Standards" means those certain service levels applicable
---------------------
to certain of the Logistics Services and identified as "Performance Standards"
in Schedule 2.21.
"POET" has the meaning ascribed thereto in Section 3.1(a).
----
"Price Protection" means all [*].
----------------
"Primary Distribution Center" means, for any Customer, the primary
---------------------------
Distribution Center for such Customer, as determined by Seller in accordance
with Schedule 1.1-4.
"Prime Rate" as of any date means the rate last published in the
----------
national edition of The Wall Street Journal as the prime rate in effect on the
-----------------------
date of publication.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-15-
<PAGE>
"Private Label Product" means any product marketed by Seller after the
---------------------
Closing Date that bears any tradename, trademark, service mark, logo, trade
dress or other proprietary name, mark or design then owned by or licensed to
Seller.
"Private Placement Closing Date" means the date on which Buyer and
------------------------------
Seller consummate the sale of Merisel common stock to Seller pursuant to the
Stock Purchase Agreement between Buyer and Seller dated as of the date hereof.
"Product Supply/Fulfillment Services" means the purchasing,
-----------------------------------
warehousing, order fulfillment, invoicing, shipping and product return services
and functions described in Article II hereof.
"Prompt Payment Discount" means any discount or other consideration
-----------------------
granted by a vendor of a product for paying such vendor for product purchases at
an earlier date than the date required by the vendor's standard terms.
"Purchase Agreement" has the meaning ascribed thereto in paragraph A
------------------
of the preamble to this Agreement.
"Realized" has the meaning ascribed thereto in Section 2.11(d)(v)(B).
--------
"Rebates" means credits in the form of cash, cash equivalents,
-------
products or other consideration that may be earned by Seller from a vendor for
having purchased or sold the vendor's products or having achieved a certain
volume of purchases or sales of the vendor's products during a given period.
"Repurchase Agreements" means the repurchase agreements entered into
---------------------
between Buyer and each of the Floor Planners set forth on Schedule 2.20,
substantially in the forms attached as exhibits to such Schedule, and any other
repurchase agreement entered into between Buyer and any Floor Planner in such
form as Seller shall have theretofore approved in writing, which approval shall
not unreasonably be withheld or delayed.
"Repurchase Price" has the meaning ascribed thereto in Section
----------------
2.12(c).
"Restocking Fee" has the meaning ascribed thereto in Section
--------------
2.12(c)(i).
"Retained Business" has the meaning ascribed thereto in paragraph D of
-----------------
the preamble to this Agreement.
-16-
<PAGE>
"Returnable Product" means any product sold by Seller to Buyer
------------------
hereunder that meets all the following conditions:
(i) such product is complete (including all components and manuals),
unused, undamaged and otherwise in a saleable condition and in its
original, undamaged factory carton (Seller reserving the right to reject
any product if such product or its carton appears on reasonable inspection
by Seller to have been damaged or defaced, to be in any way incomplete, or
to be used or otherwise not saleable);
(ii) such product's carton has Seller's bar code or part number label
affixed, and such carton does not have any other non-factory labels or
markings, other than any labels or markings made or affixed by Seller;
(iii) such product is on the Inventory List as in effect at the time
Buyer or any Customer requests authorization to return such product
pursuant to Section 2.12; and
(iv) at the time Buyer delivers such product to Seller for repurchase
pursuant to Section 2.12, Seller has not given notice to Buyer that (A) the
vendor or manufacturer of such product no longer accepts the return thereof
or (B) the vendor or manufacturer of such product only accepts the return
thereof on terms and conditions that are, in the aggregate, materially less
favorable to Seller than the terms and conditions normally obtained by
Seller on the Closing Date from those vendors that permit returns.
"Return Cost" with respect to any Returnable Product means the lesser
----------- ------
of (i) the [*] for such Returnable Product and (ii) the [*] for such Returnable
Product.
"Reviewed Party" and "Reviewing Party" have the meanings ascribed
-------------- ---------------
thereto in Section 2.14(a).
"Rolling Average Net Payment Amount" for any month means an amount
----------------------------------
equal to the sum of the Net Payment Amounts for each of the second, third and
fourth preceding months, divided by three. By way of example, the Rolling
Average Net Payment Amount for June 1994 shall equal the sum of the Net Payment
Amounts for February, March and April 1994, divided by three. For purposes of
calculating the Rolling Average Net Payment Amount for any month prior to June
1994, the months of October, November and December 1993, and January 1994, shall
each be deemed to have a "Net Payment Amount" equal to [*]. Thus, the Rolling
Average Net Payment Amount for February 1994 shall equal [*] (three times
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-17-
<PAGE>
[*], divided by three); the Rolling Average Net Payment Amount for March 1994
shall equal the sum of [*] (two times [*]) plus the actual Net Payment Amount
----
for February 1994, divided by three; and the Rolling Average Net Payment Amount
for April 1994 shall equal the sum of [*] plus the actual Net Payment Amounts
----
for February and March 1994, divided by three.
"Royalties" for any period means the aggregate amount of royalties
---------
(and/or equivalent charges for services made available, or required to be made
available, by the Subject Business to any Customer) recognized by Buyer in such
period in respect of Franchisees, which royalties (and/or equivalent charges)
shall be recognized and determined as described in Schedule 1.1-5 hereto, in
accordance with GAAP.
"Secondary Distribution Center" for any Customer means the
-----------------------------
Distribution Center other than the Primary Distribution Center for such
Customer.
"Seller" has the meaning ascribed thereto in the preamble to this
------
Agreement.
"Seller's Order Processing System" has the meaning ascribed thereto in
--------------------------------
Section 2.2(e).
"Seller Prohibited Transferees" has the meaning ascribed thereto in
-----------------------------
Section 9.11(b).
"Settlement Amount" has the meaning ascribed thereto in Section
-----------------
2.10(f).
"Settlement Date" has the meaning ascribed thereto in Section 2.10(f).
---------------
"Special Order Vendor" means any vendor with which Seller does not
--------------------
have a distribution, volume purchase or similar agreement, whose products are
not generally stocked by Seller, or are stocked only on a limited basis.
"Stipulated Due Date" for any payment obligation by Buyer to Seller
-------------------
hereunder means the date that such payment obligation is due and payable in
accordance with this Agreement, determined without giving effect to Section
2.34(a). Accordingly, the Stipulated Due Date for Buyer's obligation to pay the
Daily Net Payment Amount pursuant to Section 2.8(b) is the Business Day
immediately following the Business Day on which Seller delivers to Buyer the
Daily Net Payment Report with respect to such Daily Net Payment Amount.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-18-
<PAGE>
"Subject Business" has the meaning ascribed thereto in paragraph A of
----------------
the preamble to this Agreement, for all periods through the Closing. For any
period after the Closing, the Subject Business shall mean the Subject Business
as owned and operated from time to time by Buyer, as a going concern.
"Total MDF Percentage" for any period means the fraction, expressed as
--------------------
a percentage, equal to (i) the sum of (A) the total amount of [*] in such period
as provided in Section 2.11, plus (B) the total amount of [*] earned by Buyer
pursuant to any separate [*] entered into pursuant to Section 2.11(f), divided
-------
by (ii) Applicable Revenue for such period.
- - - --
"Vendor List" has the meaning ascribed thereto in Section 2.3(b).
-----------
"Winding Down Period" has the meaning ascribed thereto in Section
-------------------
6.2(a).
1.2. Accounting Terms. Except as otherwise expressly provided
----------------
herein, all terms of an accounting or financial nature used herein shall be
construed in accordance with GAAP, whether or not specifically stated in the
relevant definition or provision of this Agreement, and all financial statements
or accounting determinations shall be prepared or made in accordance with GAAP,
in each case as applied on a consistent basis for all relevant accounting
periods.
1.3. Interpretation. Whenever reference is made in this Agreement to
--------------
any Article, Section, Schedule or Exhibit, such reference shall be to an Article
or Section of this Agreement or to a Schedule or Exhibit attached hereto, unless
otherwise indicated. As used herein, all pronouns shall include the masculine,
feminine, neuter, singular and plural thereof whenever the context and facts
require such construction and the word "person" includes a corporation or other
entity or association as well as a natural person. The term "including" means
"including, without limitation", for all purposes of this Agreement. Unless the
context otherwise requires, any reference to a period of time as a "month" shall
mean a calendar month, and any reference to a period of time as a "quarter"
shall mean a period of three consecutive months ending on any January 31, April
30, July 31, or October 31. Unless otherwise provided, a "day" means the 24-
hour period commencing at 6:00 a.m., local time, on the calendar day in
question.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-19-
<PAGE>
ARTICLE II
DISTRIBUTION AND LOGISTICS SERVICES
2.1. Overview; Sale of Products to Buyer; Resale by Buyer to its
-----------------------------------------------------------
Customers. (a) During the Distribution Period, on the terms and subject to the
- - - ---------
conditions set forth herein, Seller shall sell to Buyer products ordered by
Customers pursuant to Section 2.2 hereof and shall provide Buyer with the
Logistics Services, in each case as described in this Article II.
(b) All products sold hereunder are sold by Seller to Buyer, and title
and risk of loss shall pass from Seller to Buyer, F.O.B. Seller's point of
shipment.
(c) Buyer shall sell all products purchased by Buyer from Seller
hereunder to the Customers that ordered such products pursuant to Section 2.2.
2.2. Order Procedures. (a) During the Distribution Period, Seller
----------------
shall make CAPS available to Buyer as provided in this Section 2.2, for use in
connection with the Subject Business. CAPS shall be available on an on-line and
dial-up basis, in substantially the manner that it is currently available to
Customers and to Seller's personnel engaged in the Subject Business. Seller
shall use commercially reasonable efforts to cause CAPS to be available each
Business Day from 5:00 a.m. Pacific time to 6:00 p.m. Pacific time (or such
other hours as Buyer and Seller shall mutually agree); provided, however, that
-------- -------
Seller shall not be responsible for any downtime caused by Buyer or by the
Mainframe Team acting on Buyer's behalf.
(b) During the Distribution Period, Buyer shall administer the "front-
end" and user interface to CAPS and shall be responsible for controlling all
access thereto by Customers, Floor Planners and Buyer personnel employed in
connection with the Subject Business (including the issuance of log-in names,
user passwords and dial-in telephone numbers), in each case in accordance with
Seller's usual policies and procedures relating thereto, as in effect on the
Closing Date, or such other policies and procedures as Buyer and Seller shall
hereafter mutually agree in writing. During the Distribution Period, Buyer
shall also be responsible for managing the "credit hold" function of CAMBAR,
including all procedures with Floor Planners to establish and update credit
limits and all other Customer "flags". Any order entered into CAPS that remains
subject to a credit hold, or is otherwise suspended by Buyer for any reason
other a back-order, for 72 consecutive hours (excluding any day that is not a
Business Day or any portion of any such day), shall automatically be canceled.
(c) Seller shall maintain and update from time to time as
provided in Section 2.3 a list of products that may be
-20-
<PAGE>
purchased by Buyer hereunder (the "Inventory List") and shall make such list
available to Customers through CAPS. Seller, acting on Buyer's behalf, shall
receive orders through CAPS for products shown on the Inventory List, as in
effect from time to time, from any Customer in the Designated Territory. Seller
shall not be required to accept or otherwise process any order that has not been
properly entered into CAPS, either by the Customer making such order or by Buyer
on behalf of such Customer. Anything contained herein to the contrary
notwithstanding, the Inventory List shall not be deemed to include any products
reflected thereon that are identified as "Status Four" products, as defined in
Schedule 2.22(b).
(d) Buyer shall use commercially reasonable efforts to cause all
Customers to comply with Seller's ordering procedures with respect to the
Subject Business, as in effect on the Closing Date, or such other ordering
procedures for the Subject Business as Buyer and Seller shall hereafter mutually
agree in writing, including all such procedures relating to the proper use and
operation of CAPS. Buyer shall not enter into CAPS any order that is not a bona
----
fide order by a Customer and shall use commercially reasonable efforts to insure
- - - ----
that no "end-user" of products sold by Seller hereunder (excluding for this
purpose any [*] company, [*] company, [*] of microcomputer products or [*])
obtains access to CAPS as a Customer; provided, however, that the foregoing
-------- -------
shall not apply to any order uploaded to CAPS through POET or any similar
"front-end" to CAPS made available during the Distribution Period to the end-
user customers of any Franchisee. Seller shall not be responsible for any delay
in or failure to fill any order caused by (i) the failure of Buyer or any
Customer to comply with the ordering procedures provided for in this Section 2.2
or (ii) any error or interruption in the operation of CAPS or CAMBAR caused by
any employee or agent of Buyer.
(e) Seller shall process all orders properly entered into CAPS in
accordance with Seller's usual electronic order processing systems and
procedures, including as of the date hereof the electronic order processing and
order-interruption functions of CAMBAR ("Seller's Order Processing System").
Any order interrupted by Seller's Order Processing System as a result of any
credit hold imposed by Buyer or any Floor Planner shall be automatically
suspended until (i) such order is deleted by Buyer or the Customer making such
order, (ii) the Floor Planner responsible for such credit hold increases the
credit limit of such Customer in an amount sufficient to fund such order or
(iii) Buyer, in its sole discretion, overrides any such credit hold in
accordance with such procedures as Buyer and Seller shall hereafter mutually
agree in writing. Seller shall not be
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-21-
<PAGE>
responsible for any loss, claim, liability or expense arising in connection with
the imposition or release of any credit limit or credit hold with respect to any
Customer by Buyer or any Floor Planner, except to the extent that any such loss,
claim, liability or expense shall have resulted from the negligence or wilful
misconduct of Seller.
(f) Anything contained herein to the contrary notwithstanding, Seller
shall not be obligated to accept or otherwise process any order from any
Customer or sell any product to Buyer hereunder, if the sale by Seller to Buyer
or by Buyer to such Customer of any product so ordered would violate any
dealership, distributorship or similar agreement between Buyer, Seller or such
Customer and any vendor, manufacturer or distributor.
(g) During the Distribution Period, Seller shall not modify in any
material respect either the functioning or the "look and feel" of CAPS, as in
effect on the Closing Date, without the prior written consent of Buyer (which
consent shall not unreasonably be withheld or delayed), unless Buyer requests
such change or implements such change through the Mainframe Team; provided,
--------
however, that if (i) Seller notifies Buyer of its intent to make any
- - - -------
modification of or replacement to CAPS at least 60 days prior to the proposed
implementation thereof and provides Buyer with such information as it reasonably
requests regarding the design, operation and cost to Buyer of the system as
proposed to be modified or replaced, (ii) such modified or replacement system
performs at least as favorably in all material respects as the then-existing
system, as determined by Buyer in its reasonable judgment, and (iii) Seller
reimburses Buyer and any affected Customers for all costs incurred by them in
order to modify their systems and train their personnel to accommodate and
properly utilize such modified or replacement system, to the same degree that
Buyer and such Customers used such system as in effect at the time such
modification or replacement is proposed, then Buyer's consent shall not be
withheld or delayed. Anything contained herein to the contrary notwithstanding,
Seller may make (but shall not be required to make) such changes to CAPS as
shall be commercially reasonable to preserve the confidentiality of any
information relating solely to the Retained Business or solely to the Subject
Business, as applicable, provided that such changes do not impair any function
of CAPS relating in whole or in part to the Subject Business.
(h) Neither party shall enter into CAPS, and Buyer shall use
commercially reasonable efforts to prevent any Customers from entering into
CAPS, any order for an "inhibitor" or other invalid SKU, or any order for any
other SKU that the person entering the order should reasonably be expected to
know will not allocate, for the purpose, in whole or material part, of holding
inventory.
-22-
<PAGE>
2.3. Seller's Inventory List; Relationships with Vendors. (a) A
---------------------------------------------------
copy of the Inventory List, as in effect on the Closing Date, is attached hereto
as Schedule 2.3(a). Except as provided in Section 2.3(b), Seller may from time
to time add and/or remove any products and/or vendors to or from the Inventory
List, as Seller in its sole discretion shall from time to time deem appropriate.
Seller shall give Buyer at least 5 days prior written notice before removing any
product from the Inventory List and shall give Buyer at least 30 days prior
written notice before removing any vendor from the Inventory List; provided,
--------
however, that Seller may remove from the Inventory List, without prior notice,
- - - -------
any product discontinued by the vendor of such product, so long as Seller gives
Buyer written notice of any such action as soon as practicable after Seller
receives notice thereof from the vendor. Seller shall update the Inventory List
from time to time by electronic mail, as needed, and shall provide to Buyer on a
monthly basis, the product, price and other data included in the Inventory List,
in such form as Buyer may reasonably request to permit Buyer to produce a price
book or similar publication.
(b) Notwithstanding Section 2.3(a), but subject to Sections 2.3(c),
(d) and (e), at all times during the Distribution Period, Seller shall include
on the Inventory List the products of each of the vendors set forth on Schedule
2.3(b), as such Schedule shall be modified from time to time pursuant to this
Section 2.3(b) (the "Vendor List"). The Vendor List may be modified only as
follows:
(i) Buyer may request the addition of a vendor to the Vendor
List at any time, by written notice to Seller, if, after giving effect to
such addition, the Vendor List would include no more than [*] vendors. As
soon as practicable after receipt of any such request, Seller will commence
negotiating in good faith with such vendor with a view to establishing a
purchasing relationship with such vendor, including negotiation of a
distribution, volume purchase agreement or similar agreement between Seller
and such vendor on customary terms and conditions. Seller shall use
commercially reasonable efforts to enter into such an agreement with such
vendor within 30 days after receipt of Buyer's notice requesting the
addition of such vendor, or as soon thereafter as shall be practicable
under the circumstances.
(ii) Seller may delete a vendor from the Vendor List at any time,
upon not less than 30 days prior written notice to Buyer (a "Deletion
Notice"), if the aggregate gross sales through the Subject Business of all
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-23-
<PAGE>
such vendor's products during any two or more of the preceding three
quarters is less than $250,000 per quarter; provided, however, that if
-------- -------
Buyer notifies Seller in writing within 10 days after receiving any
Deletion Notice that Buyer objects to the deletion of such vendor from the
Vendor List, then such vendor shall not be so deleted from the Vendor List,
and Seller shall not deliver any further Deletion Notice with respect to
such vendor for at least 12 months from the date of Buyer's objection;
provided further, however, that Buyer shall not be entitled to object to
---------------- -------
the deletion of more than five vendors pursuant to this Section 2.3(b)(ii)
in any 12-month period during the term of the Agreement.
(iii) Anything contained herein to the contrary notwithstanding,
Seller may delete any vendor from the Vendor List at any time, upon such
prior written notice to Buyer as shall be reasonable under the
circumstances (or refuse to add any vendor designated by Buyer pursuant to
Section 2.3(b)(i)), if an ordinarily prudent person in the business of
Seller could reasonably believe that, in light of the creditworthiness of
such vendor, it was imprudent to carry the products of such vendor in
inventory, under the circumstances contemplated by this Agreement, the
terms and conditions set forth herein and the terms and conditions offered
by such vendor.
(iv) Buyer may delete a vendor from the Vendor List at any time,
upon not less than 60 days prior written notice to Seller, if Seller has
deleted, or has given Buyer written notice that it intends to delete, from
the Inventory List a material portion of the products of such vendor
pursuant to Section 2.3(c) and/or Section 2.3(d), and the number of
products of such vendor remaining on the Inventory List and/or the volumes
of such products sold by Seller to Buyer hereunder do not, in Buyer's good
faith and commercially reasonable judgment, warrant maintaining such vendor
on the Vendor List.
(c) Notwithstanding Section 2.3(b), Seller may delete from the
Inventory List at any time, upon not less than 5 days prior written notice to
Buyer, any product of any vendor if fewer than 20 units of such product were
sold through the Subject Business in any of the three months immediately
preceding the date of such notice.
(d) Anything contained herein to the contrary notwithstanding, Seller
may delete from the Inventory List at any time, on such prior written notice to
Buyer as shall be reasonable under the circumstances, any product of any vendor,
if (i) Seller is prohibited from selling such product to Buyer for resale to
Customers as provided herein, pursuant to any agreement of the type described in
Section 2.2(f) to which Seller may be
-24-
<PAGE>
subject; or (ii) such product is not available to Seller for sale to Buyer
hereunder, except on terms and conditions that are, in the aggregate, materially
less favorable to Seller than the terms and conditions normally obtained by
Seller from its vendors for similar products;
(e) Except as provided in Section 2.3(d), at all times during the
Distribution Period, Seller shall include on the Inventory List any product that
Seller generally makes available for purchase by the end-user customers of the
Retained Business, other than (i) spare parts, (ii) any products that are
generally sold by Seller only in conjunction with the performance of any service
contract or other service offered by Seller through the Retained Business, (iii)
any products of any Special Order Vendor, and (iv) [*]. Notwithstanding clause
(iv) of the preceding sentence, if Buyer desires to purchase [*] from Seller,
Buyer and Seller shall negotiate with each other in good faith regarding the
terms and conditions of any such purchase, which accordingly shall not, unless
otherwise agreed, be subject to any of the terms and conditions of this
Agreement.
(f) Without limiting the rights of Seller pursuant to this Section
2.3, during the Distribution Period, Seller shall cooperate with Buyer in good
faith with respect to the composition of the Inventory List from time to time
and shall use commercially reasonable efforts to include therein any product
reasonably requested by Buyer, whether or not the vendor of such product is on
the Vendor List, provided that (i) Buyer demonstrates to Seller that there is
sufficient demand on the part of a broad base of Customers to warrant stocking
such product, or that stocking such product is necessary for strategic or
competitive reasons, and (ii) such product is available to Seller for resale to
Buyer hereunder on terms and conditions that are not, in the aggregate,
materially less favorable to Seller than the terms and conditions normally
obtained by Seller from its vendors for similar products.
(g) It is the intention of the parties to cooperate with one another
in good faith in connection with all dealings between either party and any
vendor relating to the Subject Business, including any such dealings regarding
Marketing Development Funds, Co-op Funds, Price Protection, Prompt Payment
Discounts, [*] of [*] inventory and similar issues relating thereto. In that
connection, each party shall use commercially reasonable efforts (i) to inform
the other party regarding any significant meetings, telephone conversations,
correspondence and other contacts with vendors and (ii) in the case of any such
meetings for which such party has reasonable advance notice and which are
expected to cover issues that an ordinarily prudent
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-25-
<PAGE>
person would consider important under the circumstances, to permit a
representative of the other party to participate therein. Each party shall
permit the other party, upon reasonable request, with reasonable notice during
normal business hours, to review and copy all agreements and correspondence with
vendors relating to the Subject Business; provided, however, that any out-of-
-------- -------
pocket expenses relating to such review and/or copying shall be borne by the
reviewing party. Each party hereby authorizes the other party to contact
directly any vendor of such party in connection with any matter relating to the
Subject Business, and each party shall upon the request of the other party or
any vendor confirm such authorization in writing. Neither party shall at any
time seek to influence any vendor to take any action with respect to the other
party that could reasonably be expected to have a material adverse effect upon
such other party, except as otherwise required or permitted by any provision of
this Agreement.
(h) Within 30 days after the end of each month during the
Distribution Period, Seller shall provide Buyer with (i) a report showing Gross
Sales for such month, and, on a monthly basis, for the year to date, including a
break-down by Customer and by vendor and (ii) a report showing the gross sales
of the Retained Business for such month, and, on a monthly basis, for the year
to date, including a breakdown by vendor (but not by Customer). Copies of such
reports for the month ended December 31, 1993, are attached hereto as Schedule
2.3(h).
(i) During the Distribution Period, Seller shall use commercially
reasonable efforts to announce price changes, "new product adds" and "ETAs" by
electronic mail or comparable means within 24 hours after Seller receives
knowledge thereof (not including any day that is not a Business Day, or any
portion of any such day).
(j) During the Distribution Period, Seller shall use commercially
reasonable efforts to maintain an electronic database of product descriptions,
accessible to Buyer and Customers through CAPS, for all material products on the
Inventory List from time to time. Seller shall use commercially reasonable
efforts to cause all product descriptions included in such database to be
accurate in all material respects as of the date included, and to update such
database at reasonable intervals; provided, however, that Seller shall not be
-------- -------
liable to Buyer, any Customer or any other person for any loss, claim, liability
or expense arising in connection with such database or any error therein or
omission therefrom, except to the extent that any such loss, claim, liability or
expense shall have resulted from the negligence or willful misconduct of Seller.
Without limiting the generality of the foregoing, Seller shall not in any event
be liable to Buyer, any Customer or any other person for any loss, claim,
liability or expense arising in
-26-
<PAGE>
connection with any error or omission caused by Buyer, any vendor or any third
party provider of any such product descriptions.
(k) Without limiting Seller's obligation pursuant to Section 2.3(j),
so long as Merisel or any subsidiary or affiliate shall compile any product
descriptions in connection with any other business or proposed business of
Merisel and its subsidiaries and affiliates in the Designated Territory, Buyer
shall provide to Seller upon request a copy of any product descriptions so
compiled relating to any products on the Inventory List, for an aggregate
monthly fee of [*] per month, until such time as Merisel or any such subsidiary
or affiliate shall be engaged in the business of providing product descriptions
generally to third parties in the Designated Territory. If, during the
Distribution Period, Merisel or any such subsidiary or affiliate shall be
engaged in the business of providing product descriptions to third parties in
the Designated Territory, Buyer shall cause Merisel or such subsidiary or
affiliate, within 30 days after commencing to engage in such business, to enter
into a written agreement to supply Seller with all or substantially all product
descriptions required to maintain the database contemplated by Section 2.3(j),
for a total cost to Seller not to exceed [*] per month and otherwise on terms
reasonably satisfactory to Seller and Merisel (or such subsidiary or affiliate).
2.4. Purchase Price to Buyer. (a) Subject to Section 2.4(b), the
-----------------------
purchase price payable by Buyer to Seller for any product purchased by Buyer
from Seller hereunder (the "Buyer Purchase Price") shall be the [*] of such
product.
(b) Anything contained herein to the contrary notwithstanding, in the
event that Seller (i) directly or indirectly develops, designs, produces or
assembles from components any product or (ii) sells any Private Label Product to
Buyer hereunder, then Seller and Buyer shall work together in good faith to
establish a mutually agreeable adjustment to the definition of "Buyer Purchase
Price" for such products hereunder.
2.5. Payment for Products Shipped Hereunder. (a) Subject to Section
--------------------------------------
2.34, Buyer shall pay to Seller in accordance with this Section 2.5, on or
before the second Business Day following the Invoice Date therefor, an amount
equal to the Buyer Purchase Price for each product shipped by Seller hereunder.
All such amounts shall be payable by wire transfer of immediately available
funds, subject to the netting arrangement provided for in Section 2.8(b). Buyer
shall use commercially reasonable efforts to initiate all such wire transfers no
later than 9:00 a.m. Pacific time, on the date due, and to notify
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-27-
<PAGE>
Seller by telephone of all such wire transfers (including the amount, wiring
institution, time initiated and Federal reference number, if available) as soon
as practicable after each such wire transfer has been initiated.
(b) Subject to Section 2.34, Buyer shall pay interest to Seller on any
amounts not paid when due under this Section 2.5, from the date due until the
date actually paid, at a variable rate per annum equal to the Prime Rate plus 2%
per annum. Such interest shall be due and payable monthly in arrears pursuant
to Section 2.10.
(c) Anything contained herein to the contrary notwithstanding, Seller
may suspend all sales to Buyer under this Agreement, and all shipments to
Customers on Buyer's behalf hereunder, if Buyer fails to pay to Seller the Buyer
Purchase Price for any products shipped by Seller hereunder, or any other amount
due (including on any extended due date as provided in Section 2.34) to Seller
under this Agreement, within three Business Days after the receipt of notice
from Seller stating the amount past due; provided, however, that, subject to
-------- -------
Section 2.5(d), if Buyer in good faith disputes that it is obligated to pay all
or any portion of any amount claimed by Seller hereunder, and Buyer has paid
each amount not disputed in good faith to Seller not later than three Business
Days after the receipt of the notice referred to in this sentence applicable to
such amount, and (if the aggregate of all amounts in dispute exceeds $1,000,000)
has paid all disputed amounts into escrow pursuant to Section 2.26, then,
pending resolution of such dispute pursuant to Article VIII hereof (whether
pursuant to negotiation, mediation or litigation), Seller shall not suspend any
sales and/or shipments pursuant to this Section 2.5(c) by reason of Buyer's
failure to pay such disputed amounts to Seller. During any period of such
suspension of sales and shipments, the Performance Standards shall also be
suspended. Without prejudice to the rights of Seller to suspend sales to Buyer
and shipments to Customers as provided in this Section 2.5(c), any dispute
regarding the obligation of Buyer to make any payment to Seller hereunder shall
be submitted for resolution pursuant to Article VIII hereof; provided, however,
-------- -------
that if the aggregate of all amounts in dispute is in excess of $1,000,000, the
expedited procedures of Section 8.3 shall apply. Following any suspension of
sales to Buyer and shipments to Customers for nonpayment as provided in this
Section 2.5(c), Seller may, as a condition to resuming such sales and shipments,
require that Buyer provide adequate assurance that future amounts due to Seller
hereunder will be paid when due.
(d) Anything contained herein to the contrary notwithstanding, Buyer
shall not dispute its obligation to pay the Buyer Purchase Price or Outbound
Freight for any product shipped by Seller hereunder unless Buyer in good faith
disputes that such product was in fact shipped to the Customer ordering
-28-
<PAGE>
such product (or to such Customer's customer) and specifies in writing the
product or shipment in dispute (the "Disputed Shipment"), with sufficient
information for Seller to verify the same. Buyer may set off against the Buyer
Purchase Price and/or Outbound Freight payable in respect of any product shipped
by Seller hereunder any amount theretofore actually paid by Buyer in respect of
a Disputed Shipment, but shall not otherwise have the right to set off any
amount whatsoever against the Buyer Purchase Price and/or Outbound Freight for
any product shipped by Seller hereunder. Any amount set off by Buyer pursuant
to the preceding sentence shall constitute an amount disputed in good faith by
Buyer for all purposes of Section 2.5(c) and Section 2.26.
2.6. Payment by Customers. (a) The price payable by any Customer
--------------------
for any product purchased from Buyer and shipped by Seller, on Buyer's behalf,
to such Customer hereunder (the "Customer Purchase Price") shall be determined
by Buyer. Buyer shall have sole responsibility for inputting into CAPS and/or
CAMBAR all pricing terms, mark-ups and other pricing information relating to
Buyer's sales to Customers, including information regarding any [*] to be billed
to Customers hereunder and any applicable sales and use tax charges to the
Customer, as determined by Buyer ("Buyer Pricing Information"), prior to the
effectiveness thereof. All Buyer Pricing Information and any changes therein
shall not be effective (as between Buyer and Seller) unless and until properly
inputted into CAPS and/or CAMBAR. For purposes of preparing any invoice
pursuant to Section 2.8, Seller shall be entitled to rely on the Buyer Pricing
Information last inputted by Buyer into CAPS and/or CAMBAR prior to the time
that such order becomes a confirmed order. To the extent that any Buyer Pricing
Information shall provide for the Customer Purchase Price of any product to be
based on a factor identified as "inventory cost", such factor shall be equal to
the [*] of such product as defined herein.
(b) Seller shall cooperate with Buyer and take all reasonable actions
requested by Buyer to notify Customers that amounts invoiced to Customers
hereunder and Royalties due from Customers for periods following the Closing
shall be payable to the account of and in the manner directed by Buyer. Seller
shall promptly forward to Buyer all payments received by Seller with respect to
such amounts, together with such endorsements or assignments as shall be
necessary for the transfer thereof to Buyer. Buyer shall reimburse Seller for
any reasonable out-of-pocket expenses incurred by Seller in connection with any
such actions.
(c) Anything contained herein to the contrary notwithstanding, Buyer's
obligation to pay all amounts due to
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-29-
<PAGE>
Seller hereunder shall not be affected by any default by any Customer or floor
planner, or any bankruptcy or other event by any Customer or floor planner that
enjoins or otherwise prohibits any payment by any Customer or floor planner to
Buyer or makes any such payment recoverable from Buyer.
(d) Notwithstanding Section 2.6(a), Seller shall be responsible for
inputting into CAPS and/or CAMBAR the correct Inventory Cost and Buyer Purchase
Price of each product on the Inventory List. In the event that the Inventory
Cost or Buyer Purchase Price of any product, as inputted into CAPS and/or
CAMBAR, exceeds the actual Inventory Cost or Buyer Purchase Price, as
applicable, of such product, and as a result thereof Buyer pays to Seller, in
respect of such product, an amount in excess of the Buyer Purchase Price for
such product, Seller shall promptly refund to Buyer the full amount of such
excess. In the event that the Buyer Purchase Price or Inventory Cost of any
product, as inputted into CAPS and/or CAMBAR, is less than the actual [*] or
[*], as applicable, of such product, and as a result thereof Buyer pays to
Seller, in respect of such product, an amount less than the [*] therefor, the
following procedure shall apply:
(i) If the Customer Purchase Price actually billed to any
Customer in respect of such product shall have been based on the correct
Buyer Purchase Price for such product, Buyer shall promptly pay to Seller
the amount of the actual Buyer Purchase Price for such product, less any
amount theretofore paid by Buyer to Seller in respect thereof.
(ii) If the Customer Purchase Price actually billed to any
Customer in respect of such product shall not have been based on the
correct Buyer Purchase Price for such product, Seller shall prepare and
(subject to the consent of Buyer, which consent shall not unreasonably be
withheld or delayed) send to such Customer a debit memo for the deficiency,
showing the correct Buyer Purchase Price and the Customer Purchase Price
payable in respect thereof, and Buyer and Seller shall cooperate with one
another in good faith and in a commercially reasonable manner to collect
from such Customer the additional amount owed by such Customer to Buyer in
respect of such product, as shown on such debit memo; provided, however,
-------- -------
that payment of such additional amount shall not result in undue hardship
to such Customer. Buyer shall pay to Seller a percentage of any additional
amounts recovered by Buyer from such Customer in respect of such product
equal to the percentage that the Buyer Purchase Price of such product bears
to the Customer Purchase Price for such product, in each case as corrected
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-30-
<PAGE>
pursuant to this Section 2.6(b)(ii), but Buyer shall not otherwise have any
liability to Seller in respect of the difference between the actual
Inventory Cost or Buyer Purchase Price of such product and the Inventory
Cost or Buyer Purchase Price, as applicable, used to determine the Customer
Purchase Price originally billed to such Customer.
(e) Buyer shall cooperate with Seller and take all reasonable actions
requested by Seller to notify Customers as applicable that (i) any amounts
invoiced by Seller to any customer of a Customer under the MASTER program and
(ii) any Royalties due from Customers for periods prior to the Closing Date,
shall in each case be payable to the account of and in the manner directed by
Seller. Buyer shall promptly forward to Seller all payments received by Buyer
with respect to such amounts, together with such endorsements or assignments as
shall be necessary for the transfer thereof to Seller. Seller shall reimburse
Buyer for any reasonable out-of-pocket expenses incurred by Buyer in connection
with any such actions.
2.7. Shipping and Delivery; Freight Charges. (a) Seller, acting as
--------------------------------------
an independent contractor on behalf of Buyer hereunder, shall ship products
directly to any Customer (or to any customer of a Customer) within a
commercially reasonable time after receipt of a Confirmed Order from such
Customer, provided that at the time such order is entered into CAPS (or, in the
case of any order that is subject to credit hold in accordance with Section
2.2(e), at the time such credit hold is released by Buyer or the applicable
Floor Planner pursuant to Section 2.2(e)(ii) or 2.2(e)(iii)) sufficient units of
such products are in Seller's stock and, if subject to allocation due to limited
supply, are allocated to Buyer.
(b) Seller shall not be required to ship any products for delivery to
any location outside of the Designated Territory. All products shipped by
Seller, on Buyer's behalf, to any Customer hereunder shall be shipped from the
Primary Distribution Center for such Customer, except as provided in Section
2.7(c). Interstate shipments shall be shipped by Federal Express (or another
nationally-recognized air courier), second day air, except as otherwise provided
herein. Intrastate shipments in California and Indiana shall be made by local
carrier. If such Customer requests expedited delivery, such products shall be
shipped by Federal Express (or another nationally-recognized air courier, or
local carrier for intrastate shipments), for delivery the next Business Day
("Expedited Delivery"). Except as otherwise specifically provided by this
Section 2.7(b), as permitted by Section 2.21(b), or as Buyer and Seller may
otherwise mutually agree, Seller shall
-31-
<PAGE>
comply during the Distribution Period with its usual shipping policies and
procedures in effect as of the Closing Date, including such policies and
procedures relating to split shipments and back-orders, all as more particularly
described in Schedule 2.7(b).
(c) If, at the time that Seller receives a Confirmed Order from any
Customer for any product on the Inventory List, the Primary Distribution Center
for such Customer is out-of-stock in such product, then such order shall
automatically be filled from [*] the [*] for such Customer or the [*] for such
Customer, whichever is first able to fill such order (subject to Section
2.22(b), if applicable). Except as provided in this Section 2.7(c), Seller
shall not be required to ship any product to any Customer (or to any customer of
a Customer) from the [*] for such Customer, or to permit any Customer to order
any product from such Customer's [*], if its Primary Distribution Center has
such product in stock at the time such order is entered into CAPS; however,
-------
Seller shall endeavor to ship products ordered by any Customer for delivery to
such Customer's customer from the distribution center closest to such customer.
Anything contained herein to the contrary notwithstanding, following the Closing
Date, Buyer and Seller shall cooperate with one another in good faith and in a
commercially reasonable manner to develop a modification to CAPS that will
permit any order for any product received from any "smaller Customer" (as such
term shall be defined by Buyer in good faith in connection with the development
of such modification) to be held by CAMBAR for up to two Business Days before
being filled from such Customer's [*], if such Customer's [*] is [*] in such
product at the time such order is received.
(d) Buyer shall pay to Seller pursuant to Section 2.10, for each month
during the Distribution Period, (i) Outbound Freight for such month, less (ii)
----
[*] of the ABF Differential for such month. For purposes of such payment, the
ABF Differential shall be determined as follows:
(A) in the second and third months in each quarter, Seller shall
estimate the ABF Differential for the preceding month by multiplying
Outbound Freight for such month by a fraction, the numerator of which shall
be the ABF Differential for the preceding quarter (as certified by Seller
pursuant to Section 2.10(b)(ii)(8)) and the denominator of which shall be
Outbound Freight for such preceding quarter; and
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-32-
<PAGE>
(B) in the first month in each quarter, Seller shall determine
the actual ABF Differential for the preceding quarter.
(e) Buyer shall also pay to Seller, pursuant to Section 2.10:
(i) the aggregate amount of all [*] charged to Seller by Seller's
vendor for any product sold to Buyer by Seller hereunder, to the extent not
included in Inventory Cost for such product ("[*]"); and
(ii) the aggregate amount of all [*] ([*]) incurred directly or
indirectly by Seller in respect of any products sold by Seller to Buyer
hereunder ("[*]").
Inbound Freight and Insurance shall be estimated and allocated between Buyer and
Seller in accordance with Seller's usual policies and procedures relating
thereto, as set forth in Schedule 2.7(e); provided, however, that if, as a
-------- -------
result of circumstances beyond the power of Seller to reasonably control, there
is a material change in the way that Seller pays, or is required to account, for
Inbound Freight or Insurance, Buyer and Seller shall cooperate with one another
in good faith to revise or replace any or all of such policies and procedures,
as shall be reasonably necessary to effectuate the purposes and intent of this
Section 2.7(e); provided further, however, that such policies and procedures
---------------- -------
shall in the aggregate be designed to provide that, on the whole, Seller shall
neither recognize a profit nor incur a loss in respect of [*] or [*], as
determined in accordance with GAAP. Seller shall give Buyer such notice of any
circumstances of the type contemplated by the preceding sentence as shall under
such circumstances be commercially reasonable. Following the Closing Date,
Buyer and Seller shall cooperate with each other in good faith to consider the
feasibility of developing a system that would enable individual Customers to [*]
of the insurance coverage provided by Seller hereunder for outbound deliveries,
and, if Buyer and Seller determine that development of such a system would be
feasible and in the best interests of the Subject Business, and would not impose
any additional costs upon Seller (other than such costs as, in the aggregate,
are de minimis), Buyer and Seller shall use commercially reasonable efforts to
-- -------
develop such a system.
2.8. Invoices; Confirmations to Floor Planners. (a) Seller, on
-----------------------------------------
Buyer's behalf, shall prepare and send to each Customer to which products are
shipped hereunder, an invoice,
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-33-
<PAGE>
substantially in the form of Schedule 2.8 or such other form as Seller and Buyer
may from time to time agree in writing, showing the name of such Customer, the
date of the shipment, a brief description of the products shipped, and the
Customer Purchase Price for each product shipped (the "Customer Invoice"). Each
Customer Invoice shall reflect such sale as being made by Buyer to such Customer
and shall provide for payment to be made directly to Buyer, or as Buyer shall
otherwise instruct. Seller shall send each Customer Invoice by electronic mail
to the Customer named therein not later than one Business Day after the date of
shipment and shall mail a printed copy of such invoice to such Customer not
later than six Business Days after the date of shipment; provided, however, that
-------- -------
in the case of any Customer that is not on Seller's electronic mail system, such
Customer shall receive only the printed copy of such invoice, which shall be
mailed within such six-Business Day period.
(b) Within one Business Day after the date of shipment, Seller shall
send to Buyer an electronic mail copy of the Customer Invoice relating to such
shipment, together with a statement of the Buyer Purchase Price of each product
shipped, and the invoice and statement sent to Buyer together shall constitute
Seller's invoice to Buyer for the sale of such products by Seller to Buyer
hereunder (the "Buyer Invoice"). Seller shall provide to Buyer by 5:00 p.m.,
Pacific time, on each Business Day, a report (the "Daily Net Payment Report")
showing the following amounts:
(i) the sum of all amounts payable by Buyer to Seller in respect
of Buyer Invoices that will be due and payable on the immediately
succeeding Business Day pursuant to Section 2.5(a);
(ii) the sum of all amounts payable by Seller to Buyer in respect
of Returnable Products and/or Mis-Shipped Products accepted by Seller for
return pursuant to Section 2.12(b), which amounts will be due and payable
on such immediately succeeding Business Day pursuant to Section 2.12(c);
(iii) the arithmetic difference of the amount in clause (i) above
minus the amount in clause (ii) above (the "Daily Net Payment Amount");
-----
(iv) prior to the Extended Payment Termination Date, the
Additional Receivable Amount outstanding at the beginning of such Business Day;
and
(v) prior to the Extended Payment Termination Date, the amount of
any wire transfer made by Buyer to Seller on such Business Day pursuant to
Section 2.5(a) (to the extent that Buyer shall have given notice of such wire
transfer pursuant to such Section 2.5(a)).
-34-
<PAGE>
If the Daily Net Payment Amount for any Business Day is a positive number, Buyer
shall pay that amount to Seller by the following Business Day pursuant to
Section 2.5(a); provided, however, that prior to the Extended Payment
-------- -------
Termination Date, Buyer shall in lieu thereof pay the amount, if positive, equal
to (A) the Additional Receivable Amount outstanding at the beginning of such of
such Business Day, minus (B) the amount of any wire transfer made by Buyer to
-----
Seller on such Business Day pursuant to Section 2.5(a) (to the extent that Buyer
shall have given notice of such wire transfer pursuant to such Section 2.5(a)),
plus (C) the Daily Net Payment Amount for such Business Day, minus (D)
- - - ---- -----
$20,000,000. If the Daily Net Payment Amount for any Business Day is a negative
number, Seller shall pay that amount to Buyer by the following Business Day by
wire transfer of immediately available funds, in accordance with Section
2.12(c). Seller shall provide Buyer, on a monthly basis, with a printed summary
of all transactions completed hereunder, in a form reasonably acceptable to
Buyer. Buyer shall reimburse Seller on a monthly basis for the postage costs of
mailing printed invoices to Customers.
(c) Within one Business Day after the date of each shipment, Seller
shall send to each Floor Planner financing any of the products included in such
shipment an electronic mail copy of the Customer Invoice relating to such
shipment, including such information regarding the products financed by such
Floor Planner as Buyer or such Floor Planner shall reasonably request ("Floor
Planner Invoice").
2.9. Distribution Fee; Advance Payments. (a) Buyer shall pay to
----------------------------------
Seller a fee (the "Distribution Fee") in an amount equal to the Monthly
Distribution Fee for each month during the Distribution Period, payable as
provided in Section 2.10.
(b) As an advance on the Net Payment Amount payable by Buyer to Seller
in each month, Buyer shall pay to Seller on the first, second, third and fourth
Tuesday of each month (or if any such day shall not be a Business Day, on the
next succeeding Business Day), an amount equal to [*] of the Rolling Average Net
Payment Amount for such month; provided, however, that if the Rolling Average
-------- -------
Net Payment Amount for such month shall not be greater than zero, no payment
shall be made in such month pursuant to this Section 2.9(b). The sum of all
amounts actually paid by Buyer to Seller pursuant to this Section 2.9(b) in any
month is referred to herein as the "Advance Payment Amount" for such month.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-35-
<PAGE>
2.10. Certification of Amounts; Calculation and Payment of Net
--------------------------------------------------------
Payment Amounts. (a) On or before the 14th day of each month, Buyer shall
- - - ---------------
certify to Seller, substantially in the form of Schedule 2.10(a), Royalties (and
Other Revenue, if any, and any cost of sales associated therewith) for the
immediately preceding month. The amount so certified shall be based on the
information available to Buyer through the Business Day preceding the date of
certification. In each month after the second month of the Distribution Period,
Buyer shall also certify Royalties (and Other Revenue, if any, and associated
cost of sales) for the second preceding month, as revised to reflect (i) any
additional information that shall have become available to Buyer for such second
preceding month, and (ii) the inclusion as Royalties for such second preceding
month of any and all other amounts recognized by Buyer in such second preceding
month in respect of any Royalties (or Other Revenue) that shall have been
accrued for any prior month but not previously included in any certification of
Royalties (or Other Revenue) by Buyer to Seller pursuant to this Section
2.10(a). The difference (which may be a positive or a negative number) of (A)
the revised Royalties amount for such second preceding month, as so certified,
minus (B) the amount previously certified by Buyer pursuant to the first
- - - -----
sentence of this Section 2.10(a) as Royalties for such second preceding month,
is herein called the "Additional Royalty Amount".
(b) On a date (the "Determination Date") within two Business Days
after receipt of Buyer's certification pursuant to Section 2.10(a), but in any
event not later than the 20th day of each month, or earlier than the 14th day of
each month, Seller shall
(i) calculate Applicable Revenue for the preceding month, using
the amounts for Royalties and Other Revenue certified by Buyer pursuant to
the first sentence of Section 2.10(a) (or if no such amount was certified,
using the Royalties (and Other Revenue) for the most recent month for which
they are known) plus the Additional Royalty Amount calculated for the
----
second preceding month (and any additional Other Revenue certified by Buyer
pursuant to the third sentence of Section 2.10(a)); and
(ii) certify to Buyer, substantially in the form of Schedule
2.10(b), the following amounts, in each case for the preceding month
(unless a different period is specified):
(1) Gross Sales;
(2) Applicable Revenue, as calculated in clause (i) above;
-36-
<PAGE>
(3) the aggregate Buyer Purchase Price of all products sold
to Buyer hereunder (and the Inventory Cost of any such product, if not
equal to the Buyer Purchase Price therefor);
(4) Cost-Plus Mark-Up;
(5) Outbound Freight;
(6) Inbound Freight;
(7) Insurance;
(8) Customer Freight Accruals, as reflected on all Customer
ledger cards in CAMBAR as of the end of the preceding calendar month;
(9) (A) for each of the second and third months in each
quarter, the ABF Differential for the preceding month,
as estimated pursuant to Section 2.7(d)(A), and (B) for
the first month in each quarter, the ABF Differential
for the preceding quarter, as determined pursuant to
Section 2.7(d)(B);
(10) Gross Margin;
(11) Adjusted Gross Margin;
(12) for each vendor that makes available any MDF, the
following information, showing in each case the total
for Buyer and Seller and the separate amounts allocable
to each (as determined in accordance with Section
2.11):
(A) MDF Earned (whether or not Realized) for such
month and for the year to date (as determined in
accordance with Section 2.11(d)(v)(A));
(B) MDF Realized for such month and for the year to
date, to the extent paid in cash or cash
equivalents (as determined in accordance with
Sections 2.11(d)(v)(B) and 2.11(e)(i)); and
(C) MDF Realized for such month and for the year to
date, to the extent
-37-
<PAGE>
paid in property other than cash or cash
equivalents (as determined in accordance with
Sections 2.11(d)(v)(B) and 2.11(e)(ii) and (iii));
(13) Adjusted MASTER Sales;
(14) MASTER Inventory Cost;
(15) MASTER Royalty Accrual;
(16) MASTER Royalty Collection Amount;
(17) the Performance Credit Amount, as determined in good
faith by Seller, which amount may subsequently be
disputed in good faith by Buyer pursuant to Article
VIII;
(18) the Advance Payment Amount;
(19) all financing fees payable in respect of the Additional
Receivable Amount pursuant to Section 2.34(b); and
(20) any interest payable pursuant Section 2.5(b).
(c) On the Determination Date in each of the second and third months
in each quarter, Seller shall calculate and certify to Buyer, substantially in
the form of Schedule 2.10(c), the estimated Monthly Distribution Fee for the
preceding month, calculated on the assumption that the Base Percentage for such
quarter will be equal to the Base Percentage for the preceding quarter (or, in
the case of the first quarter hereunder, that the Base Percentage will be [*]).
(d) On the Determination Date in the first month in each quarter,
Seller shall calculate and certify to Buyer, substantially in the form of
Schedule 2.10(d), the actual Base Percentage for the preceding quarter and the
actual Monthly Distribution Fee for the last month in such preceding quarter.
If such actual Base Percentage shall be different from the Base Percentage used
in calculating the Monthly Distribution Fee for the first two months of such
preceding quarter, Seller shall also recalculate and certify the actual Monthly
Distribution Fee for the first two months in such preceding quarter, as well as
the aggregate difference between the actual and estimated fees for
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-38-
<PAGE>
the first two months of such preceding quarter, which difference shall be
reflected as a positive number if payable by Buyer to Seller and as a negative
number if refundable by Seller to Buyer.
(e) Also on the Determination Date in each month, Seller shall
calculate and certify to Buyer, substantially in the form of Schedule 2.10(e)(i)
or Schedule 2.10(e)(ii), as applicable, the "Net Payment Amount", which shall be
an amount determined as follows:
(i) for each of the second and third months in each quarter, the
Net Payment Amount shall equal (in each case, for the preceding month,
unless a different period is specified):
<TABLE>
<CAPTION>
<S> <C> <C>
(A) the Monthly Distribution Fee (as estimated pursuant to
Section 2.10(c));
plus (B) Outbound Freight;
----
plus (C) [*];
----
plus (D) [*];
----
plus (E) (1) interest payable pursuant to Section 2.5(b), as certified
----
pursuant to Section 2.10(b)(ii)(20), and (2) financing fees
payable in respect of the Additional Receivable Amount
pursuant to Section 2.34(b), as certified pursuant to Section
2.10(b)(ii)(19);
minus (F) [*] of the estimated ABF Differential for the
-----
preceding month, as certified pursuant to
Section 2.10(b)(ii)(9)(A);
minus (G) any [*] Realized by Seller, payable in cash
-----
or cash equivalents and allocated to Buyer,
as certified pursuant to Section [*];
minus (H) any [*] received by Seller and allocated to
-----
Buyer pursuant to Section [*];
minus (I) the amount of any [*] allocated to Buyer
-----
pursuant to Section [*] or Section [*];
minus (J) the [*];
-----
minus (K) [*];
-----
</TABLE>
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-39-
<PAGE>
<TABLE>
<S> <C> <C>
plus (L) the aggregate of all other amounts then due
----
and payable by Buyer to Seller hereunder with respect to
which Buyer and Seller shall have agreed to permit the
payment netting arrangements under this Section 2.10(e) to
apply; and
minus (M) the aggregate of all other amounts then due and payable by
-----
Seller to Buyer hereunder with respect to which Buyer and
Seller shall have agreed to permit the payment netting
arrangements under this Section 2.10(e) to apply.
</TABLE>
(ii) for the first month in each fiscal quarter, the Net Payment
Amount shall equal (in each case, for the preceding month, unless a different
period is specified):
<TABLE>
<S> <C> <C>
(A) the actual Monthly Distribution Fee for the preceding month;
plus (B) the aggregate difference between the actual and estimated
----
Monthly Distribution Fees for the first two months of the
preceding quarter, as determined pursuant to Section
2.10(d);
plus (C) Outbound Freight;
----
plus (D) [*];
----
plus (E) [*];
----
plus (F) (1) interest payable pursuant to Section 2.5(b), as
----
certified pursuant to Section 2.10(b)(ii)(20), and
(2) financing fees payable in respect of the Additional
Receivable Amount pursuant to Section 2.34(b), as certified
pursuant to Section 2.10(b)(ii)(19);
plus (G) the aggregate amount subtracted pursuant to Section
----
2.10(e)(i)(F) in respect of estimated ABF Differential in
determining the Net Payment Amount for the first two months
of the preceding quarter;
</TABLE>
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-40-
<PAGE>
<TABLE>
<S> <C> <C>
minus (H) [*] of the ABF Differential for the preceding
-----
quarter, as certified pursuant to Section
2.10(b)(ii)(9)(B);
minus (I) any [*] Realized by Seller, payable in cash
-----
or cash equivalents and allocated to Buyer,
as certified pursuant to Section [*];
minus (J) any [*] received by Seller and allocated to
-----
Buyer pursuant to Section [*];
minus (K) the amount of any [*] allocated to Buyer
-----
pursuant to Section [*] or Section [*];
minus (L) the [*];
-----
minus (M) [*];
-----
plus (N) the aggregate of all other amounts then due and payable by
----
Buyer to Seller hereunder with respect to which Buyer and
Seller shall have agreed to permit the payment netting
arrangements under this Section 2.10(e) to apply; and
minus (O) the aggregate of all other amounts then due and payable by
-----
Seller to Buyer hereunder with respect to which Buyer and
Seller shall have agreed to permit the payment netting
arrangements under this Section 2.10(e) to apply.
</TABLE>
(f) The "Settlement Amount" for any month is the amount equal to
(i) the Net Payment Amount for such month minus (ii) the Advance Payment Amount
-----
paid in the immediately preceding month. If the Settlement Amount for any month
is a positive number, Buyer shall pay the amount thereof to Seller, on or before
the second Business Day after the Determination Date for such month (such day,
the "Settlement Date" for such month). If the Settlement Amount for any month is
a negative number, Seller shall pay the amount thereof to Buyer, on or before
the Settlement Date for such month. All payments pursuant to this Section
2.10(f) shall be made by wire transfer of immediately available funds.
(g) Within 45 days after the end of each month, Buyer shall
certify to Seller in writing the gross revenues of the Subject Business for such
month, as determined by Buyer in accordance with generally accepted accounting
principles, applied
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-41-
<PAGE>
in a manner consistent with the accounting principles used by Merisel and its
consolidated subsidiaries for financial reporting purposes. Within 15 days
after any reasonable request by Seller, Buyer shall certify to Seller in writing
whether or not, for any period, Buyer shall have realized any [*] in excess of
the aggregate amount certified by Seller as the [*] reflected in CAMBAR for such
period, as provided in Section 2.10(b)(ii)(8).
(h) Notwithstanding any termination or expiration of the Distribution
Period, Buyer and Seller shall continue to comply with the provisions of this
Section 2.10 in each month following such termination or expiration with respect
to all amounts accrued during the Distribution Period until all such amounts are
certified and, if appropriate, paid as provided in this Section 2.10.
2.11. Marketing Development Funds; Co-op Funds. (a) During the
----------------------------------------
Distribution Period, Buyer and Seller shall cooperate with each other in
connection with all negotiations and other dealings with vendors, manufacturers
and distributors relating to Marketing Development Funds related to products
sold or to be sold by Seller to Buyer hereunder.
(b) Except as provided in Section 2.11(f), Seller shall control all
negotiations and other dealings relating to Marketing Development Funds, subject
to the following general principles:
(i) Seller and Buyer shall use their respective best efforts to
maximize the [*] of Marketing Development Funds available to Seller and
Buyer in respect of products acquired by Seller for sale to Buyer
hereunder; provided, however, that neither Seller nor Buyer shall be
-------- -------
obligated to incur any cost or obligation or expend any funds that would
not otherwise have been incurred or spent in full, in order to obtain any
[*] or to convert into [*] any [*] that would otherwise have been [*].
(ii) Seller acknowledges that, to the extent permitted by
agreements and other arrangements with each applicable vendor, all [*]
allocable to Buyer pursuant to Section 2.11(d) shall be for the benefit of
Buyer, to be used as Buyer and each applicable vendor shall determine.
Buyer shall have the responsibility (with the cooperation of Seller) to
negotiate with vendors regarding the use of such [*]. Seller shall use
commercially reasonable efforts to obtain from its vendors all forms and
other requirements of such vendors necessary to receive payment of any [*]
allocated to Buyer pursuant to Section 2.11(d), shall assist
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-42-
<PAGE>
Buyer in completing such forms and procedures, shall deliver the completed
forms and any accompanying documentation provided by Buyer to the
appropriate vendor, and shall deliver to Buyer all payments received from
vendors in respect thereof, in accordance with Section 2.11(e). Seller
shall not under any circumstances have any responsibility for obtaining the
approval of any vendor for the use of any [*] or for any loss by Buyer of
any [*] or the proceeds thereof.
(c) Marketing Development Funds shall be accrued and allocated by
Seller on a separate basis as provided in this Section 2.11 for each MDF program
for which Seller is eligible during the Distribution Period, including but not
limited to programs that commenced prior to the start of the Distribution Period
or that end after the termination or expiration of the Distribution Period.
Seller shall maintain such books and records as Seller and Buyer reasonably
determine to be necessary to account for such accrual and allocation of
Marketing Development Funds and shall provide Buyer with such reports relating
to MDF accrued, Earned, Realized and allocated hereunder as Seller and Buyer
shall reasonably determine. During each quota period for each such [*], Seller
shall accrue an estimated amount of the Marketing Development Funds expected to
be Earned under such MDF program. Such accrual for each MDF program shall be
made based on (i) the actual purchases or sales from time to time during such
period of products to which such MDF program applies (or any other volume levels
or other criteria on the basis of which such MDF are earned under such MDF
program), (ii) the volume bar (or other earning rate) for which Seller would be
eligible based on the good faith projection of Seller and Buyer as to the volume
of such purchases or sales (or other basis of earning MDF under such program)
expected to be achieved during such period and (iii) such other criteria as
Seller and Buyer shall determine in good faith. If the actual amount of such
MDF Earned and/or Realized differs from the estimated amount accrued for any
period, an appropriate adjustment shall be made to reflect such difference
retroactive to the period over which such MDF was accrued.
(d) Marketing Development Funds shall be allocated between Buyer
and Seller as follows:
(i) Marketing Development Funds accrued for any period based on
the purchase by Seller of any product shall be attributed to each unit of
such product so purchased, pro rata in proportion to the Inventory Cost
--- ----
thereof. The MDF so attributed to any product sold by Seller to Buyer
hereunder shall be allocated to Buyer at the
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-43-
<PAGE>
time of such sale; the MDF attributed to any product sold by Seller to any
person other than Buyer shall be allocated to Seller at the time of such
sale.
(ii) Marketing Development Funds accrued for any period based on
the sale by Seller (whether to Buyer or to any other person) and/or by
Buyer of any product shall be attributed to each unit of such product so
sold, pro rata in proportion to the Inventory Cost thereof. The MDF so
--- ----
attributed to any product sold by Seller to Buyer hereunder shall be
allocated to Buyer at the time of such sale; the MDF attributed to any
product sold by Seller to any person other than Buyer shall be allocated to
Seller at the time of such sale.
(iii) All other Marketing Development Funds shall be allocated
between Buyer and Seller as such parties shall in good faith mutually
agree, based on the criteria for earning such MDF under the program
established by the applicable vendor.
(iv) At the time of any adjustment to any accrual of Marketing
Development Funds as provided in Section 2.11(c), any allocation previously
made based on such accrual shall also be adjusted to reflect the adjusted
level of such accrual. Any amount of Marketing Development Funds allocated
as provided in this Section 2.11(d) shall not be deemed finally allocated
until (A) such MDF shall have been Earned, (B) in the case of [*], such [*]
shall have been [*] and (C) the sale by Seller of the applicable unit of
product shall have occurred (or any other criteria for allocating such MDF,
as provided in Section 2.11(d)(iii), shall have been satisfied).
(v) Anything contained herein to the contrary notwithstanding,
(A) an MDF credit shall be deemed to have been "Earned" for purposes of
this Agreement at such time as the applicable vendor shall have notified
Seller that such credit has been earned, and (B) an MDF credit shall be
deemed to have been "Realized" for purposes of this Agreement when Seller
shall have received cash, cash equivalents, property or other consideration
from the vendor in respect of such MDF credit; provided, however, that if
-------- -------
Seller shall at any time make an accounting entry on its books and records
reflecting the setting-off by Seller of any MDF credit Earned by Seller
from any vendor against Seller's account payable to such vendor, then
Seller shall be deemed to have received cash equivalents in respect of such
MDF credit at the time that Seller would otherwise have
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-44-
<PAGE>
paid the account payable so offset. Notwithstanding the proviso in the
preceding sentence, Seller shall not be required to reflect the setting-off
of any MDF credit Earned by Seller from any vendor prior to the time that
such vendor effects such set off, as reflected on an invoice or other
written communication from such vendor to Seller.
(e) All amounts of Marketing Development Funds Realized by Seller and
allocated to Buyer pursuant to Section 2.11(d) shall be paid by Seller to Buyer,
as provided in this Section 2.11(e), on or before the Settlement Date in the
first month following the month in which such MDF was Realized; provided,
--------
however, that if Buyer receives any payment from Seller in respect of any MDF
- - - -------
prior to the time that such MDF shall have been Earned, then within 30 days
after any final allocation of such MDF pursuant to Section 2.11(d)(iv), Buyer
shall reimburse to Seller any amount received by Buyer in respect of such MDF in
excess of Buyer's final allocation with respect thereto. Payments pursuant to
this Section 2.11(e) shall be made as follows:
(i) in the case of any MDF payments made by the vendor in cash or
cash equivalents, any payments pursuant to this Section 2.11(e) shall be
made in cash, in accordance with Section 2.10(e);
(ii) in the case of any MDF paid by the vendor in property other
than cash or cash equivalents, which property may be conveniently divided
in accordance with the allocation of such MDF pursuant to Section 2.11(d),
such property shall be so divided, and any payment pursuant to this Section
2.11(e) shall be made in kind; and
(iii) in the case of any MDF paid by the vendor in property other
than cash or cash equivalents, which property can not be conveniently
divided in accordance with the allocation of such MDF pursuant to Section
2.11(d), any payment pursuant to this Section 2.11(e) shall be made in such
reasonable manner as Buyer and Seller shall in good faith mutually agree.
(f) Anything contained herein to the contrary notwithstanding, to the
extent that it is practicable for Buyer and Seller to negotiate [*] with any [*]
(including [*] and other criteria for [*]), Buyer and Seller shall cooperate
with each other in good faith to do so; provided, however, that if either party
-------- -------
shall reasonably determine that [*] would be likely to result in the [*] by such
party of an [*] of [*] in excess of [*] of the [*] of [*] that would otherwise
have been [*] by such
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-45-
<PAGE>
party under a [*], such party shall not be required to agree to any [*], except
to the extent required by the applicable [*]. In the event that Buyer and
Seller obtain [*] from any [*] with respect to any period, (i) all products
purchased by Seller from such [*] in such period shall be allocated between
Buyer and Seller for purposes of such [*] in the manner agreed to among Buyer,
Seller and such [*], (ii) Buyer and Seller shall each be [*] for [*] any [*]
from such [*] under its [*], (iii) the products of such [*] purchased by Seller
in such period shall not be considered in connection with any [*] of [*]
relating to any [*] pursuant to Sections 2.11(a), (b), (c), (d) and (e), and
(iv) Buyer and Seller shall each certify to the other, within 20 days after the
end of each month, the aggregate amounts of [*] such party shall have [*] in
such month pursuant to such [*].
(g) All Co-op Funds made available by vendors in respect of any
products purchased or sold by any Customer (collectively, "Customer Co-op
Funds") shall be allocated to Buyer for the account of such Customer, and all
Co-op Funds made available by vendors in respect of any products purchased or
sold by the Retained Business shall be allocated to Seller. Buyer acknowledges
that each Customer shall be responsible for the completion of such certificates
and/or applications and procedures as any vendor shall require in connection
with any Customer Co-op Funds; provided, however, that Seller shall use
-------- -------
commercially reasonable efforts to obtain from its vendors and provide to Buyer
all forms and other requirements of such vendors necessary to obtain such
Customer Co-op Funds. Buyer shall assist Customers as Buyer shall from time to
time deem appropriate in complying with any such procedures and shall deliver
any related certificates and/or applications completed by any Customers to
Seller as provided herein. Seller shall process and send to the proper vendor
all such certificates and/or applications delivered to Seller hereunder, within
48 hours after receipt thereof, and shall remit to Buyer for the account of the
Customers entitled thereto any and all amounts paid to Seller by vendors in
respect thereof, within 15 days after such receipt. Seller shall cooperate with
Buyer and Customers in good faith regarding Customer Co-op Funds and shall use
commercially reasonable efforts to assist Buyer and Customers in connection with
the collection of all Customer Co-op Funds to which Buyer and/or such Customers
shall be entitled (including using an overnight or second-day delivery service
to submit any such certificates and/or applications to the vendor, if Seller, in
its good faith judgment, determines that such delivery service is necessary or
appropriate). Except as provided in this Section 2.11(g), Seller shall not have
any responsibility in connection with any Customer Co-op Funds, including in
connection with (i) the failure of any Customer to complete (or of Buyer to
deliver
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-46-
<PAGE>
to Seller) any certificate or application required to receive Customer Co-op
Funds, (ii) any such certificate or application that shall not have been
properly completed or timely submitted as aforesaid or (iii) any failure by the
applicable vendor to pay any such Customer Co-op Funds when due. Any "[*]" or
"[*]" of Customer Co-op Funds shall be for the account of Buyer.
(h) Seller shall provide Buyer with such information as Buyer
reasonably requests to enable Buyer to comply with any requirements imposed by
vendors under any MDF or Co-op Funds program, including any [*] pursuant to
Section 2.11(f), to the extent such information is available to Seller as a
result of the performance of its obligations under this Agreement.
(i) Buyer acknowledges that Seller customarily receives payment
terms from vendors that may be more favorable than those received by other
purchasers of similar products from such vendors. Anything contained herein to
the contrary notwithstanding, the following guidelines shall apply in connection
with such favorable payment terms:
(i) payment terms with any vendor that are no more favorable to
Seller than the payment terms customarily received by Seller from such
vendor on the Closing Date shall not constitute MDF, Price Protection, Co-
op Funds or Other Soft Dollars for any purpose of this Agreement;
(ii) Seller shall use reasonable commercial efforts to keep Buyer
fully and fairly informed as to any and all negotiations and/or material
discussions between Seller and any vendor regarding payment terms,
including any such negotiations and/or discussions regarding the trading of
favorable payment terms against other relevant terms and conditions; and
(iii) except as provided in Section 2.11(i)(i), if favorable
payment terms are offered to Seller to induce Seller to purchase a greater
quantity of inventory of any vendor than Seller would customarily purchase
from such vendor under such circumstances, and the period of time given to
Seller to pay for such inventory is commensurate with the period of time
that Seller reasonably expects will be necessary to turn-over such
inventory, then such payment terms shall not constitute [*] for any purpose
of this Agreement; however, the value of any favorable payment terms
provided to Seller in connection with any other trade-off of the type
described in Section 2.11(i)(ii), determined as provided in Section 2.19,
shall constitute [*], to the
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-47-
<PAGE>
extent that such terms are more favorable to Seller than the payment terms
that Seller would otherwise have received from such vendor.
2.12. Restocking and Returns. (a) Buyer shall establish and
----------------------
maintain policies and procedures regarding the return and restocking of products
by Customers after the Closing Date and shall be solely responsible for
accepting and paying for such returned products, charging and collecting any
restocking fee relating thereto and otherwise administering such policies and
procedures vis-a-vis Customers, except that any policies or procedures involving
the direct return of products to Seller's designated return center shall require
the prior approval of Seller (such approval not unreasonably to be withheld or
delayed).
(b) During the Distribution Period, Seller shall repurchase from Buyer
any Returnable Products and/or Mis-Shipped Products returned by Customers to
Buyer after the Closing Date that were originally sold to Buyer by Seller
hereunder (or that were sold by Seller to such Customer prior to the Closing
Date), as provided in this Section 2.12 and Schedule 2.12 attached hereto. All
products tendered by Buyer for return pursuant to this Section 2.12 shall be
delivered to Seller, with all freight charges to Seller prepaid, at Seller's
designated return center. Seller shall use commercially reasonable efforts to
inspect such product within two Business Days after Seller's receipt of any
product so tendered, to determine, in its commercially reasonable judgment,
whether or not such product is a Returnable Product or Mis-Shipped Product. If
Seller determines that any product so tendered is a Returnable Product or Mis-
Shipped Product, it shall accept such product for return pursuant to this
Section 2.12. If Seller determines that any product so tendered is not a
Returnable Product or Mis-Shipped Product, it shall so notify Buyer within one
Business Day following such determination (and shall provide Buyer, by
electronic mail, with any documentation relating thereto that Buyer shall
reasonably request). Upon receipt of such notification, Buyer shall attempt to
resolve any potential dispute regarding such returned product and shall notify
Seller within two Business Days thereafter of any such resolution. In the event
that Seller determines that a product tendered for return hereunder is not a
Returnable Product or Mis-Shipped Product because such product's carton has been
opened, then, if Buyer shall not otherwise notify Seller within such two-
Business Day period, Seller shall return such product to the Customer tendering
it, at the risk and expense of such Customer. Any dispute regarding whether a
product tendered for return is or is not a Returnable Product or Mis-Shipped
Product shall be resolved as provided on Schedule 2.12.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-48-
<PAGE>
(c) Seller shall pay to Buyer for each Returnable Product or Mis-
Shipped Product repurchased by Seller from Buyer hereunder an amount (the
"Repurchase Price") determined as follows:
(i) in the case of any Returnable Product, the Repurchase Price
shall equal (A) the Return Cost of such Returnable Product, less (B) a
----
restocking fee equal to [*] of such Return Cost (the "Restocking Fee");
provided, however, that the Restocking Fee shall be [*] of Return Cost on
-------- -------
that portion, if any, of the aggregate Return Cost of Returnable Products
repurchased by Seller from Buyer hereunder in any quarter that exceeds [*];
and
(ii) in the case of any Mis-Shipped Product, the Repurchase
Price shall equal the [*], if any, paid by Buyer to Seller in respect of
such product.
The Repurchase Price payable by Seller to Buyer in respect of any repurchases of
Returnable Products shall be due and payable on the second Business Day
following the date that Buyer accepts such Returnable Product pursuant to
Section 2.12(b), subject to the netting arrangement provided for in Section
2.8(b). Seller shall reimburse all Customers returning any Mis-Shipped Products
to Seller for any freight charges incurred by such Customers in connection with
delivering such Mis-Shipped Products to Seller's return center as provided
herein, in accordance with Seller's usual practices relating thereto.
(d) Seller shall give Buyer reasonable prior notice of the effective
date of any determination by a vendor or manufacturer to stop accepting returns
of any product, or to accept the return of any product only on terms and
conditions that are, in the aggregate, materially less favorable to Seller than
the terms and conditions normally obtained by Seller on the Closing Date from
those vendors that permit returns (to the extent, in either such case, that
Seller receives reasonable prior notice of such effective date). If such vendor
or manufacturer has provided Seller with a window period following such
determination in which returns will be permitted, Seller shall give Buyer a
window period for such returns, which window period shall end no sooner than 15
days prior to the end of the window period provided to Seller by such vendor or
manufacturer.
(e) Anything contained herein to the contrary notwithstanding, the
following provisions (and not Sections 2.12(a), (b), (c) and (d)) shall apply
with respect to any product (a "Defective Product") that is received by any
Customer (or any customer of a Customer) in defective condition (as
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-49-
<PAGE>
determined in accordance with the standards and procedures for defective
products established by the vendor of such product and in effect on the date of
receipt of such product by such Customer (the "Vendor Procedures"):
(i) unless the vendor of any Defective Product requires Seller
to process the return of such Defective Product pursuant to Section
2.12(e)(ii), Buyer shall cause any Customer receiving a Defective Product
hereunder to return such Defective Product directly to such vendor or as
such vendor shall otherwise direct, in accordance with the applicable
Vendor Procedures; and
(ii) if the vendor of any Defective Product requires Seller to
process the return of such Defective Product, Buyer shall cause any
Customer receiving such Defective Product hereunder to return such
Defective Product to Seller at its designated return center, and Seller
shall (A) process all such returns in accordance with the applicable Vendor
Procedures, (B) remit to Buyer the full amount, if any, received by Seller
from Buyer therefor and (C) on Buyer's behalf, adjust the ledger card for
the Customer that received such Defective Product to reflect a credit from
Buyer in favor of such Customer in the full amount paid or payable by such
Customer to Buyer in respect thereof.
Seller shall cooperate in good faith with Buyer and such Customer with respect
to any Defective Product received by any Customer hereunder, and shall provide
reasonable assistance to such Customer in connection with any documentation
and/or other requirements of the vendor relating thereto.
2.13. Compliance with Vendor Agreements. Buyer acknowledges that
---------------------------------
Seller will comply with any and all restrictions imposed by any dealership
agreement or distributorship agreement between Seller and any vendor,
manufacturer or distributor concerning the resale of product subject to such
agreement, including restrictions on methods of resale, permissible resale
customers and transshipment of products; provided, however, that Seller shall
-------- -------
promptly notify Buyer in writing of all such restrictions and shall cooperate
with Buyer in connection with all negotiations and other dealings of Seller with
such vendors, manufacturers and distributors regarding such restrictions.
Seller shall not be liable to Buyer, any Customer or any other person for the
imposition or consequences of any such restriction and shall have no liability
to Buyer, any Customer or any other person for lawfully cooperating with any
vendor, manufacturer or distributor in the enforcement of any such restriction
imposed by said parties.
2.14. Audit and Inspection. (a) Each party (the "Reviewed Party")
--------------------
shall permit the other party (the "Reviewing
-50-
<PAGE>
Party") and its representatives and auditors, at reasonable times, upon
reasonable notice, and with no more than reasonable frequency, to review, audit
or otherwise inspect the Reviewed Party's books and records relating to the
Reviewed Party's operations, sales, expenditures and product purchases, to the
extent reasonably required to verify any material fact relating to any right or
obligation under this Agreement. In connection with any review, audit or
inspection pursuant to this Section 2.14, the Reviewed Party shall cause its
personnel to be available to the Reviewing Party and its representatives and
auditors to answer reasonable inquiries regarding such transactions and the
Reviewed Party's accounting systems and procedures with respect thereto;
provided, however, that any such inquiries shall be conducted in a manner,
- - - -------- -------
including notice and frequency, that does not unduly interfere with the
operation of the Reviewed Party's business. As used in this Section 2.14, the
term "books and records" includes any books and records maintained on computer
systems or disks and, to the extent within the reasonable control of the
Reviewed Party, those under the custody and control of the Reviewed Party's
bank, accountants, agents or representatives. Any review, audit or inspection
pursuant to this Section 2.14 shall be conducted in a reasonable manner, without
undue disruption of the business of the Reviewed Party.
(b) If any review, audit or inspection pursuant to Section 2.14(a)
discloses an underpayment, a Class A Event, or a Material Default by either
party, then such party shall immediately pay any amount due to the other party
hereunder and/or take all reasonable steps to cure any such Material Default or
Class A Event. The costs of any review, audit or inspection hereunder
(including attorneys' and accountants' fees and expenses, and the actual
expenses of the Reviewed Party incurred in connection therewith) shall be
allocated as follows: (i) if the Reviewed Party committed a Material Default or
if the amount of the Reviewed Party's underpayment disclosed by such review or
audit was material during the period reviewed or audited, then all such costs
shall be borne by the Reviewed Party; (ii) if the Reviewed Party shall not have
committed a Material Default, and if there shall not be any underpayment by the
Reviewed Party during such period or if the amount of any such underpayment
disclosed by such review or audit shall not have been material, then all such
costs shall be borne by the Reviewing Party. For purposes of this Section
2.14(b), an underpayment shall be "material" if the amount of such underpayment
(A) exceeds $100,000 and (B) constitutes five percent or more of the required
---
payment to which such underpayment relates, as determined with respect to the
period reviewed or audited.
(c) All information or data obtained by a Reviewing Party under this
Section 2.14 shall be subject to the confidentiality provisions of Section 9.9.
Any dispute arising
-51-
<PAGE>
under or in connection with any review or audit conducted pursuant to this
Section 2.14, or any actual or alleged underpayment or default disclosed
thereby, shall be referred for resolution pursuant to Article VIII.
2.15. Disclaimer of Warranties; Risk of Loss; Limitation of
-----------------------------------------------------
Liability. (a) SELLER DISCLAIMS ANY AND ALL WARRANTIES OF MERCHANTABILITY,
- - - ---------
SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE (INCLUDING ANY PURPOSE OF BUYER,
ANY CUSTOMER OR ANY OTHER PERSON) OF ANY PRODUCTS SOLD TO BUYER HEREUNDER.
BUYER UNCONDITIONALLY ACKNOWLEDGES AND AGREES THAT ALL PRODUCTS PURCHASED BY
BUYER FROM SELLER ARE PURCHASED ON AN "AS IS" BASIS AS BETWEEN SELLER AND BUYER.
SELLER DISCLAIMS ANY WARRANTIES WITH RESPECT TO THE VALIDITY OF ANY PATENT OR
COPYRIGHT ON ANY PRODUCTS SOLD AND SHALL NOT BE RESPONSIBLE TO BUYER, ANY
CUSTOMER OR ANY OTHER PERSON IN THE EVENT OF ANY CLAIMED INFRINGEMENT. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING DISCLAIMERS, IN NO EVENT SHALL SELLER
BE LIABLE TO BUYER, ANY CUSTOMER OR ANY OTHER PERSON FOR ANY INCIDENTAL,
CONSEQUENTIAL OR SPECIAL DAMAGES OF ANY KIND.
(b) Buyer shall cause a disclaimer of warranties and limitation of
liability substantially in the form of Section 2.15(a) to be included in each
Franchise Agreement or Datago Agreement entered into by Buyer after the date
hereof. If Buyer sells product to any Customer without such a disclaimer and
limitation in effect, Buyer hereby authorizes Seller to include such a
disclaimer and limitation on invoices sent by Seller to Customers on behalf of
Buyer hereunder.
(c) If and to the extent that Seller has been provided any
warranties, indemnification or other remedies with respect to a product or its
use or operation by the vendor, manufacturer or distributor of such product,
including any warranties with respect to product defects or indemnification or
product return or replacement in the event a product is claimed to infringe a
third party's intellectual property rights, Seller shall use commercially
reasonable efforts to pass on to Buyer the benefit of such warranties,
indemnification or other remedies made available to Seller with respect to such
products sold by Seller to Buyer hereunder, as if Buyer had purchased the
products directly from such vendor, manufacturer or distributor, except that
Seller shall not be required to incur any unreimbursed costs or expenses in
connection such efforts and shall not be required to pass on to Buyer any such
benefits except to the extent that such benefits exceed what is required to
fully indemnify and hold Seller harmless against all losses, costs, damages,
liabilities and expenses incurred by Seller to which such warranties,
indemnification or other remedies in any way relate. Seller will exercise
commercially reasonable efforts to obtain contractual commitments from vendors,
manufacturers and distributors requiring them to extend to Buyer the benefit of
any warranties,
-52-
<PAGE>
indemnification and other remedies relating to products purchased by Seller for
sale to Buyer hereunder, as if Buyer had purchased such products directly from
such vendor, manufacturer or distributor, and requiring them to extend to Buyer
customary product return rights permitting the return of defective products.
2.16. Nonexclusivity. (a) Except as otherwise expressly provided in
--------------
the Purchase Agreement, Seller (on its own behalf) may sell any product to any
person at any location, whether or not such location is served by Buyer or any
Customer, or engage in such other business or businesses as Seller may from time
to time determine.
(b) Subject to Section 2.17, and without prejudice to any rights of
Seller hereunder (including the right to receive the Distribution Fee as
provided herein), during the Distribution Period Buyer may purchase products
from any source or sources whatsoever for sale to Customers through the Subject
Business, and may perform or purchase from any other source or sources any
logistics or other service relating to the Subject Business, whether or not the
same or a similar product or service may be supplied or provided by Seller
hereunder.
2.17. Transfer of [*] and/or [*]. (a) Subject to the terms and
--------------------------
conditions of this Section 2.17, during the Distribution Period, Buyer may (i)
[*] from Seller, for the Subject Business, one or more specified products, or
all products of one or more specified vendors, [*] by Seller hereunder or (ii)
without prejudice to any obligation Buyer may have under any [*] or [*], [*], in
either case by giving written notice of such election at least 60 and not more
than 120 days prior to the effectiveness thereof; provided, however, that such
-------- -------
notice requirement shall not apply to any [*] of a [*] by Seller if Buyer
purchases such vendor's products pursuant to Section 2.23. Anything contained
herein to the Contrary notwithstanding, neither of the following occurrences
shall constitute a [*] within the meaning of Section 2.17(a)(i) and/or Section
2.17(a)(ii):
(A) the institution of volume incentive programs by Buyer and Merisel
and/or any subsidiary or affiliate of Merisel that combine the volumes of
participating customers through the Subject Business and the Other Merisel
Distribution Business; and/or
(B) the institution of a practice that enables Customers to order
products from the Other Merisel Distribution Business through CAPS.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-53-
<PAGE>
(b) If, after the [*] pursuant to Section 2.17(a)(i), [*] in any
quarter is less than [*] of [*] for such quarter, then the aggregate amount of
revenues recognized by Merisel and its subsidiaries and affiliates in respect of
the sale of any such [*] (or any successor product of the same vendor) to
Customers shall be included in [*] for such quarter for the following purposes
only:
(i) for the purpose of calculating the [*] and [*], to the extent
necessary to cause [*] to equal [*] of [*] for such quarter; and
(ii) for the purpose of calculating the amount of [*] to be
multiplied by the [*] in determining the [*], to the extent necessary to
cause such [*] to equal [*] of [*] for such quarter.
(c) If (i) Merisel and/or any of its subsidiaries or affiliates shall
cause the [*] of any [*] to be [*] from the [*] to any [*] pursuant to Section
2.17(a)(ii), which [*] is, in whole or material part, for the purpose of
reducing or minimizing the Distribution Fee payable hereunder, and (ii)
following such [*], [*] in any quarter is less than [*] of [*] for such quarter,
then the aggregate amount of revenues recognized by Merisel and its subsidiaries
and affiliates in respect of the sale of any products on the Inventory List
during such quarter to any such [*] shall be included in [*] for such quarter
for the following purposes only:
(i) for the purpose of calculating the [*] and [*], to the extent
necessary to cause [*] to equal [*] of [*] for such quarter; and
(ii) for the purpose of calculating the amount of [*] to be
multiplied by the [*] in determining the [*], to the extent necessary to
cause such [*] to equal [*] of [*] for such quarter.
(d) Anything contained herein to the contrary notwithstanding, the
provisions of Section 2.17(b) and Section 2.17(c) shall not apply with respect
to revenues from the sale of any product (or successor product) if Buyer's
notice of [*] pursuant to Section 2.17(a) is delivered at any time during which
any Class C Event shall have occurred and is continuing.
(e) Buyer shall not [*] any product on the Inventory List from Seller
pursuant to this Section 2.17 unless (i) such [*] shall not be effective until
------
the end of any quota period for Marketing Development Funds relating to such
product
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-54-
<PAGE>
or to the manufacturer or vendor of such product or (ii) the manufacturer or
vendor of such product shall agree to a reasonable [*] of the [*] relating to
such [*] between Buyer and Seller, effective as of the effective date of such
discontinuation.
(f) If Buyer gives notice to Seller electing to [*] any product from
Seller pursuant to this Section 2.17, Seller shall have the right (exercisable
by written notice to Buyer given within 30 days from the date of Buyer's written
election), but not the obligation, to require Buyer to purchase, and Buyer shall
purchase, from Seller, on the effective date of such election, at the [*] (plus
any related freight charges) an amount of inventory of such product equal to the
amount purchased by Buyer in the 45 days preceding such [*], and shall pay
Seller the [*] therefor within that number of days following the date of
purchase as shall equal 40 days minus the average number of days that the
-----
product so purchased by Buyer shall have been in Seller's inventory on the date
of purchase. Such right shall be exercisable by Seller at any time prior to the
effective date of such discontinuation, upon at least 30 days prior written
notice to Buyer. Without limiting any other rights accruing to Buyer as a
result of its purchase of any products pursuant to Section 2.17(d), such
purchases shall be considered sales by Seller to Buyer for the purposes of
allocating, pursuant to the applicable provisions of this Agreement, any MDF or
Price Protection made available to Seller by any vendor in respect of such
products. Upon consummation of any purchase and sale of inventory pursuant to
this Section 2.17(f), Seller shall convey to Buyer good title to the inventory
so sold, free and clear of all security interests, liens, pledges and other
encumbrances relating thereto.
(g) In the event of any adjustment to [*] pursuant to Section
2.17(b)(i) or Section 2.17(c)(i), as applicable, an appropriate adjustment shall
also be made to [*], as necessary to reflect the effect, if any, that the sales
giving rise to such adjustment would have had on [*] if such sales had been made
by the Subject Business in accordance with this Agreement.
2.18. Price Protection. (a) All Inventory-On-Hand Price Protection
----------------
made available by vendors to Seller in respect of products purchased by Seller
from such vendors and held by Seller in inventory at the time such price
protection is made available shall be applied by Seller to reduce the Inventory
Costs, as reflected in the books and records of Seller, of all units of such
products held by Seller in inventory at such time,
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-55-
<PAGE>
in accordance with the usual policies and procedures of Seller and the
applicable vendor from time to time relating thereto.
(b) All Inventory-On-Hand Price Protection made available by vendors
for the benefit of any Customer in respect of products purchased by Seller from
such vendors and held by such Customer in inventory at the time such price
protection is made available shall be for the account of such Customer, in
accordance with the usual policies and procedures of Seller, the Customer and
the applicable vendor from time to time relating thereto. Buyer acknowledges
that each Customer shall be responsible for the completion of such certificates
and/or applications and procedures as any vendor shall require in connection
with any such Inventory-On-Hand Price Protection; provided, that Seller shall
use commercially reasonable efforts to obtain from its vendors and provide to
Buyer all forms and other requirements of such vendors necessary to obtain such
Inventory-on-Hand Price Protection. Buyer shall assist Customers as Buyer shall
from time to time deem appropriate in complying with any such procedures and
shall deliver any related certificates and/or applications completed by any
Customers to Seller as provided herein. Seller shall not be required to process
any such certificates and/or applications delivered to Seller hereunder unless
such certificates and/or applications have been completed in proper form and are
delivered to Seller at least 20 days prior to the date due to the vendor.
Seller shall submit to the proper vendors all such certificates and applications
so received from Buyer and shall remit to the Customers entitled thereto (or as
Buyer otherwise directs) any and all amounts received from vendors in respect
thereof, within 15 days after such receipt. Except as provided in this Section
2.18(b), Seller shall not have any responsibility in connection with any
Inventory-On-Hand Price Protection, including in connection with (i) the failure
of any Customer to complete (or of Buyer to deliver to Seller) any certificate
or application required to receive Inventory-On-Hand Price Protection, (ii) any
such certificate or application that shall not have been properly completed or
timely submitted as aforesaid or (iii) any failure by the applicable vendor to
pay any such Price Protection when due.
(c) All [*] made available by vendors to Seller in respect of any
product purchased by Seller shall be applied by Seller as follows, in accordance
with the usual policies and procedures of Seller and the applicable vendor from
time to time relating thereto:
(i) First, the amount of any such [*] shall be applied to reduce
the [*], as reflected in the books and
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-56-
<PAGE>
records of Seller, of all units (whether or not the subject of such [*]) of
such product held by Seller in inventory at the time such [*] is received,
in accordance with the usual policies and procedures of Seller relating
thereto on the Closing Date, but not below the [*] of such product.
(ii) Second, if any portion of such [*] shall be remaining, such
remainder shall be allocated between Buyer and Seller in proportion to (A)
the amount of such product sold by Seller to Buyer hereunder, and (B) the
amount of such product sold by Seller to any person other than Buyer,
respectively, during the period to which such [*] relates. Seller shall
pay to Buyer in accordance with Section 2.10(e) each amount of [*]
allocable to Buyer as provided in this Section 2.18(c)(ii); provided,
--------
however, that Seller shall not have any obligation to make any such payment
-------
until such [*] shall have been actually received by Seller; and provided
--------
further, that if less than the full amount of such [*] shall have been
-------
received Seller shall be obligated to pay to Buyer only Buyer's pro rata
--- ----
portion of the amount actually received based on the relative amounts
thereof allocated to Buyer and Seller pursuant to this Section 2.18(c)(ii).
(d) All [*] made available by vendors for the benefit of any Customer
shall be for the account of such Customer, in accordance with the usual policies
and procedures of Seller, the Customer and the applicable vendor relating
thereto, as in effect at the time such Price Protection is made available, and
any amounts received by Seller in respect of such [*] shall be remitted by
Seller to such Customer (or as Buyer otherwise directs) within 15 days after
such receipt. Seller shall use commercially reasonable efforts to obtain from
its vendors and provide to Buyer all forms and other requirements of such
vendors necessary to obtain the [*]. Except as provided in this Section
2.18(d), Seller shall not have any responsibility in connection with [*] made
available for the benefit of [*].
(e) Attached hereto as Schedule 2.18 is a memorandum describing
Seller's price protection policies for Franchisees and Datago Purchasers in
effect as of the Closing. Except to the extent otherwise expressly provided in
this Section 2.18, the provisions of this Section 2.18 shall be applied
following the Closing in a manner consistent with the policies set forth in such
Schedule (or such successor policies as Buyer and Seller shall from time to time
mutually agree).
(f) Anything contained herein to the contrary notwithstanding, if in
any quarter during the Distribution Period
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-57-
<PAGE>
Buyer shall retain any Price Protection made available by any vendor for the
benefit of any Customer, or any Price Protection made available by any vendor
for the benefit of Seller and allocated by Seller to Buyer pursuant to Section
2.18(c)(ii), then [*] for such quarter shall be adjusted by adding the quotient
(expressed as a percentage) obtained by dividing (i) the aggregate amount of all
[*] so [*] by Buyer in such quarter by (ii) [*] for such quarter. At the
reasonable request of Seller, Buyer shall certify to Buyer whether it has
retained any such Price Protection, and, if so, the aggregate amount so
retained.
2.19. Prompt Payment Discounts. (a) If any vendor shall offer to
------------------------
Seller a Prompt Payment Discount in respect of any amounts payable for products
of the types held for sale by Buyer hereunder purchased by Seller from such
vendor during the Distribution Period, and the interest rate equivalent of such
Prompt Payment Discount, determined as provided in Section 2.19(d), is a rate
per annum not less than the Prime Rate plus [*] per annum, then [*] shall use
commercially reasonable efforts to [*] such [*] with respect to its [*] from [*]
by [*] within the [*], except as otherwise provided in this Section 2.19.
(b) Except as provided in the proviso to Section 2.19(c), the
aggregate dollar amount of any such Prompt Payment Discount earned by Seller
during the Distribution Period shall be allocated as follows:
(i) First, (x) an amount equal to the aggregate amount [*],
times (y) a rate per annum equal to the [*] as in effect at the time of
-----
payment plus [*] per annum, times (z) the fraction described in clause (ii)
-----
of the first sentence of Section [*] shall be allocated to Seller; and
(ii) Second, if any portion of such Prompt Payment Discount
shall be remaining, such remainder shall be [*] so purchased, [*] in
proportion to the [*] thereof, and allocated between Buyer and Seller in
accordance with the allocation percentages that would then be in effect for
such products pursuant to Section [*], if such products were at such time
subject to the allocation provisions of that Section.
Any Prompt Payment Discount allocated to Buyer pursuant to this Section 2.19(b)
in any month shall be payable as provided in Section 2.10(e).
(c) Anything contained herein to the contrary notwithstanding, Seller
shall not be required to [*] of any [*]
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-58-
<PAGE>
if Seller certifies to Buyer that, in the good faith business judgment of
Seller, [*] of such [*] would not be commercially reasonable in light of
Seller's [*]; provided, however, that if Buyer notifies Seller in writing within
-------- -------
five Business Days after receipt of any such certificate that Buyer is willing
to [*] the required [*] at an [*] less than the [*] equivalent of such [*], as
determined pursuant to Section 2.19(d), then, subject to the negotiation of
other terms and conditions thereof mutually satisfactory to Buyer and Seller,
Seller shall accept such [*] from Buyer and shall use commercially reasonable
efforts to take advantage of any [*] so [*]. In any such case, the [*] of such
[*], in excess of the [*] by Buyer to Seller for such [*], shall be [*] to [*]
and [*] to [*] as provided in Section 2.10(e). Anything contained herein to the
contrary notwithstanding, Seller shall not be required to [*] any [*] from Buyer
pursuant to this Section 2.19(c) if such [*] could reasonably be expected to
result in a breach of any provision of any agreement evidencing any indebtedness
or other obligation of Seller or materially impair Seller's ability to [*] or
[*]. Any certification by Seller pursuant to the first sentence of this Section
2.19(c), and any notification by Buyer pursuant to the proviso to such Section,
shall be effective for 60 days from the date given, unless withdrawn by the
party giving the same, or unless such certification or notification (as
applicable) otherwise states.
(d) For purposes of this Section 2.19, the interest rate equivalent of
any Prompt Payment Discount shall be a rate per annum equal to (i) the amount of
the discount or other consideration offered, expressed as a percentage of the
vendor's invoice price, divided by (ii) a fraction, the numerator of which is
------- --
the number of days credit required to be foregone to receive the Prompt Payment
Discount and the denominator of which is 365. For purposes of this Section
2.19, the "number of days credit required to be foregone to receive a Prompt
Payment Discount" from any vendor shall equal the difference between (i) the
greater of (A) such vendor's standard payment terms and (B) the average number
of days between the date of invoice and the date of payment with respect to
orders by Seller filled by such vendor during the last full quarter and (ii) the
number of days between the date of invoice and the date by which payment must be
made to earn the Prompt Payment Discount, excluding for the purposes of clause
(i)(B) above all such orders for which Seller was required to pay a late payment
fee, interest charge or other penalty and all such orders for which any Prompt
Payment Discount was received.
2.20. Repurchase Obligations with Floor Planners. On or about the
------------------------------------------
Closing Date, Buyer is entering into Repurchase Agreements with the Floor
Planners set forth on Schedule 2.20
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-59-
<PAGE>
attached hereto, substantially in the forms attached as exhibits to such
Schedule. Each Repurchase Agreement provides for Buyer to repurchase from a
Floor Planner certain products repossessed by such Floor Planner pursuant to a
valid floor planning agreement between such Floor Planner and certain Customers.
Seller shall purchase from Buyer any product sold by Seller hereunder during the
Distribution Period and repurchased by Buyer from any Floor Planner pursuant to
any Repurchase Agreement, on substantially the same terms as those obtained by
Buyer from such Floor Planner; provided, however, that such terms shall in no
-------- -------
event be less favorable to Seller than the terms provided in the applicable
Repurchase Agreement (as in effect on the Closing Date) for purchases by Buyer
thereunder.
2.21. Performance Standards. (a) Seller shall use its best efforts
---------------------
to perform the Logistics Services to be provided by Seller hereunder in a manner
that meets or exceeds the Performance Standards for such Logistics Services set
forth in Schedule 2.21. If Seller fails to meet a Performance Standard for any
specified measurement period as set forth therein, Buyer shall be entitled to a
Performance Credit determined in accordance with Schedule 2.21 and payable as
provided in Section 2.10. Performance Credits represent negotiated reductions
in pricing on the basis of reduced service levels and shall not be deemed or
construed as a measure of damages. Buyer's right to receive any Performance
Credit to which it may be entitled hereunder shall be without limitation of any
rights or remedies of Buyer pursuant to Section 5.4, if applicable, but shall
otherwise be the exclusive remedy available to Buyer with respect to Seller's
failure to meet the relevant Performance Standard.
(b) Without limiting the foregoing, Seller agrees that, except as
otherwise expressly provided herein, during the Distribution Period (but not
including any Winding Down Period), the Logistics Services provided by Seller
hereunder will be performed using the systems, procedures, methodologies and
facilities currently used by Seller in the operation of the Subject Business, as
such systems, procedures, methodologies and facilities may be modified from time
to time by Seller, in the good faith exercise of its reasonable business
judgment; provided, however, that Seller shall not, without Buyer's prior
-------- -------
written consent, make any modification to any such systems, procedures,
methodologies and/or facilities that could reasonably be anticipated to result
in (i) any material increase in the aggregate costs to Buyer or Customers of the
services provided by Seller hereunder (including any costs of training relating
to such modification), or (ii) any material decrease in the quality of such
services, or (iii) any material adverse effect on the way Buyer or the Customers
conduct their respective business operations, taken as a whole, except, in any
such case, for any such modification caused or required by force majeure, so
long as such force majeure continues to require such modification. All services
provided by Seller hereunder will be rendered by
-60-
<PAGE>
qualified personnel and in a manner consistent in all material respects with
good commercial practice in the industry. Seller will perform its
responsibilities under this Agreement in a manner that does not infringe, or
constitute an infringement or misappropriation of any patent, trade secret,
copyright or other proprietary right of any third party. During the Winding
Down Period, if any, Seller and Buyer shall cooperate in good faith regarding
any modifications proposed by Seller or Buyer with respect to the systems,
procedures, methodologies and/or facilities then used by Seller to perform the
Logistics Services.
2.22. Allocation of Inventory. (a) Without limiting any Performance
-----------------------
Standards provided for herein or in Schedule 2.21, Seller shall use commercially
reasonable efforts to purchase and maintain inventories at its two Distribution
Centers with respect to all products on the Inventory List in amounts reasonably
anticipated by Seller to be sufficient to satisfy the requirements of both the
Subject Business and the Retained Business during the Distribution Period.
(b) If Seller's inventories of any product on the Inventory List are
insufficient at any time to meet the demand of the Subject Business and the
Retained Business, Seller's inventories of such product shall be allocated
between Seller and Buyer in proportion to the sales of all products of the
applicable vendor by the Retained Business and the Subject Business,
respectively, during the latest [*] for which information is available preceding
such allocation; provided, however, that until one or more products of any
-------- -------
vendor have been sold by the Subject Business and the Retained Business for at
least [*] after its introduction, inventories of all products of such vendor
shall be allocated between Seller and Buyer in proportion to the sales of all
products on the Inventory List by the Subject Business and the Retained
Business, respectively, during the [*] period for which information is available
prior to the date of such product's introduction. The allocation of inventory
provided for in this Section 2.22(b) shall be determined on a separate basis for
[*], based on the sales of the Subject Business and the Retained Business
shipped from [*], respectively, and shall be administered in all material
respects in accordance with and subject to the policies and procedures set forth
on Schedule 2.22(b) attached hereto, or such other policies and procedures as
Buyer and Seller may hereafter agree in writing. In any case in which a
vendor's products are sold under more than one vendor number, the allocation
provided for herein shall be determined separately for each such vendor number.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-61-
<PAGE>
(c) Except as otherwise provided in Section 2.22(d), in the event of
any failure by Seller to comply with the provisions of Section 2.22(b) with
respect to any product, the result of which is that Buyer's allocation of such
product is less than the amount that should have been allocated to Buyer
thereunder, Seller shall compensate Buyer for such failure as follows:
(i) if, at the time such failure is determined, the product in
question shall be subject to allocation due to limited supply, then,
notwithstanding Section 2.22(b), all such product shall be specially
allocated first to Buyer, in the amount by which such earlier allocation
was deficient, and thereafter to Buyer and Seller in accordance with
Section 2.22(b); and
(ii) if, at the time such failure is determined, the product in
question shall not be subject to allocation due to limited supply, then
Seller shall pay to Buyer as liquidated damages for such failure, and not
as a penalty, an amount equal to [*] of the aggregate Inventory Cost of the
items of such product that should have been allocated to Buyer pursuant to
Section 2.22(b), but were not so allocated, up to a maximum payment
pursuant to this Section 2.22(c)(ii) of [*] in any six-month period.
(d) Notwithstanding Section 2.22(c), in the event that either party
(the "Interfering Party") shall willfully circumvent or otherwise interfere with
the proper functioning of the allocation procedures provided for in Section
2.22(b), and as a result of such willful circumvention or interference, the
Interfering Party shall receive a greater allocation of any constrained product
than the allocation to which such party would otherwise have been entitled, then
the Interfering Party shall pay to the other party, as liquidated damages for
such action, and not as a penalty, an amount equal to [*] of the aggregate
Inventory Cost of the items of such product that were allocated to the
Interfering Party, in excess of the amount to which the Interfering Party would
have been entitled pursuant to Section 2.22(b); provided, however, that if such
-------- -------
willful circumvention or interference results in the allocation to the
Interfering Party, in excess of the allocation to which such party would
otherwise have been entitled, of products having an aggregate Inventory Cost in
excess of [*] in any six-month period, such willful circumvention or
interference shall constitute a "Material Allocation Default" on the part of
such Interfering Party.
(e) The parties acknowledge that Buyer may [*] the allocation of any
product [*] Customer (or from any order by
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-62-
<PAGE>
a Customer) to [*], and that Seller may [*] of any product [*] one customer of
the Retained Business (or [*] any order by such a customer) [*], in each case as
such parties, in their reasonable business judgment, shall determine to be
appropriate. Notwithstanding the foregoing, neither Buyer nor Seller shall [*]
any product [*] any order placed by a customer of the other party, or [*] the
[*] of any product to a [*] prior to the normal [*] process, unless prior
approval is obtained by the other party in writing.
(f) Seller shall use commercially reasonable efforts to provide that
inbound shipments of constrained products are, in the aggregate, allocated
reasonably fairly between the Distribution Centers, so that neither the Subject
Business nor the Retained Business is, in the aggregate, materially or
intentionally favored.
(g) Within 30 days after the end of each month during the
Distribution Period, Seller shall provide Buyer with a report, based on the
information contained in the reports provided to Buyer pursuant to Section
2.3(h), setting forth Buyer's and Seller's respective allocation percentages for
the month for each product on the Inventory List. A copy of such report for the
month ended December 31, 1993, is attached hereto as Schedule 2.22(g).
2.23. Consignment of Inventory. In the event any vendor of products
------------------------
on the Inventory List delays or imposes a hold on all shipments to Seller as a
result of Seller's failure to pay such vendor in a timely manner or as a result
of a determination by such vendor that Seller is not creditworthy, or in the
event Seller for any reason is no longer authorized or otherwise able to sell to
Buyer any products required to be on the Inventory List (and such delay or hold
imposed by such vendor, or such failure by Seller to be authorized or able to
sell such products, as applicable, continues uncured for more than 10
consecutive Business Days or for more than 15 Business Days in any period of 3
months), then, upon not less than 10 Business Days prior written notice to
Seller, Buyer may (but shall not be under any obligation to) elect to enter into
a separate agreement with such vendor to sell its products directly to Buyer for
sale through the Subject Business, in which case (i) Seller shall accept
delivery of such product at its Distribution Centers, (ii) Seller shall comply
at its expense with all reasonable security measures requested by Buyer to
segregate inventory provided by Buyer from Seller's inventory, (iii) Seller
shall provide all Logistics Services contemplated by this Agreement with respect
to such inventory as if it were supplied by Seller hereunder (except that (A)
Buyer shall not be obligated to pay Seller the [*] for such
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-63-
<PAGE>
products and (B) other appropriate adjustments shall be made to the obligations
of Buyer and Seller as necessary to reflect Buyer's ownership of such inventory)
and (iv) the monthly Distribution Fee payable with respect to each month in
which the provisions of this Section 2.23 shall be applicable shall be reduced
by an amount equal to (A) the aggregate Inventory Cost of all products purchased
directly by Buyer from the vendor thereof and sold during such month (determined
for this purpose as if Buyer were Seller) times (B) one plus the [*] for the
-----
immediately preceding quarter times (C) [*]. If Buyer elects to exercise its
-----
rights under this Section 2.23, Buyer and Seller shall use commercially
reasonable efforts to enter into a letter agreement or similar document setting
forth their mutual understanding regarding the implementation of the procedures
provided for hereunder, including provisions with respect to Seller's liability
for such products while in Seller's possession.
2.24. Recordkeeping and Accounting. (a) Seller shall maintain
----------------------------
accurate and complete books and records with respect to all transactions
contemplated by this Agreement, including all product purchases, sales and
returns, and all MDF, Co-op Funds, Price Protection, Prompt Payment Discounts
and other amounts received from vendors. Seller shall also maintain accurate
and complete books and records with respect to Seller's performance of all
Performance Standards and calculation of all Performance Credits. All such
books and records shall be maintained in accordance with GAAP throughout the
Distribution Period. All such books and records shall be subject to the
provisions of Section 9.11. Seller shall not dispose of such books and records
during the five-year period commencing upon expiration of the Distribution
Period; provided, however, that prior to the expiration of such five-year
-------- -------
period, Seller may dispose of any or all of such records at any time upon 60
days' prior written notice to Buyer; provided further, however, that during such
-------- ------- -------
60-day period, Buyer shall have the right, at Buyer's sole expense, to take
possession of all or any part of such records at a time to be agreed upon by
Seller and Buyer.
(b) With respect to all transactions occurring during the Distribution
Period, Seller shall continue to prepare and deliver to Buyer, the accounting
and management information and reports regarding the Subject Business described
in Schedule 2.24, in the form and at such times as described therein. If, at
any time during the Distribution Period, Buyer shall request any additional
reports or information regarding the Subject Business from Seller not described
on Schedule 2.24, then Seller shall use reasonable efforts to prepare and
deliver the requested items; provided, however, that if preparation or delivery
-------- -------
of such reports requires Seller to incur any costs or
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-64-
<PAGE>
expenses, Seller and Buyer shall negotiate appropriate compensation to Seller
for such costs and expenses, prior to Seller incurring any obligation therefor.
(c) During the Distribution Period, so long as Seller makes DC Watch
available to the Retained Business, Seller shall also make DC Watch available to
Buyer, on substantially the same basis as currently provided to the Subject
Business, subject to any changes in or modifications to DC Watch or its
availability that apply to both the Retained Business and Seller on a consistent
basis.
2.25. Continuing Performance. Subject to (i) the right of Seller to
----------------------
suspend shipments and sales as provided in Section 2.5(c), (ii) the provisions
of Section 9.9 regarding force majeure, (iii) any right of Buyer to terminate
this Agreement pursuant to Section 5.5 and (iv) any right of Seller to terminate
this Agreement pursuant to Section 6.2, Seller shall continue to perform the
Logistics Services in good faith, notwithstanding any dispute between the
parties, including any arbitration or litigation proceedings, provided that
Buyer pays all amounts disputed in good faith into escrow as set forth in
Section 2.26 and pays the entire portion of such amount not disputed in good
faith to Seller as provided in Sections 2.5(c) and (d). Any failure by Seller
to comply with the provisions of this Section 2.25, which failure continues for
five Business Days after notice thereof to Seller, shall constitute a Class C
Event for all purposes of this Agreement.
2.26. Disputed Amounts. Except as otherwise expressly provided in
----------------
Sections 2.5(c) and (d), if either party in good faith protests or disputes any
amount asserted to be due to the other, such party shall not be in default of
its payment obligation hereunder if it deposits the disputed amount in escrow
with a major U.S. commercial bank or other qualified institution, as escrow
agent, with the interest thereon to be allocated to the party entitled to the
principal upon resolution of the dispute. In the event either party deposits
any disputed amount in escrow, such amount, together with any accrued interest,
shall be released by the escrow agent only upon (i) receipt of written
instructions signed by both Buyer and Seller or (ii) receipt of a final
nonappealable order of any court of competent jurisdiction or a final, binding
award of any mediation hereunder. As soon as practicable after the Closing
Date, Buyer and Seller shall select an escrow agent by mutual agreement and
shall work together in good faith and in a commercially reasonable manner to
negotiate, execute and deliver an escrow agreement in customary form among
Buyer, Seller and such escrow agent, consistent with the terms and conditions of
this Section 2.26.
2.27. Disaster Recovery Services. (a) Seller shall, at its expense,
--------------------------
use commercially reasonable efforts to provide and maintain, as soon as
practicable after the Closing Date,
-65-
<PAGE>
disaster recovery back-up services for the data processing resources, systems
and services provided by Systemhouse pursuant to the Systemhouse Agreement (as
such terms are defined in Section 5.2), which disaster recovery back-up services
shall be designed to provide for a transition of such data processing resources,
systems and services to a disaster recovery facility in the event of an
interruption in the availability or accessibility of the Systemhouse Los Angeles
data center located in Buena Park, California. Such disaster recovery services
will conform to reasonable and customary levels in the microcomputer products
distribution industry and, without limiting the foregoing, such disaster
recovery back-up services shall include a data processing "hot site", dial-up
backup lines, and regularly scheduled tests to confirm the ability of the system
to recover from a disaster. Seller shall prepare and deliver to Buyer on or
before April 1, 1994, a written statement describing in commercially reasonable
detail the disaster recovery plan provided for in this Section 2.27(a). Seller
shall perform an initial test of such plan on or before June 1, 1994, and shall
achieve a successful test of such plan on or before July 1, 1994.
(b) On or before June 1, 1994, Seller shall, at its own expense,
develop a written plan to provide for a transition of Seller's headquarters
functions (including purchasing, accounts payable, traffic, operations,
accounting, and executive) to an alternate site in the event of any interruption
in the availability or accessibility of Seller's principal offices in
Pleasanton, California, due to a disaster or other event of force majeure. Such
disaster recovery plan shall be prepared in good faith and shall be in such form
and such detail as shall be commercially reasonable.
(c) Seller further agrees to provide reasonable cooperation and
assistance to facilitate Buyer's negotiation of a disaster recovery agreement
directly with Systemhouse or any other entity providing services to Seller that
would permit Buyer to assume responsibility and/or to have one or more third
parties assume responsibility for some or all of the Logistics Services in the
event of any termination of this Agreement prior to the second anniversary of
the Closing Date (or, if later, prior to the end of any Winding Down Period
hereunder); provided, however that Seller shall not be required to incur any
-------- -------
out-of-pocket expense in connection with such reasonable cooperation or
assistance, or to jeopardize Seller's own data processing system or the security
or confidentiality of, or proprietary rights of Seller in, any such data and
program files.
2.28. Financial Statements and Other Reports. (a) During the
--------------------------------------
Distribution Period, Seller shall maintain a system of accounting established
and administered in accordance with sound business practices to permit
preparation of financial statements in conformity with generally accepted
accounting principles, consistently applied.
-66-
<PAGE>
(b) During the Distribution Period, Seller shall provide to Buyer
complete copies of the following financial statements, certificates and/or
reports, to the extent that Seller shall be required to provide the same to its
principal senior lender pursuant to any loan agreement, credit agreement, note
purchase agreement, indenture or similar agreement between Seller and such
principal senior lender, as in effect from time to time:
(i) on a monthly basis, the consolidated balance sheet of Seller
and its consolidated subsidiaries and related consolidated statement of
income for the preceding month;
(ii) on a quarterly basis, the consolidated balance sheet of
Seller and its consolidated subsidiaries and related consolidated
statements of income and cash flow for the preceding fiscal quarter;
(iii) on an annual basis, the consolidated balance sheet of
Seller and its consolidated subsidiaries and related consolidated
statements of income and cash flow for the preceding fiscal year, as
audited by Seller's independent certified public accountants; and
(iv) as applicable, any report or certificate by Seller relating
to the occurrence of any material adverse change in the business,
operations, properties, assets or condition (financial or otherwise) of
Seller and its consolidated subsidiaries, taken as a whole.
All such financial statements, certificates and/or reports shall be provided to
Buyer in substantially the same form provided to Seller's principal senior
lender (together with such certificates by financial officers of Seller or, in
the case of the annual financial statements contemplated by clause (iii) above,
the report of Seller's auditors), within five Business Days after the date first
provided to such principal senior lender.
(c) Attached hereto as Schedule 2.28(c) is a complete copy of the
consolidated balance sheets of Seller and its consolidated subsidiaries as at
September 30, 1993, and September 30, 1992, and the related consolidated
statements of income and cash flow of Seller and its consolidated subsidiaries
for the 12-month periods then ended (the "Financial Statements"). Seller
represents and warrants that the Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis and present fairly, in all material respects, the financial condition of
Seller and its consolidated subsidiaries at such dates and the results of their
operations for the period therein specified. Except for liabilities or
obligations which were incurred after September 30, 1993, in the ordinary course
of business, to the best
-67-
<PAGE>
knowledge of Seller after due inquiry, Seller and its consolidated subsidiaries
do not have any material liabilities or obligations (whether absolute, accrued,
contingent or otherwise and whether due or to become due and whether or not the
amount thereof is readily ascertainable) that would be required to be disclosed
on Seller's consolidated balance sheet by generally accepted accounting
principles and that were not either fully reflected or disclosed in the
Financial Statements.
(d) Seller represents and warrants to Buyer that Seller is not in
default under any instrument or agreement of Seller for borrowed money, other
than any such default that (i) has been waived by the lender thereunder, or (ii)
would not have a material adverse affect on the business, operations,
properties, assets or condition (financial or otherwise) of Seller or the
Subject Business, taken as a whole.
2.29. Other Soft Dollars. In the event that, at any time during the
------------------
Distribution Period, Buyer or Seller shall receive any Other Soft Dollars from
any vendor, and a reasonable person in the business of Buyer and Seller would
conclude that such Other Soft Dollars were received in lieu of any [*] or other
amount specifically addressed herein, then such [*] (and any cash, cash
equivalents, product or other consideration received in respect thereof) shall
be allocated between Buyer and Seller in the same proportion that it would have
been so allocated if such Other Soft Dollars constituted the [*] or other amount
in lieu of which they were received.
2.30. E-Mail. (a) During the Distribution Period, Buyer and its
------
Customers shall have the opportunity to send and receive messages through
Seller's existing electronic mail system, as modified from time to time by
Seller in the ordinary course of business, subject to any internal limits to
such system that may now or hereafter be in effect. Each Customer may maintain
no more than one hub per location, and may maintain no more than ten mailbox
addresses per hub; provided, however, that with the consent of Seller, which
-------- -------
consent shall not unreasonably be withheld or delayed, a limited number of
Customers may maintain up to two hubs per location. Buyer may maintain, in the
aggregate, no more than 25 mailing lists at any time. Buyer and Customers shall
be responsible for their own telephone charges incurred in accessing Seller's
electronic mail system from any remote location and for all hardware required to
access the system. No additional charge shall be imposed by Seller for
electronic mail usage up to the limits described in this Section 2.30.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-68-
<PAGE>
(b) If, at any time during the Distribution Period, Seller modifies
or replaces its electronic mail system, and such modification or replacement
requires a new gateway to be installed to link Seller's electronic mail system
and any other system used by Buyer, Seller shall cooperate with Buyer in good
faith to assist Buyer in installing such a gateway; provided, however, that
-------- -------
Buyer shall in such case reimburse or advance to Seller upon request any out-of-
pocket expense of Seller relating thereto.
(c) SELLER MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER REGARDING
ITS ELECTRONIC MAIL SYSTEM AS NOW EXISTING OR HEREAFTER MODIFIED OR REPLACED AND
SHALL NOT BE LIABLE TO BUYER OR ANY OTHER PERSON FOR ANY DAMAGE OR EXPENSE
WHATSOEVER RESULTING FROM OR IN CONNECTION WITH THE USE BY BUYER OR ANY OTHER
PERSON OF SELLER'S ELECTRONIC MAIL SYSTEM OR OF ANY FAULT OR FAILURE OF SUCH
SYSTEM. Each party shall treat electronic mail communications of the other
party (and Buyer shall use commercially reasonable efforts to cause Customers to
treat electronic mail communications of both parties) as private communications
and shall not examine or monitor any such electronic mail communications that
are not directed to such party. To the extent either party inadvertently
obtains access to any such electronic mail communications during the course of
servicing or maintaining the electronic mail system, such party shall notify the
other party that such access was obtained and such electronic mail
communications shall constitute Confidential Information pursuant to Section
9.9.
2.31. CAPS; Telecommunications Charges. Buyer shall reimburse Seller
--------------------------------
monthly in arrears for the aggregate amount of all out-of-pocket
telecommunications and related charges and expenses incurred by Seller in
connection with making CAPS available to Buyer and Customers on an on-line or
dial-up basis. Such charges shall be billed to Buyer by Seller based on usage,
in accordance with Seller's usual policies and procedures relating to such
charges as in effect on the Closing Date, and will be charged to Customers on
their ledger cards. Seller shall cause all such ledger card charges to be
posted within ten Business Days after Seller receives an invoice therefor from
AT&T (or such other carrier as shall provide such telecommunications services
hereunder). Seller shall not, however, have any liability to Buyer in respect
of the preceding sentence if Buyer changes or otherwise interferes with the
posting of such charges.
2.32. Ledger Cards. During the Distribution Period, Seller shall
------------
make available to Buyer the ledger card function of CAMBAR to record and invoice
such fees, freight charges and other amounts charged by Buyer to Customers as
Buyer shall reasonably determine and/or as provided herein. The use of the
ledger card function shall be in accordance with Seller's policies and
procedures applicable thereto on the Closing Date, and/or such
-69-
<PAGE>
other commercially reasonable procedures as Buyer and Seller shall in good faith
mutually agree.
2.33. Miscellaneous. (a) During the Distribution Period, Seller
-------------
shall provide to those Customers that have "will call" privileges at a
Distribution Center on the date hereof, and a limited number of additional
Customers, the ability to arrange for delivery of products ordered by such
Customers at such Distribution Center on a "will call" basis, substantially in
accordance with Seller's current practices and procedures relating thereto.
(b) During the Distribution Period, (i) Seller shall not install at
either Distribution Center any material signs or other displays referring to
Seller or the Retained Business by name, without the prior consent of Buyer,
which consent shall not unreasonably be withheld or delayed, and (ii) Buyer and
Seller shall cooperate with one another in good faith regarding the installation
in the Distribution Centers of appropriate signs and displays identifying the
Subject Business and the Retained Business, respectively. Notwithstanding the
preceding sentence, the parties agree that Seller shall in good faith choose a
trade name for Seller's logistics and distribution services business that shall
be different from the trade name used by Seller's reseller business, and that
Seller may use such trade name on such signs or other displays at each
Distribution Center as Seller shall, in its reasonable business judgment,
determine to be appropriate.
2.34. Additional Receivable Amount. (a) Anything contained herein
----------------------------
to the contrary notwithstanding, during the period from the date hereof through
the Extended Payment Termination Date, Buyer shall not be in default of its
payment obligations to Seller under Section 2.8(b) if and to the extent that the
aggregate principal amount of all Extended Payment Obligations (the "Additional
Receivable Amount") does not exceed $20,000,000.
(b) Prior to the Extended Payment Termination Date, Buyer shall pay a
financing fee to Seller on all Extended Payment Obligations (up to a maximum of
$20,000,000), from the Stipulated Due Date for each Extended Payment Obligation
to the date actually paid, at a variable rate per annum equal to the Prime Rate
minus 2 percent per annum. Such financing fee shall be due and payable monthly
- - - -----
in arrears pursuant to Section 2.10. Anything contained herein to the contrary
notwithstanding, Buyer shall pay interest to Seller at the rate set forth in
Section 2.5(b) on (i) any portion of the Additional Receivable Amount that
exceeds $20,000,000 and (ii) the entire Additional Receivable Amount, if any
Extended Payment Obligations shall remain outstanding after the Extended Payment
Termination Date.
-70-
<PAGE>
(c) All amounts paid by Buyer pursuant to Section 2.8(b) shall be
applied to reduce the Extended Payment Obligations in the order in which they
were incurred.
2.35. Configuration. In the event that, at any time during the
-------------
Distribution Period, Seller shall provide configuration services on behalf of
Buyer to any Customers hereunder, including any Customers participating in the
existing MASTER program, the proposed MASTER Plus program, or otherwise, Seller
shall in good faith use commercially reasonable efforts to allocate its
configuration resources fairly between those configuration orders arising from
the Subject Business and those arising from the Retained Business. To that end,
Seller shall cause at least 90% of all configuration orders received by Seller
in each month to be started on a FIFO (first-in, first-out) basis, based on the
time, for each such order, that such order became a Confirmed Order (or, if, at
the time that such order became a Confirmed Order, one or more necessary kit
components for such order were out of stock at the applicable Distribution
Center, at the time that all such kit components shall first have become
available). Seller shall process all configuration orders so commenced in a
workman-like and commercially reasonable manner and shall not, in the aggregate,
discriminate unreasonably or for any improper purpose between configuration
orders arising from the Subject Business and those arising from the Retained
Business in managing the processing queue or allocating work cells.
2.36. Baseline Adjustment Event. If a Baseline Adjustment Event
-------------------------
shall have occurred, Baseline Revenue and the Distribution Fee theretofore paid
shall be adjusted in accordance with the following procedures:
(a) A calculation shall be made as to the aggregate amount of
Applicable Revenue that the [*] referred to in the definition of Baseline
Adjustment Event would have been [*] during the period (the "Calculation
Period") beginning on the first day immediately following the Closing Date
through the earlier of (i) the second anniversary of the Closing Date and
(ii) the termination of the Distribution Period (such aggregate amount
being hereinafter called the "[*]") had the Baseline Adjustment Event not
occurred.
(b) A calculation shall be made as to the aggregate amount of
Applicable Revenue that such [*] during the Calculation Period (such
aggregate amount being hereinafter called the "Actual Amount").
(c) If the [*] shall exceed the Actual Amount, a fraction (such
fraction being hereinafter called the "Actual
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-71-
<PAGE>
Fraction") shall be calculated in which the numerator shall be the Actual
Amount and the denominator shall be the [*].
(d) Baseline Revenue shall be recalculated by reducing the amount
(such amount being hereinafter called the "[*] Baseline Revenue") of
Baseline Revenue attributed to the [*] referred to in the definition of
Baseline Adjustment Event to an amount determined by multiplying the Actual
Fraction by the [*] Baseline Revenue, provided, however, that in the event
-----------------
the Actual Amount, calculated on an annual basis over the Calculation
Period, is equal to or greater than the [*] Baseline Revenue, the Baseline
Amount shall not be recalculated and there shall be no recalculation of the
Distribution Fee.
(e) The Distribution Fee shall be recalculated based upon the
Baseline Revenue recalculated as provided in clause (d) above, and Seller
shall pay to Buyer, promptly upon such recalculation, an aggregate amount
equal to the actual amount of Distribution Fee paid by Buyer to Seller
during the Calculation Period in excess of the Distribution Fee as so
recalculated.
ARTICLE III
INFORMATION SERVICES
3.1. Non-Exclusive License. (a) Seller hereby grants to Buyer, on
---------------------
the terms and conditions set forth in this Section 3.1 (and for no additional
charge), an irrevocable, perpetual, fully-paid, non-exclusive license (the
"Software License") in the Designated Territory to all computer programs, data
files and other software (including object code and source code) used by
Seller's Integrated Logistics System, as described on Schedule 3.1(a) ("ILS"),
including Seller's Purchase Order Entry and Tracking System ("POET")
(collectively, the "Seller Licensed Software"). The Software License includes
(i) the right to use, execute, reproduce and modify the Seller Licensed Software
and any derivative works based on the Seller Licensed Software for any purpose,
(ii) the right to authorize Customers (and any reseller customers of any Other
Merisel Distribution Business) to use and execute (in object code form only, and
not in source code) the Seller Licensed Software and any derivative works based
on the Seller Licensed Software for the benefit of Buyer and Customers in
connection with the Subject Business and (iii) the right to sublicense third
parties to do any of the foregoing for the benefit of Buyer and Customers in
connection with the Subject Business. The Software License may be assigned by
Buyer to any
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-72-
<PAGE>
person or entity (A) which owns more than 50% of Buyer's issued and outstanding
voting stock, (B) in which Buyer owns more than 50% of the issued and
outstanding voting stock, (C) which acquires all or substantially all the assets
of Buyer relating to the Subject Business, or (D) into which Buyer is merged or
reorganized pursuant to any plan of merger or reorganization, but is otherwise
not transferable to any person.
(b) SELLER HEREBY DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO THE SELLER LICENSED SOFTWARE, INCLUDING ANY AND ALL
REPRESENTATIONS AND WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE (INCLUDING ANY PURPOSE OF BUYER, ANY CUSTOMER OR ANY OTHER
PERSON), OR WITH RESPECT TO THE VALIDITY OF ANY PATENT OR COPYRIGHT RELATING
THERETO. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING SELLER SHALL NOT BE
LIABLE TO BUYER FOR ANY INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES OF ANY KIND
RELATING TO ANY SELLER LICENSED SOFTWARE OR ANY RELATED MATTER.
(c) Seller shall indemnify Buyer and hold it harmless from any
liabilities to any third party arising out of, and all reasonable costs of
defending or settling, any claim against Buyer by any third party that any of
the Seller Licensed Software infringes any copyright, patent or other
proprietary right of such third party. Buyer shall notify Seller in writing of
any such claim promptly after Buyer first learns thereof, shall tender sole
control of the defense and settlement of such claim to Seller, and shall provide
Seller with such reasonable assistance and cooperation as Seller may reasonably
request from time to time in connection with such defense. None of Seller's
obligations under this Section 3.1(c) shall apply in connection with any claim
of infringement if Buyer has modified the Seller Licensed Software or combined
it with or into any other programs, data, device, component or applications and
such infringement would not have occurred without such modification or
combination.
(d) Within 30 days after the Closing Date, Seller shall provide Buyer
with an itemization of all software other than Seller Licensed Software that is
used by Seller in providing Logistics Services hereunder. Seller further agrees
to provide reasonable cooperation and assistance to facilitate Buyer's
negotiation of license agreements for such software directly with any third
parties who own or license such software; provided, however, that Seller shall
-------- -------
not be required to incur any out-of-pocket expense in connection therewith, or
to take any action that Seller reasonably believes could result in the breach by
Seller of any license or other agreement with respect to such software or
otherwise jeopardize Seller's relationship with the licensor of any such
software.
(e) At Buyer's request, upon reasonable prior notice, Seller will
deliver to Buyer or a third party designated by Buyer on a weekly basis (or more
often as Buyer and Seller may
-73-
<PAGE>
mutually agree), and at Buyer's expense, a back-up copy of all material data and
program files used by Seller in connection with the Subject Business and/or the
provision of the Logistics Services to Buyer as provided herein, including all
such data and program files as shall at such time be backed-up by Seller at a
back-up facility operated by Arcus Data Security Inc. Such back-up copy will
include source code, object code and any and all available source and other
documentation. Except as otherwise provided in Section 3.1(a) and Section
5.5(b)(iii), nothing in this Agreement shall be construed as a license to, or a
grant of any other right or interest in, any of the data and program files
described in this Section 3.1(e), or in any itemization of software provided
pursuant to Section 3.1(d), or any information contained therein, and all such
data and program files and information shall constitute confidential and
proprietary information of Seller within the meaning of Section 9.9.
(f) Anything contained herein to the contrary notwithstanding, the
Software License does not convey or include any right, title or interest in or
to any improvements and/or enhancements to any software included in Seller
Licensed Software obtained or developed by Seller after the date hereof.
(g) The Seller Licensed Software includes certain computer programs,
data files and/or other materials provided to Seller by third parties, under
license or otherwise ("Third Party Materials"), all of which are identified as
Third Party Materials on Schedule 3.1(a). Anything contained herein to the
contrary notwithstanding, the Software License shall be limited, as to such
Third Party Materials, to such rights as may lawfully be granted under any
applicable license or other arrangement governing the use thereof. Seller
represents and warrants to Buyer that, except as provided in the immediately
preceding sentence, Seller has all rights, power and authority required to grant
the Software License to Buyer as provided in this Section 3.1.
3.2. Dedicated Personnel. (a) During the Distribution Period, but
-------------------
not to exceed the two-year period following the Closing Date, Seller shall pay
to Buyer, monthly in arrears, an amount equal to 125% of the aggregate base
salaries, determined as provided in Schedule 3.2(a), of seven persons to be
employed by Buyer to operate ILS and POET (the "ILS Team"). The ILS Team shall
initially include the five persons named on Schedule 3.2(a), and two additional
Store Systems Support Specialists hired by Buyer. Buyer shall have the sole
authority to hire, fire, and reassign members of the ILS Team, and to establish
the salaries of the ILS Team at any level Buyer chooses, provided that the
aggregate amount that Seller is obligated to pay Buyer pursuant to this Section
3.2 shall in no event exceed $35,345 per month, plus a 5% increase on the first
anniversary of the date hereof (the "ILS Salary Cap"). Anything to the contrary
contained herein notwithstanding, Seller shall
-74-
<PAGE>
not have any obligation or responsibility whatsoever to Buyer or any other
person with respect to the ILS Team, except the obligation to make the payments
expressly provided for in this Section 3.2.
(b) In the event of any Winding Down Period following the second
anniversary of the Closing Date, Seller shall pay to Buyer during such Winding
Down Period, monthly in arrears, an amount equal to (i) the lesser of (A) the
------
aggregate base salaries of the ILS Team, determined as provided in Schedule
3.2(a), and (B) the ILS Salary Cap, times (ii) a percentage, which shall decline
-----
ratably from 125% in the first month of the Winding Down Period to 0% in the
last month of the Winding Down Period.
(c) Seller shall also provide during the Distribution Period (but not
to exceed the two-year period following the Closing Date), at no additional cost
to Buyer, the full-time services, during normal business hours, of three
programmers (the "Mainframe Team"), to develop applications relating to the
Subject Business for Seller's mainframe computer. The Mainframe Team shall be
employed by Seller, and Seller shall have the sole authority to hire and fire
members of the Mainframe Team; provided, however, that the members of the
-------- -------
Mainframe Team shall be generally comparable in salary, training and experience
to the programmers employed by Seller to develop its own mainframe applications.
The Mainframe Team shall initially include the persons set forth on Schedule
3.2(c). Seller agrees not to reassign any members of the Mainframe Team to
other projects without Buyer's prior written consent (which consent shall not
unreasonably be withheld or delayed). The Mainframe Team will work exclusively
on projects defined and prioritized by Buyer; provided, however, that Seller
-------- -------
shall have the right to approve and/or manage such projects to the extent that
such projects could reasonably be expected to have an impact on the Seller or
any of the Retained Business.
(d) During any Winding Down Period, Seller shall use commercially
reasonable efforts (i) to provide Buyer with such information regarding the
Subject Business accessible through CAMBAR as Buyer shall reasonably request,
and (ii) to maintain the interface between CAPS and Seller's Order Processing
System; provided, however, that Seller shall not be required to provide Buyer
-------- -------
with any programming services or support during any Winding Down Period other
than routine maintenance and bug fixes, if needed, and Buyer shall not be
required to provide any dedicated personnel in connection with such services.
(e) All improvements, enhancements and/or other intellectual property
developed or invented by the ILS Team while under the supervision of Buyer shall
be the exclusive property of Buyer; all improvements, enhancements and/or other
intellectual property developed by Seller or any employee or independent
-75-
<PAGE>
contractor of Seller (including the Mainframe Team) shall be the exclusive
property of Seller.
(f) Without prejudice to the rights of Buyer pursuant to Section
2.21(b), Seller shall provide Buyer with reasonable advance notice of any
upgrades or modifications proposed to be implemented by Seller with respect to
any operating system or applications software that might impact the interfacing
or compatibility of Seller's computer systems with any material software
utilized by Buyer or Customers in connection with the Subject Business (to the
extent that (i) at the time any such upgrade or modification is proposed, such
systems and such software interface and are compatible and (ii) in the case of
any software adopted for such purpose after the date hereof, Buyer has advised
Seller that such software is in use and has advised Seller of all interfaces
between such software and such systems), and shall cooperate with Buyer in good
faith and use commercially reasonable efforts to provide that compatibility and
interoperability between Seller's computer system and any such material software
are maintained at levels not less than currently in effect.
ARTICLE IV
ADDITIONAL SERVICES
4.1. Availability of Additional Services. In addition to the
-----------------------------------
Logistics Services to be provided by Seller pursuant to Article II and the
information services to be provided under Article III, Seller may from time to
time make available to any or all Customers, on the terms and subject to the
conditions set forth in this Article IV, certain other services ("Additional
Services"), including services provided by Seller to Franchisees and/or Datago
Purchasers prior to the Closing.
4.2. CLTV. (a) Buyer acknowledges that Seller currently provides
----
television programming by satellite to Franchisees for training, communication
and vendor announcements ("CLTV"). After the Closing Date, either party may
terminate its provision or receipt of CLTV programming, as applicable, upon 90
days' prior written notice to the other. Buyer shall pay for any CLTV
programming that Seller makes available to Franchisees prior to the effective
date of any termination notice by Buyer hereunder, at Seller's fully-burdened
cost. Buyer may, at its option, use [*] to pay for any such programming, if
permitted by the [*].
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-76-
<PAGE>
(b) In the event that Buyer determines to continue its participation
in CLTV, Buyer and Seller shall cooperate in good faith to negotiate an
agreement to govern the provision of CLTV programming and broadcast services by
Seller.
(c) Buyer acknowledges that Seller owns all satellite dishes located
at Franchisees. Whether or not Buyer continues its participation in CLTV,
Seller may from time to time use such satellite dishes to provide broadcast
services for the Retained Business and/or any third parties, on such terms and
conditions as Seller and such Franchisees shall mutually agree. Seller may from
time to time offer any CLTV programming directly to any Franchisee, on such
terms and conditions as Seller and such Franchisee shall mutually agree. Seller
shall have the right, but not the obligation, to install satellite dishes
comparable to the ones currently in place, at any current or future Franchisee
location, on such terms and conditions as Seller and such Franchisee shall
mutually agree, and without any charge (other than a royalty at normal rates) or
interference by Buyer. Buyer shall not remove or take any action to remove or
induce any Franchisee to remove any satellite dish owned or operated by Seller
from any current or future Franchisee location.
(d) Buyer may use any satellite dishes owned or operated by Seller at
any Franchisee location, at its own expense but without any fee imposed by
Seller therefor, for any purpose, provided that such use does not conflict or
interfere with any programming or other use thereof by Seller. Buyer shall give
Seller at least five Business Days prior notice of any such use by Buyer and
shall have the right to reserve any or all such satellite dishes, upon such
notice, if not theretofore reserved by Seller or any other person.
4.3. National Accounts. (a) Seller has established and currently
-----------------
administers a national accounts program (the "National Accounts Program") to
facilitate the marketing, sale and delivery of computer hardware, software,
peripherals and related products by Seller, through its Retained Business, to
business customers at multiple locations in the Designated Territory. Pursuant
to the National Accounts Program, including those certain National Accounts
Participating Dealer Agreements between Seller and certain Franchisees ("NAP
Dealers"), NAP Dealers have agreed to provide services to National Accounts
Program customers, as requested from time to time by Seller, including delivery,
installation, maintenance and repair services, and Seller has agreed to pay any
NAP Dealers performing such services fees in amounts calculated pursuant to
Seller's policies and procedures for the National Accounts Program, as in effect
from time to time.
-77-
<PAGE>
(b) Upon the expiration of the six-month period immediately following
the Closing Date, Seller shall no longer provide any NAP Dealer with any fee
(currently calculated as [*] of Seller's gross margin on such sale) for any sale
by Seller to any customer in the marketing territory of any NAP Dealer, without
the active support or participation of such NAP Dealer. Except as provided in
the preceding sentence and as otherwise expressly provided herein or in the
Purchase Agreement, the National Accounts Program shall not be affected by the
Purchase Agreement or any of the transactions contemplated thereby; provided,
--------
however, that Seller reserves the right to terminate the National Accounts
- - - -------
Program at any time upon not less than 30 days prior written notice to Buyer.
4.4. National Service Agreements. (a) Seller currently provides
---------------------------
computer-related services and support on a nationwide basis to end-users and
resellers through its Retained Business. Prior to the Closing Date, a number of
Franchisees sold service contracts for Seller to their end-user customers.
After the Closing Date, Seller may in its discretion provide certain
Franchisees, as value-added resellers, the opportunity to sell service contracts
for Seller in markets that do not directly conflict with the Retained Business,
on such terms and conditions as Seller and such Franchisees shall mutually
agree. Anything contained herein to the contrary notwithstanding, during the
six-month period following the Closing Date, Seller shall permit all Franchisees
that are parties to any National Service Agreement Master Agreement or Location
Addendum to sell service contracts for Seller pursuant to the National Service
Agreement program, as in effect from time to time during such period.
(b) Seller shall use commercially reasonable efforts to perform in all
material respects its obligations under the National Service Agreement program
and all service contracts sold by Franchisees pursuant to the National Service
Agreement program, whether sold before or after the Closing Date, on the terms
and conditions set forth therein.
(c) Certain Franchisees that sold one or more service contracts prior
to the Closing Date will not be offered the opportunity to sell service
contracts after the Closing Date. Seller shall not solicit any customer of any
such Franchisee who on the Closing Date is a party to any service contract
provided by Seller, or take any action to induce any such customer, to terminate
or fail to renew any such contract through such Franchisee, without the prior
consent of such Franchisee, until after the expiration of the 45-day period
immediately following
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-78-
<PAGE>
(i) the current term of any such service contract or (ii) a single term of
renewal thereof.
(d) Upon the written request of Buyer received within six months after
the Closing, Seller shall sell, transfer and assign to Buyer, for no additional
consideration, ON AN AS-IS, WHERE-IS BASIS AND WITHOUT ANY WARRANTY OF ANY KIND,
EXPRESS OR IMPLIED (subject to Section 3.1(d)), all right, title and interest of
Seller in the computer software and data files used by Seller prior to the
Closing Date to allocate and keep track of the fees earned in connection with
service contracts sold and/or performed by two or more Franchisees in multiple
locations (the "NSA System"). Buyer shall pay any expenses incurred in
connection with any transfer of the NSA System pursuant to this Section 4.4(d).
4.5. Help Desk. (a) Seller currently provides a nationwide
---------
telephone help desk for computer-related assistance and support through its
Retained Business ("National Help Desk"). Prior to the Closing Date, a number
of Franchisees sold National Help Desk contracts for Seller to their end-user
customers. After the Closing Date, Seller may in its discretion provide to
certain Franchisees, as value-added resellers, the opportunity to sell National
Help Desk contracts to end-users in markets that do not directly conflict with
the Retained Business, on such terms and conditions as Seller and such
Franchisees shall mutually agree. Anything contained herein to the contrary
notwithstanding, during the six-month period following the Closing Date, Seller
shall permit all Franchisees to sell contracts under the National Help Desk
program, as in effect from time to time during such period.
(b) Seller shall use commercially reasonable efforts to perform in all
material respects its obligations under the National Help Desk program and all
contracts sold under the National Help Desk program, whether sold before or
after the Closing Date, on the terms and conditions set forth therein.
(c) Certain Franchisees that sold National Help Desk contracts prior
to the Closing Date will not be offered the opportunity to sell such contracts
after the Closing Date. Seller agrees that it will not solicit any customer of
any such Franchisee who on the Closing Date is a party to any National Help Desk
contract provided by Seller, or take any action to induce any such customer, to
terminate or fail to renew any such contract through such Franchisee, without
the prior consent of such Franchisee, until after the expiration of the 45-day
period immediately following (i) the current term of any such contract or (ii) a
single term of renewal thereof.
(d) Seller shall from time to time make help desk phone support
services available to Franchisees and Datago Purchasers, for their internal
support needs, on such terms and
-79-
<PAGE>
conditions (including applicable fee schedules) as Seller and such Franchisees
and/or Datago Purchasers shall mutually agree.
4.6. MASTER and MASTER Plus. (a) After the Closing Date, Seller
----------------------
shall continue to provide access to the MASTER program and related systems to
the Customers set forth on Schedule 4.6(a) attached hereto but shall not be
required to make MASTER available to any other person. Seller may terminate
MASTER for any Customer (i) at any time, if Seller shall at such time have the
right to terminate MASTER for such Customer pursuant to the MASTER agreement
between Seller and such Customer, a copy of which is attached hereto as an
exhibit to Schedule 4.6(a)-1; and/or (ii) at such time as MASTER Plus shall have
become available, tested and ready to replace MASTER for such Customer. Buyer
shall cooperate with Seller and take all reasonable actions requested by Seller
to notify Customers participating in MASTER, and their end-user customers, that
amounts invoiced to such end-user customers in respect of MASTER sales (whether
for periods before or after the Closing Date) shall be payable to the account of
and in the manner directed by Seller. Buyer shall promptly forward to Seller
all payments received by Buyer with respect to such amounts, together with such
endorsements or assignments as shall be necessary for the transfer thereof to
Seller. Seller shall reimburse Buyer for any reasonable out-of-pocket expenses
incurred by Buyer in connection with any such actions. All sales under the
MASTER program shall constitute sales by Buyer through the Subject Business for
all purposes of this Agreement. The MASTER program will be administered in
accordance with the agreement and other procedures in effect on the Closing
Date, which agreement and other procedures are summarized on Schedule 4.6(a)-1.
(b) Seller is currently developing the MASTER Plus program and related
systems. MASTER Plus is currently expected to augment CAPS by providing
Customers with the ability to place orders requiring (i) electronic staging of
inventory, (ii) order complete, (iii) central configuration, and/or (iv) direct
shipment to the end-user customer. Orders placed through MASTER Plus are
currently expected to be financed by one or more floor planners. MASTER Plus is
currently expected to be available on a fee basis, in accordance with a matrix
to be agreed; provided, however, that such fee matrix will be reasonably
-------- -------
designed to reimburse Seller for the fully-burdened cost to Seller of the MASTER
Plus program, including the cost of all returns and/or cancellations (to the
extent permitted by such program), configuration and freight, and the estimated
total costs associated with holding the additional inventory required by the
MASTER Plus program (including costs relating to interest, obsolescence,
insurance and risk of loss). All sales under the MASTER Plus program will
constitute sales by Buyer through the Subject Business for all purposes of this
Agreement, and fees payable in respect of the MASTER Plus program will be in
addition to the Monthly Distribution Fee and other amounts due hereunder.
-80-
<PAGE>
(c) In addition to any fees for participation in MASTER Plus to be
borne by participating Customers, Buyer shall be responsible for the cost of
training Customers to use the MASTER Plus system. No Customer shall be provided
access to MASTER Plus until such Customer shall have successfully completed the
training and certification program therefor.
(d) Seller shall consult with Buyer in good faith from time to time
regarding the programming and implementation of MASTER Plus and shall endeavor
to make such changes therein as Buyer shall reasonably request. Anything
contained herein to the contrary notwithstanding, Seller shall not be required
to make any change to the MASTER Plus system if Seller, in its reasonable
discretion, believes that such change would interfere with any other systems or
operations of Seller or otherwise result in an adverse effect upon the business
or operations of Seller or any part thereof. In the event that Seller, in its
reasonable discretion, agrees to make any changes requested by Buyer, and such
changes require programming resources in addition to the Mainframe Team, Buyer
shall pay all costs relating to such additional programming resources.
ARTICLE V
REMEDIES
5.1. Overview. This Article V sets forth the respective rights and
--------
obligations of Buyer and Seller in the event of the occurrence of any Class A
Event, Class B Event or Class C Event, in each case as defined herein. The
remedies available to Buyer hereunder are not cumulative; no event or occurrence
may constitute both a Class A Event and a Class B Event or Class C Event, or any
other combination of such categories, for purposes of this Article V.
5.2. Definitions. As used in this Article V, the following terms
-----------
have the corresponding meanings:
"Adjusted Operating Profit" for any period means net income recognized
-------------------------
by Buyer in such period in respect of the Subject Business, after provision for
income and other taxes, but before any extraordinary items, plus depreciation,
----
plus a percentage of all interest charges deducted in calculating net income
- - - ----
equal to the percentage that Excluded Indebtedness bears to Total Indebtedness.
"Total Indebtedness" for any period means the average total principal amount of
------------------
interest-bearing indebtedness of Buyer outstanding during such period.
"Excluded Indebtedness" for any period means an amount of interest-bearing
- - - ----------------------
indebtedness equal to (i) goodwill minus (ii) paid-in capital, determined in
-----
each case for Buyer on an average basis for such period in accordance with
generally accepted accounting principles consistently applied; provided,
--------
however, that the
- - - -------
-81-
<PAGE>
amount of Excluded Indebtedness, and the amount of all interest-bearing
indebtedness other than Excluded Indebtedness, shall be adjusted on a pari passu
---- -----
and cumulative basis as if all positive cash flow of the Subject Business from
operating activities were retained by Buyer and used to reduce such
indebtedness. If Excluded Indebtedness is reduced by such positive cash flow
below the amount of goodwill minus paid-in capital, as determined as provided
-----
above, Adjusted Operating Profit shall be increased by the interest income that
would have been generated by such cash flow if retained by the Subject Business.
"Assumed Agreement" has the meaning ascribed thereto in Section 5.9.
-----------------
"Assumed Freight Charges" means, for any period during the Special
-----------------------
Transition Period, the aggregate amount of all freight charges that would have
been incurred by Buyer if all products sold by Buyer through the Subject
Business during such period and included in calculating Buyer Freight Charges
for such period had been shipped by Seller, on behalf of Buyer hereunder, from
the [*] of the Customers ordering such products, in accordance with the terms
and conditions applicable to such shipments under this Agreement, as in effect
on the Special Closing Date, determined as if the Distribution Period had
continued in effect through the Special Transition Period.
"Assumed Distribution Fee" means, for any period during the Special
------------------------
Transition Period, the Distribution Fee that would have been payable by Buyer in
respect of such period in accordance with the terms of this Agreement,
determined as if the Distribution Period had continued in effect through the
Special Transition Period.
"[*]" means each of [*] and [*], with respect to the material [*] of
---
such [*] generally offered by such [*] to [*].
"BPI Purchase Price" has the meaning ascribed thereto in Section
------------------
5.5(b)(i).
"Buyer Freight Charges" means, for any period during the Special
---------------------
Transition Period, the aggregate amount of all actual freight charges incurred
directly or indirectly by Buyer during such period (as determined from the
carrier's or vendor's invoice, as applicable, net of all rebates, discounts and
other credits actually received in respect thereof), relating to the delivery of
computer hardware, software and related products sold by Buyer through the
Subject Business and shipped by Buyer (or by any vendor) to any Customer (or to
any customer of a Customer); provided, however, that Buyer Freight Charges shall
-------- -------
not include
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-82-
<PAGE>
any amount in excess of the charges for shipping such product by Federal Express
second day air (or, in the case of any intrastate shipments, for shipping such
product in accordance with Buyer's usual intrastate delivery method).
"Buyer Purchased Inventory" has the meaning ascribed thereto in
-------------------------
Section 5.5(b)(i).
"Buyer's Allocable Inventory" means, for each vendor whose products
---------------------------
are included in the Inventory List, Buyer's pro rata allocation of all products
--- ----
of such vendor in Seller's inventory on the date of the Special Termination
Notice, including all inventory located in, or on route to, either Distribution
Center, other than (i) any inventory of products not listed on the Inventory
List on such date, (ii) any inventory reserved on such date for any order
received by Seller (whether for the Subject Business or the Retained Business)
on or before such date and (iii) any inventory in the process of being
configured on such date. For purposes of this definition, Buyer's pro rata
--- ----
allocation of the products of any vendor shall be determined in accordance with
the allocation percentages for such vendor in effect on the date of the Special
Termination Notice pursuant to Section 2.22(b).
"[*]" means the quotient, expressed as a percentage, obtained by
---
dividing (i) the [*] of the Subject Business during the two-year period
immediately following the Closing Date, by (ii) [*].
"Claim" means a claim, demand, action, suit, proceeding or cause of
-----
action.
"Class A Event" means the breach of any covenant or agreement required
-------------
to be performed by Seller under this Agreement, which breach continues uncured
for a period of ten Business Days after Buyer gives written notice thereof to
Seller; provided, however, that if Seller breaches that same covenant or
-------- -------
agreement two or more times in any two consecutive quarters, such cure period
shall be reduced to five consecutive Business Days for the second such breach in
such period, and no opportunity to cure need be provided for the third or any
subsequent breach in such period; and provided further, however, that such cure
-------- ------- -------
period shall be 30 days with respect to any breach claimed by Buyer within the
first 30 days following the Closing Date. Anything contained herein to the
contrary notwithstanding, neither (i) the failure of Seller to perform any or
all of the Logistics Services in a manner that meets or exceeds any Performance
Standards for such Logistics Services, nor (ii) the occurrence of any Class B
Event, nor (iii) the occurrence of any Material Deficiency or
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-83-
<PAGE>
other Class C Event, shall in any event constitute a Class A Event.
"Class B Event" means any event or occurrence that shall give rise to
-------------
an obligation to credit Buyer with a Performance Credit in accordance with
Schedule 2.21.
"Class C Event" means the occurrence, at any time during the
-------------
Distribution Period (but not following the second anniversary of the Closing
Date), of any of the following:
(i) a Material Deficiency;
(ii) a Vendor Shutdown; or
(iii) a Material Allocation Default by Seller; or
(iv) any failure by Seller to comply with the provisions of
Section 2.25, which failure continues for five consecutive Business Days
after notice thereof to Seller.
"Customer Performance Standards" has the meaning ascribed thereto in
------------------------------
Section 5.9.
"DCMS" means Seller's Distribution Center Management System, as in
----
effect on the Special Closing Date.
"Direct Personnel Charges" means, for any period during the Special
------------------------
Transition Period, an amount equal to [*] times the aggregate base salaries for
-----
such period of each of the following persons employed by Buyer during such
period, to the extent such base salaries are allocable to the Subject Business:
(i) all persons in Buyer's purchasing department engaged in
connection with the Subject Business;
(ii) all persons in Buyer's accounts payable department engaged in
connection with the Subject Business;
(iii) all persons in Buyer's MIS department engaged in connection
with the Subject Business; and
(iv) all persons in Buyer's traffic and operations departments
engaged in connection with the Subject Business;
provided, however, that the foregoing persons shall not for this purpose include
- - - -------- -------
any persons employed at the Livermore Facility.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-84-
<PAGE>
"Livermore Facility" means the Livermore DC, including (i) Seller's
------------------
leasehold interest in all real property and improvements used in connection with
the Livermore DC, (ii) Seller's leasehold interest in any personal property
leased by Seller and used in and located at the Livermore DC, and (iii) the
Livermore FF&E.
"Livermore Facility Charges" means, for any period during the Special
--------------------------
Transition Period, the aggregate operating expenses incurred by Buyer during
such period in respect of the Livermore Facility, as determined in accordance
with generally accepted accounting principles, consistently applied,including
all rent and other charges payable by Buyer under the Livermore Lease; all
taxes, insurance, utility and telephone charges relating to the Livermore
Facility (including voice and data lines), to the extent not included under the
Livermore Lease; and all salaries, wages, ordinary and customary bonuses and
benefits, payroll taxes and other ordinary and customary expenses relating to
the employment of all persons employed by Buyer at the Livermore Facility, in
each case determined in accordance with generally accepted accounting
principles, consistently applied.
"Livermore FF&E" means all personal property owned by Seller, located
--------------
at the Livermore DC on the Special Closing Date and used or held for use by
Seller in connection with providing the Logistics Services.
"Livermore Lease" means the Lease Agreement dated August 21, 1991,
---------------
between Seller and Lincoln Las Positas, a California Limited Partnership, and
Patrician Associates, Inc., a California corporation, as amended through and in
effect on the Special Closing Date.
"LPAR" has the meaning ascribed thereto in Section 5.5(c).
----
"Material Deficiency" means the occurrence of any Material Deficiency
-------------------
with respect to one or more of the Performance Standards for (i) Stocking
Efficiency, (ii) Shipping Efficiency, (iii) Error Rate and (iv) CAPS Down-Time,
in each case as set forth on Schedule 2.21.
"Notice of Claim" has the meaning ascribed thereto in Section 5.4.
---------------
"Quarterly Excess Operating Costs" means, for any quarter during the
--------------------------------
Special Transition Period, an amount equal to (i) the sum of Transition
Operating Costs and Buyer Freight Charges for such quarter, minus (ii) the sum
-----
of the Assumed Distribution Fee and Assumed Freight Charges for such quarter.
-85-
<PAGE>
"Scheduled Software" has the meaning ascribed thereto in Section
------------------
5.5(b)(iii).
"Special Closing Date" means a Business Day at least 10 and not more
--------------------
than 20 Business Days following the date of any Special Termination Notice, as
determined in writing by Buyer with the consent of Seller (which consent shall
not unreasonably be withheld or delayed), or such other date as Buyer and Seller
shall mutually agree in writing.
"Special Termination Notice" has the meaning ascribed thereto in
--------------------------
Section 5.5(a).
"Special Term License" has the meaning ascribed thereto in Section
--------------------
5.5(b)(iii).
"Special Transition Procedure" has the meaning ascribed thereto in
----------------------------
Section 5.5(b).
"Special Transition Period" means the period commencing on the Special
-------------------------
Closing Date and ending on the second anniversary of the Closing Date.
"Systemhouse" means Systemhouse Inc., a Delaware corporation.
-----------
"Systemhouse Agreement" means the Data Processing Agreement dated
---------------------
December 23, 1992, between Systemhouse and Seller, as amended through and in
effect on the Special Closing Date, including Schedules A through E and any and
all other schedules or exhibits attached thereto.
"Systemhouse Charges" for any period means the aggregate amount
-------------------
payable to Systemhouse by Seller for such period under the Systemhouse Agreement
times a fraction, the numerator of which is the aggregate System Resource Units
- - - -----
consumed by Buyer during such period and the denominator of which is the
aggregate System Resource Units consumed by Buyer and Seller during such period.
For purposes of this definition, the term "System Resource Unit" (or "SRU") has
the meaning that such term has under the Systemhouse Agreement, and the numbers
of SRUs consumed by Buyer and Seller, respectively, in any period, shall be as
set forth in the Customer Resource Consumption report for such period provided
by Systemhouse pursuant to Sections A.13.0 through A.13.7 of Schedule A to the
Systemhouse Agreement.
"TOP F&E" has the meaning ascribed thereto in Section 5.5(b)(v).
-------
"Transition Operating Costs" for any period means the sum of the
--------------------------
Direct Personnel Charges, the Systemhouse Charges and the Livermore Facility
Charges, in each case for such period.
-86-
<PAGE>
"Transition Operating Personnel" means up to 150 persons employed by
------------------------------
Seller on the Special Closing Date and set forth on the TOP List as in effect on
such date, including up to (i) half the number of employees in Seller's
purchasing department on such date; (ii) half the number of employees in
Seller's accounts payable department on such date; (iii) the Mainframe Team plus
----
ten additional employees from Seller's MIS department; (iv) all persons employed
at the Livermore Facility and engaged in connection with providing Logistics
Services; and (v) such other persons, if any, as Buyer and Seller shall mutually
agree. Within 60 days after the Closing Date, Seller shall prepare and deliver
to Buyer a list of all Transition Operating Personnel (the "TOP List"). Prior
to the Special Closing Date, Seller shall use its best efforts to make such
changes in the personnel included in the TOP List as Buyer may from time to time
reasonably request; provided, however, that Seller shall at all times retain the
-------- -------
sole power and authority to hire, fire and reassign its personnel, including any
persons set forth in the TOP List and any other persons engaged in connection
with providing Logistics Services.
"Transition Period Determination Date" has the meaning ascribed
------------------------------------
thereto in Section 5.5(d).
"Vendor Shutdown" means the occurrence of any of the following:
---------------
(i) Seller ceasing to be an [*] of any of the [*], which event
continues for five consecutive Business Days;
(ii) the imposition against Seller of a [*] or similar action by
any of [*] that results in the [*] cessation of [*] to Seller over a period
of ten consecutive Business Days; or
(iii) the imposition against Seller of a [*] or similar action by
more than [*] vendors (other than any [*]) that results in each such case
in the [*] cessation of [*] such vendors to Seller over a period of ten
consecutive Business Days;
not including, for the purposes of clauses (ii) and (iii) of this paragraph,
shipments of any products if [*] or more by dollar volume of the products
shipped are allocated to the Retained Business; provided, however, that in the
-------- -------
case of any event of the type described in clauses (i) or (ii) above, at the
time of the first such occurrence, if Buyer wishes such occurrence to constitute
a Class C Event, Buyer shall first use commercially
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-87-
<PAGE>
reasonable efforts to enter into a separate agreement with the [*] for the
Subject Business, as provided in Section 2.23, on terms that are not in the
aggregate materially less favorable to Buyer than those obtained by Buyer from
[*], and if Buyer enters into such a separate agreement, then the loss [*] by
Seller shall not constitute a Vendor Shutdown.
5.3. Class A Events; Limitations on Aggregate Liability. (a) Except
--------------------------------------------------
as otherwise expressly provided in this Article V, the sole and exclusive remedy
of Buyer and liability of Seller in respect of any Class A Event shall be
monetary damages determined in accordance with applicable contract law
principles; provided, however, that to the extent that any Class A Event is
-------- -------
caused by or arises from willful misconduct of Seller, such limitation shall not
apply. Notwithstanding the foregoing, Seller shall not be liable for any
consequential, incidental, punitive, exemplary or other special damages relating
to any Class A Event, including any damages for lost profits; provided however,
----------------
that to the extent that such Class A Event is caused by or arises from willful
misconduct of Seller, such limitation shall not apply. Seller's liability for
any damages hereunder shall be reduced by any compensation or reimbursement
received by Buyer in respect thereof from any insurer or other third party, to
the extent permitted by any contract of insurance or similar agreement.
Anything contained herein to the contrary notwithstanding, Buyer shall not be
precluded from making a Claim against Seller in respect of any actual, direct,
contractual damages incurred by Buyer as a result of any breach by Seller of any
covenant or agreement required to be performed by Seller hereunder, which
damages were incurred prior to the expiration of any cure period provided for in
the definition of Class A Event set forth above, whether or not such breach
shall have been cured prior to the expiration of such period.
(b) No Claim shall be brought or asserted by Buyer against Seller in
respect of any Class A Event, and Buyer shall not be entitled to receive any
payment from Seller with respect thereto, unless Buyer gives Seller notice of
the existence of any such Claim, specifying in reasonable detail the basis
therefor, as provided in this Section 5.3(b) (a "Notice of Claim"). Buyer shall
give such notice to Seller, in a commercially reasonable manner (including
written, telephonic or electronic mail notices, as appropriate), within a
commercially reasonable period of time after Buyer first becomes aware of the
existence of such Claim. Any dispute regarding any such Claim shall be resolved
in accordance with Article VIII, and the delivery of a Notice of Claim pursuant
to this Section 5.3(b) shall commence the ten Business Day-period provided for
in Section 8.2(a).
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-88-
<PAGE>
(c) Anything contained herein to the contrary notwithstanding, if the
occurrence of a Class A Event results in the occurrence of a Class B Event, any
liability of Seller with respect to any damages incurred by Buyer in connection
with such Class A Event shall be deemed for all purposes of this Agreement to
have been satisfied in an amount equal to the aggregate amount of all
Performance Credits received by Buyer in respect of such Class B Event.
(d) Anything contained herein to the contrary notwithstanding, the
liability of Seller under or in respect of this Agreement (including any
liability of Seller in respect of any and all Class A Events, Class B Events
and/or Class C Events) shall not, in the aggregate, exceed the following limits,
as applicable:
(i) the aggregate liability of Seller in respect of any and all
Class A Events shall not exceed [*], except as otherwise expressly set
forth in Section 5.3(e);
(ii) the aggregate of all Performance Credit Amounts shall not
exceed one-half the aggregate amount paid to Seller by Buyer during the
term of this Agreement in respect of the [*]; and
(iii) the aggregate liability of Seller in respect of any and all
Class C Events shall not exceed the amounts set forth in Section 5.5.
(e) The cap on the aggregate liability of Seller in respect of Class
A Events and, with respect to Sections 5.3(e)(ii)(A) and 5.3(e)(iii), Class C
Events, as set forth in Section 5.3(d)(i), shall not include any amounts in
respect of any of the following:
(i) any liability of Seller to Buyer in respect of products
purchased by Buyer and consigned to Seller pursuant to Section 2.23, as
provided in any written agreement entered into between Buyer and Seller
pursuant to the last sentence of such Section 2.23;
(ii) any liability of Seller to Buyer hereunder in respect of the
warranty of title given by Seller to Buyer in connection with any sale of
inventory or other property by Seller to Buyer (A) pursuant to Section 5.5
or (B) otherwise pursuant to this Agreement; or
(iii) any monetary obligation of Seller to Buyer pursuant to the
express terms of this Agreement).
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-89-
<PAGE>
(f) Anything contained herein to the contrary notwithstanding, the
liability of Buyer under or in respect of this Agreement (with the exception of
all monetary obligations of Buyer to Seller pursuant to the express terms of
this Agreement) shall not, in the aggregate, exceed [*]. Buyer shall not be
liable for any consequential, incidental, punitive, exemplary or other special
damages relating to any breach of this Agreement, including any damages for lost
profits; provided, however, that, to the extent that such breach is caused by or
-------- -------
arises from willful misconduct of Buyer, such limitation shall not apply.
Buyer's liability for any damages hereunder shall be reduced by any compensation
or reimbursement received by Seller in respect thereof from any insurer or other
third party, to the extent permitted by any contract of insurance or similar
agreement. Notwithstanding the first two sentences of this Section 5.3(f), in
the event of a Material Allocation Default by Buyer, Seller shall have the right
to terminate this Agreement upon at least ten Business Days' prior written
notice to Buyer, and upon any such termination, Buyer shall pay to Seller, as
liquidated damages and not as a penalty, the amount of [*].
5.4. Class B Events. Anything contained herein to the contrary
--------------
notwithstanding, Seller shall not have any liability to Buyer in respect of any
Class B Event, other than any Performance Credit to which Buyer may be entitled
with respect to such Class B Event, as provided in Section 2.21 of this
Agreement and Schedule 2.21 attached hereto.
5.5. Class C Events; Buyer's Right to Terminate; Special Transition
--------------------------------------------------------------
Procedure. (a) Upon the occurrence of any Class C Event, Buyer shall have the
- - - ---------
right, but not the obligation, to terminate the Distribution Period and
implement the Special Transition Procedure as provided in this Section 5.5.
Buyer's right and option set forth in this Section 5.5 shall be exercisable by
written notice (a "Special Termination Notice") to Seller delivered at any time
within 60 days after the occurrence of any Class C Event. Any termination of
the Distribution Period pursuant to this Section 5.5 shall be effective at the
close of business on the Special Closing Date. Any dispute between Buyer and
Seller regarding the existence of any Class C Event or the right of Buyer to
terminate the Distribution Period pursuant to this Section 5.5 shall be subject
to the expedited mediation procedure provided for in Section 8.3.
(b) In the event of any termination of the Distribution Period
pursuant to this Section 5.5, each of the following transactions (collectively,
the "Special Transition Procedure") shall also occur:
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-90-
<PAGE>
(i) Seller shall sell to Buyer, and Buyer shall purchase, on the
Special Closing Date, all rights, titles and interests of Seller in and to
Buyer's [*]; provided, however, that Buyer shall not be required to
-------- -------
purchase from Seller pursuant to this Section 5.5(b)(i) the products of any
vendor in a quantity in excess of the quantity of all products of such
vendor sold through the Subject Business during the 45 day period ending on
the date of the Special Termination Notice. Within five Business Days
after receipt of the Special Termination Notice, Seller shall make
available to Buyer a list showing Seller's aggregate inventory as of the
date of the Special Termination Notice, Buyer's Allocable Inventory, the
allocation percentages for the Subject Business and the Retained Business
used to determine Buyer's Allocable Inventory, and for each vendor on such
list the aggregate quantity of all products of such vendor sold through the
Subject Business during the 45 day period ending on the date of the Special
Termination Notice. At least two Business Days prior to the Special
Closing Date, Buyer shall advise Seller of the aggregate Inventory Cost of
products of any vendor included in Buyer's Allocable Inventory that Buyer
elects not to purchase pursuant to the proviso in the first sentence of
this Section 5.5(b)(i), in which case all products of such vendor included
in [*] shall be reduced proportionately. The purchase price for all
products in Buyer's Allocable Inventory purchased by Buyer pursuant to this
Section 5.5(b)(i)Inventory ("Buyer Purchased Inventory") shall be equal to
the aggregate [*] of such products ("BPI Purchase Price"). The BPI
Purchase Price shall be due and payable as follows: An amount equal to [*]
of the BPI Purchase Price shall be paid in cash on the Special Closing
Date; the remainder shall be payable in three equal installments on each of
the 14th, 28th and 42nd days following the Special Closing Date. Delivery
of the Buyer Purchased Inventory to Buyer shall be in accordance with such
procedures as Buyer and Seller shall in good faith mutually agree,
consistent with the principle that freight costs incurred in connection
with such delivery should be minimized to the extent reasonably possible.
(ii) Buyer shall have the right (but not the obligation) to acquire
the Livermore Facility as provided in this Section 5.5(b)(ii). Such right
shall be exercisable by written notice to Seller given within three
Business Days after delivery of the Special
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-91-
<PAGE>
Termination Notice. If Buyer exercises its right to acquire the Livermore
Facility, (A) Seller shall sell to Buyer, and Buyer shall purchase, all
rights, titles and interests of Seller in and to the Livermore FF&E, (B)
Seller shall assign and delegate to Buyer, and Buyer shall assume, the
Livermore Lease, and (C) Seller shall assign and delegate to Buyer, and
Buyer shall assume, any and all leases of personal property leased by
Seller and used in and located at the Livermore DC, (except leases where
consent of the other party is required in which case the parties shall use
commercially reasonably efforts to obtain such consents) such transactions
to be effective on and as of the Special Closing Date. The purchase price
for the Livermore FF&E shall be the aggregate book value thereof as
reflected on the books of Seller in accordance with GAAP and shall be due
and payable in full on the Special Closing Date. If Buyer acquires the
Livermore Facility, any inventory of Seller on hand at, or on route to, the
Livermore DC, other than the Buyer Purchased Inventory, shall be delivered
to Seller, at Seller's risk and expense, in accordance with such procedures
as Buyer and Seller shall in good faith mutually agree, consistent with the
principle that freight costs incurred in connection with such delivery
should be minimized to the extent reasonably possible.
(iii) Seller shall grant to Buyer, for no additional charge, a
non-exclusive license (the "Special Term License") in the Designated
Territory to use (A) all computer programs, data files and other software
(including object code and source code) used by DCMS (including the program
and data files necessary to calculate Assumed Freight Charges) and (B) all
software components described in Sections D.2.1, D.3.1, and D.4.1 of
Schedule D to the Systemhouse Agreement, as in effect on the Special
Closing Date (the "Scheduled Software") in each case to the extent of
Seller's interest therein, to the extent such interest may be licensed to
Buyer as provided hereunder. The Special Term License shall be effective
for a term commencing on the Special Closing Date and ending on the second
anniversary of the Special Closing Date and shall be irrevocable and fully-
paid during such term. Except as otherwise expressly provided in this
Section 5.5(b)(iii), the Special Term License shall be on the same terms
and conditions as the Software License set forth in Section 3.1; provided,
--------
however, that the Special Term License shall not include (i) the right to
-------
authorize Customers (and/or any reseller customers of any Other Merisel
Distribution Business) to use and execute DCMS or the Scheduled Software,
or any derivative works based on thereon, whether in object code or any
other form, and for any purpose, or (ii)
-92-
<PAGE>
the right to sublicense third parties to do any of the foregoing for any
purpose.
(iv) Buyer shall be permitted to extend to all or any of the
Transition Operating Personnel an offer of employment, effective as of the
Special Closing Date, on such terms, including base salary, commission,
bonus, benefits and similar arrangements, as shall be at least
substantially comparable to those under which such Transition Operating
Personnel were employed by Seller immediately prior to the Closing. Buyer
acknowledges that Seller makes no representation that any of the Transition
Operating Personnel will accept Buyer's offer of employment, however for
six months following the date of the Special Termination Notice, Seller
shall not solicit the employment of (or otherwise interfere with Buyer's
right to employ) any Transition Operating Personnel to whom Buyer extends
an offer of employment pursuant to this paragraph. Seller shall reimburse
Buyer for all reasonable, out-of-pocket expenses actually incurred by Buyer
in connection with moving the Transition Operating Personnel from Seller's
offices in Pleasanton, California to Buyer's offices in Pleasanton,
California (or, if the space available in such offices of Buyer, plus all
additional space in the same building that Seller shall offer to sublet to
Buyer on substantially identical terms, shall not be sufficient to house
the Transition Operating Personnel, within 45 miles of Pleasanton,
California), including costs of installing wiring and data lines and
similar one-time start-up costs incurred as a result of such move. Buyer
may elect to have some or all of the Transition Operating Personnel engaged
by it continue to work out of Seller's offices for a period of up to 90
days following the Special Closing Date.
(v) If requested by Buyer, Seller shall sell to Buyer, and Buyer
shall purchase, on the Special Closing Date, all readily transportable
office furniture, telephones, personal computers and personal computer
peripherals used by the Transition Operating Personnel immediately prior to
the Special Closing Date (the "TOP F&E"). The purchase price for the TOP
F&E shall be equal to the aggregate book value thereof as reflected on the
books of Seller in accordance with GAAP and shall be due and payable in
full on the Special Closing Date. The TOP F&E shall not include any
computer operating systems or other software relating to or installed on
such personal computers, to the extent that (A) such software is
proprietary to Seller and not included in the Seller Licensed Software,
DCMS or Scheduled Software or (B) such transfer would breach any license or
other agreement between Seller and the owner or licensor thereof.
-93-
<PAGE>
On the Special Closing Date, (A) Seller shall sell and assign to Buyer the
Buyer Purchased Inventory and, if Buyer elects as provided herein, the Livermore
FF&E and TOP F&E, in each case free and clear of any and all security interests,
liens, pledges and other encumbrances, (B) Buyer and Seller shall each deliver
such instruments of conveyance, certificates and other documentation as either
party shall reasonably request to effect each of the transactions in the Special
Transition Procedure, including a bill of sale by Seller with respect to the
Buyer Purchased Inventory and, if Buyer so elects, the Livermore FF&E and TOP
F&E, and assignment and assumption agreements between Buyer and Seller with
respect to the Livermore Lease and any lease of personal property used or held
for use in connection with the Livermore Facility to be assumed by Buyer, in
each case in customary form, (C) Buyer shall pay to Seller the purchase price
for the Livermore FF&E and TOP F&E, by wire transfer of immediately available
funds, and (D) Buyer shall pay to Seller an amount equal to 40% of the BPI
Purchase Price; upon delivery of any Special Termination Notice by Buyer
pursuant to Section 5.5(a), each party shall use its best efforts to take such
actions as shall be necessary to consummate each of the transactions in the
Special Transition Procedure in accordance with this Section 5.5, including
exercising such best efforts to obtain any consents of third parties necessary
to consummate such transactions. Anything contained herein to the contrary
notwithstanding, it shall be a condition precedent to the obligations of each of
Buyer and Seller set forth in this Section 5.5(b) that (1) Seller's obligation
to perform the Logistics Services shall be terminated on the Special Closing
Date (except as provided in Section 5.5(g)), concurrently with the consummation
of the transactions in the Special Transition Procedure, and (2) each of the
transactions in the Special Transition Procedure shall be consummated
concurrently, except as otherwise expressly provided herein.
(c) Promptly upon receipt of any Special Termination Notice pursuant
to Section 5.5(a), Seller shall instruct Systemhouse in writing (i) to establish
a separate logical partition ("LPAR") at the Systemhouse Los Angeles data center
located in Buena Park, California, or any successor or replacement data center,
for use by Buyer in connection with the Subject Business, and (ii) to provide
Buyer in such LPAR with all data processing services as shall on the date of the
Special Termination Notice be provided by Systemhouse to Seller. During the
Special Transition Period, Seller shall provide (or cause Systemhouse to
provide) to Buyer copies of all reports provided by Systemhouse to Seller
pursuant to Sections A.13.0 through A.13.7 of Schedule A to the Systemhouse
Agreement, as well as copies of all invoices from Systemhouse to Seller
thereunder.
(d) Within 30 days after the end of each month in the Special
Transition Period, Buyer shall pay to Seller the
-94-
<PAGE>
Systemhouse Charges for such month, by wire transfer of immediately available
funds.
(e) On the Special Closing Date, as liquidated damages for any and
all Class C Events occurring on, before or after the Special Closing Date, and
not as a penalty, and without prejudice to any rights of Buyer with respect to
any Class A Event or Class B Event occurring prior to the Special Closing Date,
Seller shall pay to Buyer, by wire transfer of immediately available funds, the
amount of [*]. Without limiting the foregoing, Buyer shall be entitled to
offset against any payments otherwise payable by Buyer to Seller pursuant to
this Section 5.5 the amount payable by Seller to Buyer pursuant to this Section
5.5(e).
(f) At the request of Buyer at any time after delivery of a Special
Termination Notice, Seller shall cooperate with Buyer in good faith in
connection with all negotiations between Buyer and [*] and shall use
commercially reasonable efforts to assist Buyer in effecting the transition from
the freight and shipping procedures applicable under this Agreement to those
applicable under any general freight agreement that Buyer may enter into during
the six month period following such Special Termination Notice.
(g) From and after the Special Closing Date, (i) Seller shall not
have any obligation to provide any Logistics Services to Buyer hereunder, and
(ii) neither Buyer nor Seller shall have any further obligation thereafter under
Article II of this Agreement, except (A) any obligations of such party pursuant
------
to Section 2.14, "Audit and Inspection", or Section 2.24, "Recordkeeping and
-------------------- -----------------
Accounting", each of which shall survive the termination of the Distribution
- - - ----------
Period and remain in effect in accordance with its terms, and (B) that any
obligation of either party arising prior to the Special Closing Date pursuant to
paragraph (h) of Section 2.10, "Certification of Amounts; Calculation and
-----------------------------------------
Payment of Net Payment Amounts", Section 2.15, "Disclaimer of Warranties; Risk
- - - ------------------------------ ------------------------------
of Loss; Limitation of Liability", or Section 2.26, "Disputed Amounts", shall
- - - -------------------------------- ----------------
survive the termination of the Distribution Period. Notwithstanding the
foregoing, following the Special Closing Date, each party shall use commercially
reasonable efforts to finish any Confirmed Order providing for configuration
services and complete any other pending Confirmed Order received prior to the
Special Closing Date, in each case to the extent that such order is within the
reasonable control of such party. The provisions of Sections 8 and 9 shall in
any event survive any termination of the Distribution Period.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-95-
<PAGE>
(h) Except as provided in this Section 5.5, or as provided in Article
VI or Section 9.8, Buyer shall not have any right to terminate this Agreement or
the Distribution Period hereunder for any reason, including the occurrence of
any Class A Event, any Class B Event, or any Material Deficiency or other Class
C Event. Seller shall not have any right to terminate this Agreement or the
Distribution Period hereunder for any reason, except as provided in Section 6.2,
relating to the occurrence of a Material Default, and/or Section 5.3(f),
relating to the occurrence of any Material Allocation Default.
5.6. Reimbursement of Excess Operating Costs. In the event that
---------------------------------------
Buyer exercises its option to acquire the Livermore Facility pursuant to Section
5.5(b)(ii), the following additional provisions shall apply with respect to the
Special Transition Period:
(a) Within 40 days after the end of each quarter during the Special
Transition Period (the "Transition Period Determination Date" for such quarter),
Buyer shall calculate and certify to Seller, substantially in the form of
Schedule 5.6(a), each of the following amounts for such quarter:
(i) Applicable Revenue;
(ii) the gross margin of the Subject Business for such
quarter, adjusted if necessary to include the effect of all marketing
development funds, freight costs and freight recoveries relating
thereto;
(iii) the Assumed Distribution Fee (calculated by Buyer and
using the amount certified in Section 5.6(a)(ii) as "Adjusted Gross
Margin");
(iv) Direct Personnel Charges;
(v) Livermore Facility Charges;
(vi) Systemhouse Charges;
(vii) Transition Operating Costs;
(viii) Buyer Freight Charges;
(ix) Assumed Freight Charges; and
(x) Quarterly Excess Operating Cost.
(b) For any quarter that the Quarterly Excess Operating Cost is a
positive number, Seller shall pay to Buyer, on or before the second Business Day
after the Determination Date for such quarter, the Quarterly Excess Operating
Cost for such
-96-
<PAGE>
quarter, by wire transfer of immediately available funds. If the Quarterly
Excess Operating Cost is zero or less than zero, neither party shall pay any
amount to the other in respect of the Quarterly Excess Operating Cost for such
quarter.
5.7. Treatment of Earnout under Purchase Agreement. Except as
---------------------------------------------
expressly provided in this Section 5.7, neither the occurrence of any Class A
Event, Class B Event, Material Deficiency or Class C Event, nor any failure of
any of the Logistics Services to be performed in a manner that meets or exceeds
the Performance Standards for such Logistics Services, nor any other actual or
alleged breach of this Agreement by Seller shall in any way reduce or otherwise
limit or affect the right of Seller to receive all or any portion of the Earnout
Amount (as defined in the Purchase Agreement) payable to Seller under Section
2.2 of the Purchase Agreement. Notwithstanding the foregoing, if the
Distribution Period is terminated as a result of a Class C Event and [*] is less
than [*], then the Earnout Amount shall be reduced by [*] of the amount
otherwise payable to Seller as the Earnout Amount pursuant to the Purchase
Agreement for each basis point that [*] is less than [*].
5.8. Covenant Regarding Third Party Consents; Detailed Transition
------------------------------------------------------------
Plan. (a) Following the Closing Date, Buyer and Seller shall each use
- - - ----
commercially reasonable efforts to obtain from Systemhouse, any licensor of any
of the Scheduled Software, the lessor of the Livermore Facility and any other
third party whose consent may be required to consummate any of the transactions
included in the Special Transition Procedure, a written consent to such
transactions in such form as Buyer and Seller shall in good faith mutually
agree.
(b) Following the Closing Date, each of Buyer and Seller shall also
use commercially reasonable efforts to develop and document a contingency plan
for implementing the Special Transition Procedure, in such form and such detail
as Buyer and Seller shall in good faith mutually agree. No such contingency
plan or other agreement or arrangement shall be effective to amend, modify or
waive any provision of this Agreement (including any provision of this Article
V), except to the extent that such plan, agreement or arrangement is set forth
in a written instrument signed by Buyer and Seller, which instrument expressly
states that it is intended as such an amendment, modification or waiver.
5.9. Reimbursement of Certain Amounts and Related Representation and
---------------------------------------------------------------
Warranty. (a) In addition to any other right or remedy of Buyer under this
- - - --------
Article V, Seller shall reimburse Buyer for any amount that Buyer shall be
obligated to pay to any
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-97-
<PAGE>
[*] as a result of Buyer's [*] to [*] any [*] in any [*] between Seller and such
[*] entered into prior to the Closing Date and assumed by Buyer pursuant to the
Purchase Agreement, to the extent that any such [*] by Buyer results from the
[*] by Seller to [*] any or all of the [*] in a [*] that [*] or [*] any [*] for
such [*]; provided, however, that Seller shall not be obligated pursuant to this
-------- -------
Section 5.9 to the extent that Seller's [*] to [*] such [*] was caused by any
default by Buyer hereunder, or by any other event constituting force majeure.
(b) Seller represents and warrants to Buyer (i) that no written
agreement assumed by Buyer under the Purchase Agreement ("Assumed Agreement")
obligates Buyer to [*] any [*] for any [*] ("[*]") that are more [*] than the
[*] specified in this Agreement, (ii) that if Seller [*] or [*] the [*]
specified in this Agreement, Buyer will not be in breach of any [*] in any
Assumed Agreement, and (iii) that, to Seller's best knowledge, no Assumed
Agreement provides for any [*], other than [*].
(c) In the event that any Customer terminates an Assumed Agreement
(other than any Assumed Agreement which by its terms is terminable at the option
of such Customer), prior to the termination or expiration date set forth
therein, and it is finally determined, by a court of competent jurisdiction or
by mediation pursuant to Section 8.2, that such Customer had the right to
terminate such Assumed Agreement because of the [*] of Buyer to [*] the [*]
therein, and either (i) such [*] are more [*] than the [*] set forth herein or
(ii) Buyer's [*] to [*] such [*] was caused by Seller's [*] to [*] the [*] in a
[*] that [*] the [*] set forth herein, then Seller shall indemnify and hold
harmless Buyer, its successors and assigns, from and against any and all losses,
costs, liabilities, obligations and expenses, including the reasonable fees and
expenses of attorneys and accountants, arising out of or resulting from such
termination of such Assumed Agreement by such Customer. Anything contained
herein to the contrary notwithstanding, neither the cap on the aggregate
liability of the Seller provided in Section 5.3(d)(i), nor any provision of this
Agreement excluding liability for special, indirect, incidental or consequential
damages, shall apply to the foregoing indemnity.
5.10. Exclusivity of Remedies. (a) Anything contained herein to the
-----------------------
contrary notwithstanding, the rights of Buyer under this Article V shall
constitute the sole and exclusive rights and remedies of Buyer in connection
with any and all losses, costs, damages, deficiencies, liabilities and/or
expenses of Buyer arising from or in connection with this Agreement or any
related transaction or event.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-98-
<PAGE>
(b) Anything contained herein to the contrary notwithstanding, the
rights of Seller under this Agreement (including the right to receive direct
monetary damages determined in accordance with applicable contract law) shall
constitute the sole and exclusive rights and remedies of Seller in connection
with any and all losses, costs, damages, deficiencies, liabilities and/or
expenses of Seller arising from or in connection with this Agreement or any
related transaction or event.
5.11. Amendment of Certain Agreements. Seller shall provide Buyer
-------------------------------
with a copy of any amendment to the Livermore Lease or the Systemhouse
Agreement, promptly following the execution thereof.
5.12. Representation Regarding Special Term License. DCMS and the
---------------------------------------------
Scheduled Software include certain computer programs, data files and/or other
materials provided to Seller by third parties, under license or otherwise, all
of which are identified as such on the program listing for DCMS attached hereto
as Schedule 5.12. Anything contained herein to the contrary notwithstanding,
the Special Term License shall be limited, as to the third party materials so
identified, to such rights as may lawfully be granted under any applicable
license or other arrangement governing the use thereof. Seller represents and
warrants to Buyer that, except as provided in the immediately preceding
sentence, Seller has all rights, power and authority required to grant the
Special Term License to Buyer as provided in Section 5.5(b)(iii).
ARTICLE VI
CERTAIN EVENTS
6.1. Bankruptcy, Etc.. In the event that:
----------------
(a) either party to this Agreement (the "Affected Party") shall
(i) apply for or consent to the appointment of, or the taking of possession
by, a receiver, custodian, examiner, trustee, liquidator or the like of
itself or all or a substantial portion of its property, (ii) admit in
writing that it is unable to pay its debts as they come due, (iii) make a
general assignment for the benefit of creditors, (iv) file a voluntary
petition in bankruptcy, or a petition or an answer seeking reorganization
or an arrangement with creditors or composition or adjustment of its debts,
or to take advantage of any law, statute or regulation relating to
bankruptcy, reorganization, insolvency, dissolution or liquidation, or an
answer admitting the material allegations of a petition filed against it in
any proceeding under any such law, statute or
-99-
<PAGE>
regulation, (v) fail to controvert in a timely and appropriate manner any
petition filed against it in an involuntary case under Title 11, United
States Code, (S)(S) 101 et seq. (the "Bankruptcy Code"), or (vi) take any
-- ---
formal corporate action for the purpose of effecting any of the foregoing;
or
(b) a proceeding or case shall be commenced, without the
application or consent of the Affected Party, in any court of competent
jurisdiction, seeking (i) the reorganization, liquidation, dissolution or
winding-up of the Affected Party, (ii) the appointment of a receiver,
custodian, examiner, trustee, liquidator or the like of the Affected Party
or of all or any substantial part of its property, or (iii) similar relief
in respect of such Affected Party under any law relating to bankruptcy,
reorganization, insolvency, dissolution, liquidation or winding-up, and
such proceeding or case shall continue undismissed, or an order,judgment or
decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 45 or more consecutive
days, or (iv) an order for relief against the Affected Party shall be
entered in an involuntary case under the Bankruptcy Code;
(any such event, a "Bankruptcy Event"), then the other party hereto, by written
notice to the Affected Party (the "Termination Notice"), may cause the
Distribution Period to be terminated, effective immediately upon delivery of
such Termination Notice, or as of such later date as shall be set forth therein.
Each party hereby agrees that in the event of a Bankruptcy Event, the party
other than the Affected Party shall be entitled to immediate relief from any
automatic stay provisions of the Bankruptcy Code that might otherwise prohibit
or restrict such party from exercising any of its rights hereunder or from
commencing, continuing or enforcing claims against the Affected Party arising
hereunder, including relief from any automatic stay provisions that might
otherwise prohibit or restrict such other party's immediate exercise of its
rights hereunder (including any rights of set off hereunder and, in the case of
a Bankruptcy Event affecting Seller, Buyer's rights and remedies set forth
herein upon the occurrence of a Class C Event). The Affected Party hereby
consents to the immediate lifting of any such automatic stay with respect to the
other party and agrees not to contest any motion brought by such other party to
lift such stay. The Affected Party hereby agrees that any protection that would
otherwise be accorded by the application of the automatic stay provisions to
such other party is not necessary to relieve the Affected Party from financial
pressure or to permit the Affected Party to attempt an effective repayment or
reorganization plan in bankruptcy.
-100-
<PAGE>
6.2. Material Default by Buyer. Without limiting any other rights of
-------------------------
Seller hereunder, upon the occurrence and during the continuation of any
Material Default by Buyer hereunder, Seller may cause the Distribution Period to
be terminated, upon not less than ten Business Days' prior written notice to
Buyer.
6.3. Effect of Termination. In the event of any termination of the
---------------------
Distribution Period pursuant to Section 6.1, Section 6.2 or Section 9.8, (i)
Seller shall not have any obligation to provide any Logistics Services to Buyer
hereunder, and (ii) neither Buyer nor Seller shall have any obligation under
Article II of this Agreement, except (A) any obligations of such party pursuant
------
to Section 2.14, "Audit and Inspection", or Section 2.24, "Recordkeeping and
-------------------- -----------------
Accounting", each of which shall survive the termination of the Distribution
- - - ----------
Period and remain in effect in accordance with its terms, and (B) that any
obligation of either party arising prior to the Special Closing Date pursuant to
paragraph (g) of Section 2.10, "Certification of Amounts; Calculation and
-----------------------------------------
Payment of Net Payment Amounts", Section 2.15, "Disclaimer of Warranties; Risk
- - - ------------------------------ ------------------------------
of Loss; Limitation of Liability", or Section 2.26, "Disputed Amounts", shall
- - - -------------------------------- ----------------
survive the termination of the Distribution Period. Notwithstanding the
foregoing, following any termination pursuant to Section 6.1 or Section 6.2,
each party shall use commercially reasonable efforts to finish any Confirmed
Order providing for configuration services and complete any other pending
Confirmed Order received prior to the date of such termination, in each case to
the extent that such order is within the reasonable control of such party. The
provisions of Sections 8 and 9 shall in any event survive any termination of the
Distribution Period.
ARTICLE VII
WINDING-DOWN
7.1. Winding Down Period. (a) Not less than [*] months prior to the
-------------------
second anniversary of the Closing Date, Seller and Buyer shall begin negotiating
in good faith to establish a timetable and procedures for the termination of the
Logistics Services pursuant to Article II. If Seller and Buyer are unable to
agree upon such a timetable and procedures prior to the beginning of the [*]
month preceding the second anniversary of the Closing Date, the Distribution
Period shall automatically be extended by a period of [*] additional months (the
"Winding Down Period"). During any Winding Down Period hereunder, the monthly
volume of products sold by Seller to Buyer hereunder shall be reduced ratably in
each month during the Winding Down
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-101-
<PAGE>
Period to reduce the volume of products sold to zero at the end of the Winding
Down Period. Anything contained herein to the contrary notwithstanding, the
provisions of this Article VII shall not apply to any termination of the
Distribution Period pursuant to Section 5.5. or Article VI.
(b) Upon any expiration or termination of the Distribution Period, for
a period of [*] months following the date of such expiration or termination,
Seller will cooperate with Buyer to the extent commercially reasonable to assist
in the orderly transfer of the services, functions and operations provided by
Seller hereunder to another services provider or to Buyer itself (including the
orderly migration of data processing services and data); provided, however,
-------- -------
that, except in the case of any termination of the Distribution Period pursuant
to Section 5.5, Buyer shall reimburse Seller as incurred for all reasonable out-
of-pocket expenses incurred by Seller in connection therewith.
7.2. Termination of Winding Down Period. Anything contained herein
----------------------------------
to the contrary notwithstanding, if any of the Events described in clauses (i),
(ii), (iii) and (iv) of the definition of Class C Event set forth in Section 5.1
occur at any time during the Winding Down Period, Buyer shall have the right to
terminate the Winding Down Period, exercisable upon not less than ten Business
Days' prior written notice to Seller.
ARTICLE VIII
RESOLUTION OF DISPUTES
8.1. Resolution by Parties. In the event that any dispute arises
---------------------
regarding the interpretation of this Agreement or any of the respective rights
and obligations of the parties hereunder, the parties shall cooperate with one
another in a good faith effort to resolve such dispute on an amicable basis,
consistent with the general purposes of this Agreement. To that end, Buyer and
Seller shall each appoint two senior executives (including at least one
financial or accounting officer) to represent such party in negotiations under
this Section 8.1. The initial representatives of each party are set forth on
Schedule 8.1 attached hereto. Either party may change one or more of its
representatives appointed pursuant to this Section 8.1 by written notice to the
other party.
8.2. Mediation. (a) If the parties are unable to resolve any
---------
dispute hereunder pursuant to Section 8.1, either party may upon ten Business
Days prior written notice to the
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-102-
<PAGE>
other refer such dispute to mediation by a panel of two or three independent
mediators, who shall be qualified by education, experience and training to
resolve the issues to be mediated. Any mediation hereunder shall be held in San
Francisco, California, or such other place as the mediators shall reasonably
determine. Buyer and Seller shall each appoint one mediator; if the two
mediators are unable to resolve any issue before them, they shall appoint a
third independent mediator, and the decision of the majority shall be the
decision of the panel. Buyer and Seller shall cooperate with the mediators in
good faith and shall provide, on a confidential basis reasonably satisfactory to
Buyer, Seller and the mediators, such information as the mediators shall
reasonably request in connection with any mediation. The mediators may adopt
such reasonable rules regarding the conduct of any mediation as such mediators
shall deem necessary or appropriate.
(b) The reasonable costs and expenses of any mediation pursuant to
this Section 8.2 shall be borne equally by Buyer and Seller, unless the decision
of the mediators shall otherwise direct.
(c) In the case of any dispute referred to mediation hereunder in
which the dollar amount in question is less than [*], and no relief other than
money damages has been requested by either party, the decision of the mediators
shall be final, binding and conclusive upon each of the parties hereto and
judgment may be entered thereon in any federal or state court having
jurisdiction. Mediation conducted hereunder shall be non-binding with respect
to any dispute in which the dollar amount in question equals or exceeds [*], and
any dispute in which either party requests relief other than money damages
regardless of the amount in dispute, and any evidence with respect to any
decision rendered in any such non-binding mediation shall not be admissible in
any legal, equitable, arbitral or other proceeding relating to any dispute
hereunder.
(d) If, in the case of any dispute in which the dollar amount in
question equals or exceeds [*], or in which either party requests relief other
than money damages regardless of the amount in dispute, such dispute is not
resolved for any reason (including the inability of the parties or the mediators
to schedule such mediation) within 60 days following delivery of the notice
requesting mediation under this Section 8.2, then neither party shall have any
further obligation to attempt to resolve such dispute through negotiation or
mediation under this Article VIII or otherwise and each party shall have the
right to exercise whatever rights or remedies it may have hereunder or at law or
in equity, including the right to initiate litigation.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-103-
<PAGE>
(e) Each party shall notify the other in writing within 30 days after
the Closing Date as to the initial mediators selected by such party. Either
party may change the mediator selected by such party upon written notice to the
other party.
8.3. Expedited Mediation. In the event of any dispute regarding the
-------------------
existence, cure or continuation of any Material Default, the mediation process
shall be expedited as follows:
(a) If the dispute is not resolved through negotiations by the senior
executives appointed pursuant to Section 8.1 within three Business Days
following written notice from either party requesting such negotiations, the
matter shall immediately be referred to mediation pursuant to Section 8.2, with
no requirement of ten Business Days prior written notice as set forth in Section
8.2.
(b) If the dispute is not resolved within seven Business Days
thereafter for any reason (including the inability of the parties or the
mediators to schedule such mediation), neither party shall have any further
obligation to attempt to resolve such dispute through mediation and each party
shall have the right to exercise whatever rights or remedies it may have
hereunder or at law or in equity, including the right to initiate litigation.
ARTICLE IX
MISCELLANEOUS
9.1. Entire Agreement. This Agreement (including the Schedules,
----------------
Annexes and Exhibits attached hereto), the Purchase Agreement and the other
agreements entered into concurrently therewith contain the entire agreement
among the parties hereto with respect to the transactions contemplated hereby
and supersedes all prior agreements or understandings between the parties with
respect thereto.
9.2. Descriptive Headings. Descriptive headings are for convenience
--------------------
only and shall not control or affect the meaning or construction of any
provisions of this Agreement.
9.3. Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and shall be sufficient if (a) delivered
personally or sent by telecopier, (b) sent by nationally-recognized overnight
courier or (c) sent by certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Buyer, to:
-104-
<PAGE>
Merisel FAB, Inc.
c/o Merisel, Inc.
200 Continental Boulevard
El Segundo, California 90245-0984
Attention: Michael D. Pickett
Co-Chairman, President and
Chief Executive Officer
Telecopier: (310) 615-1234;
with copies to:
Riordan & McKinzie
300 South Grand Avenue
29th Floor
Los Angeles, California 90071-3155
Attention: Robert G. Morrish, Esq.
Telecopier: (213) 229-8550;
and
Merisel FAB, Inc.
5964 West Las Positas
Pleasanton, California 94588-8575
Attention: Donna Straff
Corporate Counsel
Telecopier: (510) 734- 4813; and
if to the Seller, to:
ComputerLand Corporation
5964 West Las Positas
Pleasanton, California 94588-9012
Attention: Richard F. Vitkus
Senior Vice President and
General Counsel
Telecopier: (510) 734-4823;
with a copy to:
O'Sullivan Graev & Karabell
30 Rockefeller Plaza
New York, New York 10112
Attention: Lawrence G. Graev, Esq.
Telecopier: (212) 408-2467;
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. Any such
communication shall be effective (i) when delivered if personally delivered or
sent by telecopier, (ii) on the Business Day (as hereinafter defined) after
dispatch if sent by nationally-recognized, overnight courier and (iii) three
Business Days following the posted date, if sent by mail.
-105-
<PAGE>
9.4. Counterparts. This Agreement may be executed in any number of
------------
counterparts and on separate counterparts, and each such counterpart shall
constitute an original instrument, but all such counterparts together shall
constitute one agreement.
9.5. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California applicable to
contracts made and performed wholly therein.
9.6. Amendment, Modification and Waiver. This Agreement shall not be
----------------------------------
amended or modified except pursuant to an instrument in writing signed by Seller
and Buyer. No purported waiver hereunder (including any purported waiver due to
either party's failure to send a written notice of default to the other party)
shall be effective without a written instrument signed by the party against whom
such waiver is sought to be enforced. The waiver of any provision hereunder on
any occasion shall not constitute a waiver of any other provision, or of the
same provision on any other occasion.
9.7. Severability. Any provision of this Agreement that 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 any appropriate judicial
body by limiting or reducing it to the minimum extent necessary to make it
legally enforceable.
9.8. Force Majeure. Seller shall not be liable for any delay or
-------------
failure to deliver any products ordered by any Customer from Buyer as
contemplated hereby or to perform any of its other obligations hereunder if such
delay or failure is caused by a strike, lockout or other labor dispute (other
than any such dispute between Seller and members of its own work force); war,
riot, civil commotion or act of a public enemy; fire, flood, accident, storm or
act of God; change in law or regulation, embargo or other government
restriction; or any other cause beyond the reasonable control of Seller ("force
majeure"). In the event of any force majeure event, Seller will use
commercially reasonable efforts to minimize the impact of such event and to re-
establish full services as soon as reasonably practicable, including but not
limited to using commercially reasonable efforts to secure alternative sources
of supply, if available on commercially reasonable terms and conditions. If a
force majeure event results in the occurrence of any Class C Event that
continues for a period of ten or more consecutive Business Days (or that
continues for a period of five or more consecutive Business Days, if a
reasonable person in the business
-106-
<PAGE>
of Buyer and Seller would believe that it was highly unlikely for Seller to cure
such Class C Event within such ten Business Day period), Buyer may cause the
Distribution Period to be terminated (with effect as provided in Section 6.3),
upon not less than three Business Days' prior written notice to Buyer;
otherwise, no delay or failure caused by force majeure shall constitute a breach
of any provision of this Agreement or result in a termination of this Agreement
or of the Distribution Period or result in the imposition of damages (including
liquidated damages) or Performance Credits in respect of such delay or failure
upon any party hereto.
9.9. Confidentiality. (a) Each of Buyer and Seller shall maintain
---------------
the confidentiality of all confidential or proprietary information of the other
party obtained hereunder, including marketing, advertising and promotional
methods, agreements with vendors, manufacturers, distributors and other
suppliers, Franchise Agreements, Datago Agreements, customer lists and other
information regarding the customers of any Customer, pricing policies, financial
information, sales volume, inventory procedures and amounts, logistic systems,
computer programs (including source code and object code), ideas, concepts,
processes, research and development and other information related to the
business or customers of such other party, whether such information shall be in
written, machine-readable, graphic or other form (collectively, "Confidential
Information"). Neither party shall use (except in connection with this
Agreement or any transaction contemplated hereby), transfer, release, publish or
disclose, directly or indirectly, any Confidential Information of the other
party, without such other party's prior written consent (which consent shall not
unreasonably be withheld or delayed), except as required by law. Confidential
Information of any party does not include any information that (i) becomes
generally known or available to the public, through no fault of the other party,
(ii) except as provided in Section 9.9(c) was known by the other party, without
any obligation of confidentiality, prior to the date hereof, or (iii) is
lawfully obtained by the other party after the date hereof from a third person
not bound by any obligation of confidentiality to the first party. Each party
understands that the other party will not have an adequate remedy at law for a
breach or threatened breach by such party of the terms of this Section and
therefore agrees that in the event of such a breach or threatened breach, the
other party may obtain an injunction or restraining order to enjoin such breach
or threatened breach, in addition to any other available remedy.
(b) Seller will establish and maintain safeguards against the
destruction, loss or alteration of Buyer's data in the possession of Seller
which are not less rigorous than those currently utilized by Seller to protect
its own data. In the event that additional safeguards for Buyer's data are
reasonably requested by Buyer, upon prior written approval by Buyer of any
-107-
<PAGE>
additional costs or charges, Seller shall provide such additional safeguards and
Buyer shall reimburse Seller as incurred for any additional costs thereby
incurred by Seller. Buyer's data will be and remain Buyer's property. Seller
is authorized to have access to and to make use of such data as is appropriate
for the performance by Seller of its obligations under this Agreement. Upon the
termination of this Agreement for any reason or, with respect to any particular
data that shall no longer be required by Seller in order to render services
under this Agreement, on the date so requested by Buyer, such data will be
either erased from the data files maintained by Seller or, if Buyer so elects,
returned to Buyer by Seller, and an officer of Seller will deliver to Buyer such
certification of Sellers' fulfillment of this obligation as Buyer may reasonably
request. Buyer's data will not be utilized by Seller for any purpose other than
in accordance with this Agreement, nor will Buyer's data or any part thereof be
disclosed, sold, assigned, leased or otherwise disposed of to third persons by
Seller or commercially exploited by or on behalf of Seller, its employees or
agents.
(c) Seller shall use its reasonable best efforts to ensure that
information regarding the Subject Business, including information regarding
Customers and any customer of any Customer, shall be maintained as confidential
following the Closing Date, whether or not such information was in the
possession of Seller on or prior to the Closing Date. Seller shall maintain
such procedures and safeguards as Seller determines may be necessary to ensure
that Confidential Information obtained on or before the Closing Date for use in
connection with the central confirmation, special order purchasing, soft
allocation, traffic, direct ship and other functions and services that require
such information in the performance of their duties is not available or
disclosed to any sales representative of the Retained Business, any person in
any company-owned branch location, or any other employee or office of the
Retained Business who does not require access thereto in connection with his or
her proper function.
(d) Anything to the contrary contained herein notwithstanding, Buyer
and Seller may at any time disclose to any vendor any information regarding the
products of such vendor purchased by Seller as contemplated hereunder, without
the consent of any other person.
9.10. Construction. Each party acknowledges that it has participated
------------
fully in the negotiation and drafting of this Agreement, that it has been
represented by counsel in connection therewith, that such negotiations and
drafting have been conducted at arms-length, and that neither party had any
greater negotiating power than the other in accordance herewith. Accordingly,
each party agrees that it shall not assert that the other party is the "drafter"
of this Agreement in connection with any rule of law or principal of
interpretation that requires a
-108-
<PAGE>
contract to be construed against the drafter thereof, and irrevocably waives the
benefit of any such rule or principal in connection herewith, as an affirmative
defense or otherwise.
9.11. No Assignment; Benefits of Agreement; No Third Party
----------------------------------------------------
Beneficiary. (a) Neither party may assign or delegate any of its rights or
- - - -----------
obligations hereunder without the prior written consent of the other party,
which consent such other party may withhold in the good faith exercise of its
sole discretion; provided, however, that this Section 9.11(a) shall not prohibit
-------- -------
Seller from out-sourcing the operation and maintenance of its mainframe-based
data processing system, substantially in the manner in effect on the Closing
Date.
(b) Anything contained herein to the contrary notwithstanding, this
Agreement may be assigned to any secured lender in connection with any financing
provided by such lender to the assigning party or to the purchaser of all or
substantially all the assets of the party so assigning this Agreement; provided,
--------
however, that from and after the date hereof until the earlier of (1) the second
- - - -------
anniversary of the date hereof and (2) the termination of the Distribution
Period (A) in the case of Seller, such purchaser shall not be one of the
following (collectively, the "Seller Prohibited Transferees"):
(i) any Eligible Vendor;
(ii) any of those entities set forth on Schedule 11.7(a)(ii) to the
--------------------
Purchase Agreement or any successor entities thereto;
(iii) except for those entities set forth on Schedule 11.7(a)(iii) to
---------------------
the Purchase Agreement, any entity that derives a [*] of its [*] from the
purchase and resale to end-users in the Designated Territory of
microcomputer products; and
(iv) any entity whose [*] at the time of the assignment is less than
[*]; and
(B) in the case of Buyer, such purchaser shall not be one of the following
(collectively, the "Buyer Prohibited Transferees"):
(i) any Eligible Vendor;
(ii) any of those entities set forth on Schedule 11.7(a)(ii) to the
--------------------
Purchase Agreement, or any successor entities thereto; and
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-109-
<PAGE>
(iii) any entity whose [*] at the time of the assignment is less than
[*].
For purposes of this Section 9.11, any transaction or series of transactions by
way of merger, consolidation or other business combination or purchase of
beneficial ownership (as defined in Rule 13d-3 of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), in which a "person" or "group" (within
the meaning of Section 13(d) and 14(d)(2) of the Exchange Act) becomes the
"beneficial owner" (as defined in Rule 13d-3 of the Exchange Act) of capital
stock representing 50% or more of the total voting power entitled to vote in the
election of the board of directors of Seller, Buyer, Merisel or such other
entity surviving the transaction, as the case may be, shall constitute an
assignment hereunder. Without limiting any other rights or remedies available
to (A) the Buyer at law or equity, if an assignment by Seller in violation of
this Section 9.11 occurs, Buyer shall have no obligation to make the payments
required by Section 2.1(c) of the Purchase Agreement, such assignment shall, at
the Buyer's option exercised within 45 days of such assignment, be deemed to be
a Class C Event under this Agreement, and the Guaranty Agreement shall
immediately terminate and Merisel shall have no further liability thereunder
(except for liabilities arising prior to such termination which have not yet
been discharged) and (B) the Seller at law or equity, if an assignment by the
Buyer in violation of this Section 9.11 occurs, the Monthly Distribution Fee
otherwise payable by the Buyer to the Seller pursuant to the Services Agreement
from and after such assignment shall be increased by [*] and Buyer shall pay to
Seller [*] as liquidated damages.
(c) This Agreement shall be binding upon and inure to the benefit of
each of the parties hereto and their respective successors and permitted
assigns. This Agreement shall not inure to the benefit of any person not a
party hereto and no third party shall accrue any benefit, claim or right of any
kind whatsoever pursuant to, under, by or through this Agreement.
9.12. First Month Estimates. Anything contained herein to the
---------------------
contrary notwithstanding, all amounts required to be certified by Buyer and/or
Seller pursuant to Section 2.10 with respect to the first month of the
Distribution Period shall be based on the good faith estimate of such party for
such month, as determined by such party in a commercially reasonable manner.
- - - -----------
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
-110-
<PAGE>
ARTICLE X
MAINTENANCE OF EQUITY OWNERSHIP IN MERISEL
10.1. Overview. In order to provide Seller with additional
--------
incentives to successfully perform its obligations under this Agreement, in the
event that Seller shall acquire any shares of Common Stock (as hereinafter
defined) pursuant to the Stock Purchase Agreement (as hereinafter defined),
Seller shall maintain an equity investment in Merisel in an amount, for the
period and on the other terms set forth in this Article X.
10.2. Definitions. As used herein, the following terms shall have
-----------
the meanings ascribed to them below:
(a) "Applicable Price" shall mean the last sale price regular way for
the Common Stock as traded on the National Association of Securities Dealers
Automated Quotation System or any national securities exchange on which the
Common Stock is traded immediately prior to the placing of a sell order
hereunder with respect to the Common Stock.
(b) "Common Stock" shall mean the Common Stock, $.01 par value,
of Merisel.
(c) "Investment Period" shall mean the period commencing on the
Closing Date and ending on the earlier of (i) the second anniversary of the
Closing Date and (ii) the termination of the Distribution Period.
(d) "Minimum Ownership Amount" shall mean that number of shares of
Common Stock, if any, issued to Seller pursuant to the Stock Purchase Agreement,
subject to reduction for sales of shares of Common Stock pursuant to the first
proviso to Section 10.3 and adjustment as provided in Section 10.4.
- - - -------
(e) "Minimum Value" shall mean (i) in the case of the Seller, $12.0867
per share of Common Stock, and (ii) in the event Seller has pledged Common Stock
to a Secured Lender, $13.5975 per share of Common Stock.
(f) "Secured Lender" shall mean a lender to whom all outstanding
shares of Common Stock owned by Seller have been pledged.
(g) "Stock Purchase Agreement" shall mean the Stock Purchase Agreement
dated as of January 31, 1994, pursuant to which Seller may acquire shares of
Common Stock.
10.3. Maintenance of Equity Ownership. In the event Seller shall
-------------------------------
acquire any shares of Common Stock pursuant to the Stock Purchase Agreement,
during the Investment Period, Seller
-111-
<PAGE>
(or a Secured Lender, as applicable) shall remain the registered and beneficial
owner of not less than the Minimum Ownership Amount; provided, however, that in
-------- -------
the event the Applicable Price of Common Stock is at any time below the Minimum
Value, Seller (or a Secured Lender, as applicable, who shall have exercised its
rights and remedies under the documentation relating thereto) shall have the
right to sell any or all of the shares of Common Stock then owned by it so long
as such shares are sold within a week of placing the sell order referred to in
the definition of Applicable Price; provided further, however, that the
-------- ------- -------
obligation of Seller to maintain the Minimum Ownership Amount shall not prevent
(a) sales of Common Stock to any Affiliate (as defined in the Purchase
Agreement) so long as such Affiliate agrees in writing with the Buyer to be
bound by this Article X (but such Affiliate shall not have the right to sell to
another Affiliate) or (b) any sale (1) in response to an offer to all
stockholders to purchase or exchange for cash or other consideration any Common
Stock (A) which is made by or on behalf of Merisel or (B) which is made by
another person or group, or (2) in the event of a merger or consolidation in
which Merisel is acquired or a sale of all or substantially all of the assets of
Merisel or pursuant to a plan of liquidation of Merisel.
10.4. Stock Splits, Combinations and Similar Events. In the event of
---------------------------------------------
any stock split, combination or other similar event with respect to the Common
Stock, the share amounts and share prices set forth in this Article X shall be
appropriately adjusted to reflect such event.
10.5. Breach. Any breach of this Article X shall constitute a Class
------
A Event for purposes of this Agreement; provided, however, that the limitations
-----------------
on damages and remedies set forth elsewhere in this Agreement with respect to a
Class A Event shall not be applicable to any such breach of this Article X.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
COMPUTERLAND CORPORATION
By: /s/ Ware Grove
Name: Ware Grove
Title: VP, Treas.
MERISEL FAB, INC.
By: /s/ James L. Brill
Name: James L. Brill
Title: Vice President
-112-
