FIRST AMENDMENT TO PURCHASE AGREEMENT
THIS IS A FIRST AMENDMENT TO PURCHASE AGREEMENT (the
"Amendment") dated as of October 4, 1996 by and among CHS
Electronics, Inc., a Florida corporation ("Buyer"), and Merisel,
Inc., a Delaware corporation ("Merisel"), and Merisel Europe,
Inc., a Delaware corporation ("Europe"). Merisel and Europe are
collectively referred to herein as the "Sellers." All
capitalized terms without definition used in this Amendment shall
retain their respective meanings as specified in the Purchase
Agreement (as defined hereafter).
Background
Pursuant to the Purchase Agreement (the "Purchase
Agreement") dated August 29, 1996 by and among the Buyer and the
Sellers, the Buyer agreed to purchase and the Sellers agreed to
sell the Europe Stock, the Latin America Stock and the Mexico
Stock and the Europe Assets on the terms and subject to the
conditions set forth in such Purchase Agreement. The Buyer and
the Sellers have deemed it advisable to amend certain terms of
the Purchase Agreement, subject to the terms and conditions of
this Amendment.
Terms
In consideration of the mutual covenants contained herein
and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I.
1.1. Amendment to Section 1.2(a). Section 1.2(a) of the
Purchase Agreement is hereby amended in its entirety as follows:
(a) Purchase Price. The aggregate purchase price for all
of the Stock and the Europe Assets (the "Purchase Price") shall
be as follows: (i) Forty Million Dollars ($40,000,000) for the
Latin America Stock and the Mexico Stock, subject to adjustment
as set forth in Section 1.2(d)(ii) hereof (the "Latin/Mexico
Purchase Price"), (ii) with respect to the Europe Stock, an
amount equal to the Total Adjusted Capital of the European
Subsidiaries and (iii) with respect to the Europe Assets, the
book value of the Europe Assets (the "Europe Assets Value") as of
the Closing Date (the aggregate of items (ii) and (iii) are
defined as the "Purchase Price of Europe Stock and the Europe
Assets"). Each of the Latin/Mexico Purchase Price and the
Purchase Price of the Europe Stock and the Europe Assets shall be
apportioned between the Latin American Stock and the Mexico Stock
and among the Europe Stock and Europe Assets, respectively, in
accordance with the apportionment schedules set forth on Schedule
1.2(a). "Total Adjusted Capital of the European Subsidiaries" is
hereby defined to be Net Assets, excluding any Amounts Due to or
from Related Parties, as defined hereafter, as adjusted by the
formula set forth in Exhibit A. "Net Assets" is defined as
assets reflected on the Europe Closing Balance Sheet (as such
term is defined in Section 1.2(c)(i)) increased by any
receivables subject to the Asset Amortization Agreement (as such
term is defined in Section 1.2(b), but decreased by liabilities
to third parties reflected on such balance sheet. "Amounts Due
to or from Related Parties" shall include any payables to or
receivables from Related Parties (as such term is defined in
Section 2.19) including, without limitation, any amounts
outstanding under the Revolving Credit Agreement dated as of
December 26, 1993 and amended and restated as of April 12, 1996
among Europe and Merisel Americas, Inc. as borrowers and Citicorp
USA Inc. as agent (the "Revolving Credit Agreement") and inter
company tax accounts but excluding deferred tax liabilities and
deferred tax assets which will be assumed by the Buyer. The
Purchase Price shall be further reduced by (X) $4 million for the
cost of eliminating duplicative facilities and severance of
redundant personnel and relocation costs and (Y) $3,216,000
representing the rent payable under certain leases in the
Netherlands during the 12 months following the Closing Date.
Attached as Schedule 1.2(a) is a sample calculation of what the
Purchase Price would be if the same were determined on the June
30, 1996 balance sheet. Merisel and Buyer shall cause a physical
inventory to be taken on the Closing Date in connection with the
foregoing calculation.
1.2. Amendment to Sections 1.2(b), (c)(i) and (d). Sections
1.2(b), (c)(i) and (d) of the Purchase Agreement are hereby
amended in their entirety as follows:
(b) Payments. The Purchase Price shall be payable as
follows: on the Closing Date, Buyer shall pay (i) to Europe, by
wire transfer, a cash amount (the "Europe Cash Payment") equal to
the Estimated Purchase Payment Amount (as defined below) less the
amount payable to Deutsche Financial Services (UK) Ltd. under the
Asset Amortization Agreement as of the Closing Date and (ii) to
Merisel, by wire transfer, a cash amount (the "Latin/Mexico Cash
Payment") equal to Forty Million Dollars ($40,000,000). For
purposes of this Agreement, the term "Estimated Purchase Payment
Amount" means the dollar amount of One Hundred and Twenty Eight
Million Two Hundred and Thirty Eight Thousand One Hundred and
Forty Five Dollars ($128,238,145) less the amounts paid pursuant
to clause (ii) above less cash transfers to Merisel prior to
Closing of $16,408,000. In addition, Buyer shall assume the
liability of Europe under the Asset Amortization Agreement
between Deutsche Financial Services, (UK) Ltd., and Merisel
(U.K.) Limited dated as of October 12, 1995 (the "Asset
Amortization Agreement") and the liabilities and obligations set
forth on Schedule 1.1.
(c)(ii) Regarding the Closing Balance Sheets. (i) Prompt
ly after the Closing Date, but in any event no later than 60 days
after the Closing Date, Europe shall prepare and deliver to
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Buyer, or cause to be prepared and delivered to Buyer, a
combining balance sheet of the European Subsidiaries and Europe
Assets as of the close of business on the Closing Date (the
"Europe Closing Balance Sheet"), together with the draft audit
report of Deloitte & Touche, LLP thereon. The Europe Closing
Balance Sheet shall be prepared in accordance with United States
generally accepted accounting principles ("U.S. GAAP") applied
consistently with those U.S. GAAP principles applied in the
preparation of the 1995 Balance Sheets (as defined in Section
2.7) (such accounting principles being, the "Accounting
Principles"), except that the accounts receivable and inventory
on the Europe Closing Balance Sheet will be valued utilizing the
adjustments listed in Exhibit A. In addition, the combining
closing balance sheet will convert foreign currencies to U.S.
dollars at the closing exchange rate published in the Wall Street
Journal as of the Closing Date, and the Europe Closing Balance
Sheet will be prior to the application of purchase accounting and
recordation of the transactions contemplated in the Agreement.
MIFINCO, Inc.'s investment in shares of Merisel France, Inc. and
Mexico will be valued at zero for the combining Closing Balance
Sheet. The report of Deloitte & Touche, LLP shall state (without
qualification as to scope of audit or other matters) that in
their opinion the Europe Closing Balance Sheet presents fairly in
all material respects, the net assets of Europe sold as of the
Closing Date, on the basis of accounting defined in this
Agreement and Exhibit A. The Europe Closing Balance Sheet shall
be subject to the review of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ L.L.P. The parties
shall allow and cause the European Subsidiaries to allow the
parties, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, L.L.P. and other representatives of the
parties full and complete access to all work papers, books and
records and all additional information used in preparing the
Europe Closing Balance Sheet and will make their and the European
Subsidiaries' officers and employees reasonably available to
discuss with the parties and their representatives such papers,
books, records and information. Buyer and its representatives
shall be provided complete access to all work papers and other
information used by Deloitte & Touche, LLP in examining the
Europe Closing Balance Sheet which are not proprietary to
Deloitte & Touche, LLP and Sellers and their representatives
shall be provided complete access to all work papers and other
information used by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, L.L.P. in reviewing the
Europe Closing Balance Sheet which are not proprietary to ▇▇▇▇▇
▇▇▇▇▇▇▇▇, LLP. The Europe Closing Balance Sheet, when delivered
by Europe to Buyer, shall be deemed final, conclusive and binding
on the parties and will be deemed to be the Europe Closing
Balance Sheet, upon which the Purchase Price of the Europe Stock
and the Europe Assets will be based, unless either Europe or
Buyer notifies the other, within 10 days after receipt of the
Europe Closing Balance Sheet, of its disagreement therewith
(which notice shall state with reasonable specificity the reasons
for any disagreement and the amounts in dispute). If neither
Europe nor Buyer disagrees with the draft Europe Closing Balance
Sheet, Deloitte & Touche, LLP will issue their final audit
report. If there is a disagreement, and such disagreement cannot
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be resolved by Buyer and Europe (each of which shall use their
"reasonable efforts" to so resolve the claim) within 30 days
following the receipt by Europe of the Europe Closing Balance
Sheet, the items in dispute shall be submitted to a nationally
recognized firm of independent auditors acceptable to both Buyer
and Europe (or, in the absence of agreement, the auditing firm of
KPMG Peat Marwick L.L.P.) (the "Resolution Accountants"). The
sole function of the Resolution Accountants shall be to select as
most accurately reflecting the Europe Closing Balance Sheet,
without adjustment or alteration, the Europe Closing Balance
Sheet submitted by Buyer or the Europe Closing Balance Sheet
submitted by Europe as the true Europe Closing Balance Sheet, and
the determination by such independent auditing firm shall be
binding and conclusive upon the parties. If the Resolution
Accountants select the Europe Closing Balance Sheet submitted by
Buyer, Europe shall pay the fees and expenses of the Resolution
Accountants; if the Resolution Accountants select the Europe
Closing Balance Sheet submitted by Europe, Buyer shall pay the
fees and expenses of the Resolution Accountants. Europe shall
pay the cost of the fees and expenses of Deloitte & Touche,
L.L.P. and Buyer shall pay the cost of the fees and expenses of
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ L.L.P. There shall be no adjustment to the
Purchase Price unless and until such adjustment exceeds $250,000
and only to the extent of that excess of $250,000.
(d) Post-Closing Determination.
(i) To the extent that the Estimated Purchase Payment
Amount shall have been more than the sum of the Total Adjusted
Capital of the European Subsidiaries and Europe Assets Value, the
amount of such difference shall be paid by Sellers to Buyer
within five business days after the determination of such amount.
To the extent that the Estimated Purchase Payment Amount is less
than the Total Adjusted Capital of the European Subsidiaries and
the Europe Assets Value, the amount of such difference shall be
paid by Buyer to Europe, within five business days after the
determination of such amount, by wire transfer.
(ii) To the extent that the amount of the shareholders
equity of Latin America and Mexico as set forth on the
Latin/Mexico Closing Balance Sheet, assuming all liabilities of
Latin America and Mexico to Merisel or any of its other
affiliates have been capitalized (the "Closing Equity Value"), is
less than the sum of (x) the amount of adjusted shareholders
equity of Latin America and Mexico as of June 30, 1996 which the
parties hereby agree is $36,698,191 computed as shown on Schedule
1.2(a) plus (y) the net pretax earnings of Latin America and the
net earnings of Mexico between July 1, 1996 and the Closing Date
as reflected in the monthly financial statements of Latin America
and Mexico plus any provision which would increase the reserve
for inventory, receivables and/or other accruals in excess of
normal provisions for inventory, receivables and/or other
accruals, computed consistently with past practice, less (z) $1.5
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million (the "Minimum Latin/Mexico Equity Value"), the amount of
such difference shall be paid to Buyer by Sellers within five
business days after the determination of such amount; provided,
however, that no amount in excess of $2,000,000 shall be so
deducted.
1.3. Amendment to Sections 1.3(a) and (b)(iii). Sections 1.3(a)
and (b)(iii) of the Purchase Agreement are hereby amended in
their entirety as follows:
(a) Time and Place. The closing under this Agreement (the
"Closing") will take place at 9:00 a.m., local time, on September
27, 1996 or on such later date as the conditions precedent
contained in Section 5.1 and 5.2 hereof are satisfied or waived
(subject, however, to the provisions of Section 5.3(a)(iv)), at
the offices of Greenberg, Traurig, Hoffman, Lipoff, ▇▇▇▇▇ &
Quentel, P.A., ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇, or at such
other time, date or place as the parties shall mutually agree;
provided, however, that notwithstanding the actual date of
Closing, the Closing shall be deemed to have occurred on
September 27, 1996. The date on which the Closing occurs is
referred to herein as the "Closing Date."
(b)(iii) Deliveries By Buyer. Buyer will deliver (A) to
Europe the Europe Cash Payment and (B) to Merisel the
Latin/Mexico Cash Payment.
1.4 Amendment to Section 5.1(i). Section 5.1(i) of the
Purchase Agreement is hereby amended in its entirety as follows:
(i) Bringdown of Representations and Warranties. The
representations and warranties of Sellers in this Agreement shall
be true and correct in all material respects on and as of the
time of Closing, except as set forth on Exhibit 5.1 attached
hereto and incorporated herein by reference, with the same force
and effect as though such representations and warranties had been
made on, as of and with reference to such time and Buyer shall
have received a certificate to such effect, signed by Sellers.
1.5 Amendment to Section 5.1(ii). Section 5.1(ii) of the
Purchase Agreement is hereby amended in its entirety as follows:
(ii) Performance and Compliance. Sellers shall have
performed all of the covenants and complied with all of the
provisions required by this Agreement to be performed or complied
with by them on or before the Closing, except as set forth on
Exhibit 5.1 attached hereto and incorporated herein by reference,
and Buyer shall have received a certificate to such effect,
signed by Sellers.
1.6 Amendment to Section 5.1(v). Section 5.1(v) of the
Purchase Agreement is hereby amended in its entirety as follows:
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(v) Required Consents. All consents and approvals of
third parties, including consents of those vendors representing
90% of purchases for the eighteen months ended June 30, 1996 by
Europe, Latin America, Mexico or the Subsidiaries from the
vendors identified on Exhibit D, but excluding all other vendors
to Latin America, Mexico or any Subsidiary to the transactions
contemplated hereby shall have been obtained, except as set forth
on Exhibit 5.1 attached hereto and incorporated herein by
reference, and all waiting periods specified by law the passing
of which is necessary for the consummation of such transactions
(including without limitation any waiting periods under
applicable governmental laws) shall have passed or been
terminated.
1.7 Amendment to Section 5.1(vii). Section 5.1(vii) of the
Purchase Agreement is hereby amended in its entirety as follows:
(vii) Executive Management. Sellers shall have
terminated, without cost to any of Europe, Latin America, Mexico
or any of the Subsidiaries, and without liability to any of the
foregoing, all employment and other agreements with those
individuals listed on Schedule 5.1, except as set forth on
Exhibit 5.1 attached hereto and incorporated herein by reference;
provided, however, that if Buyer or its affiliates rehire any
individual listed on Schedule 5.1 prior to or on the date of
Closing, or within one year thereafter, Buyer will reimburse
Sellers for any severance costs paid by them to such individual.
1.8 Deletion of Section 5.1(ix). Section 5.1(ix) is hereby
deleted in its entirety.
1.9 Amendment to Section 5.1(x). Section 5.1(x) of the
Purchase Agreement is hereby amended in its entirety as follows:
(x) Material Changes. Since the date hereof, there
shall not have been any material adverse change in the financial
condition, assets, liabilities, net worth, earning power or
business of Latin America, Mexico or any of the Subsidiaries,
except as set forth on Exhibit 5.1 attached hereto and
incorporated herein by reference, and Buyer shall have received a
certificate to such effect, signed by the chief executive officer
of each of the Sellers on behalf of each of the Sellers.
1.10 Amendment to Section 5.1(xi). Section 5.1(xi) of the
Purchase Agreement is hereby amended in its entirety as follows:
(xi) Permits and Licenses Required. Buyer shall have
received all licenses, permits and certificates and governmental
approvals listed on Schedule 2.16, except as set forth on Exhibit
5.1 attached hereto and incorporated herein by reference,
applicable to it.
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1.11 Amendment to Section 5.1(xvi). Section 5.1(xvi) of the
Purchase Agreement is hereby deleted in its entirety.
1.12 Amendment to Section 5.1(xx). Section 5.1(xx) of the
Purchase Agreement is hereby amended in its entirety as follows:
(xx) Miami, Florida Lease. Sellers shall have delivered
to Buyer an assignment of the lease or a sublease and agreements
set forth on Schedule 5.1(xx), except as set forth on Exhibit 5.1
attached hereto and incorporated herein by reference, to the
extent permitted by the terms of such agreements; provided, in
each case that Buyer assumes all obligations thereunder.
1.13 Deletion of Section 5.2(vi). Section 5.2(vi) is hereby
deleted in its entirety.
1.14 Amendment to Article VI. Article VI of the Purchase
Agreement is hereby amended to include the following additional
Section:
6.17 Conditional Acquisition of the Mexico Stock. Buyer
and Sellers hereby agree that the consummation of the acquisition
of the Mexico Stock (the "Acquisition") upon the Closing of this
Purchase Agreement is subject to revocation upon the disapproval
of the Mexican Federal Competence Commission ("Comision Federal
de Competencia Economica" hereinafter referred to as the "CFC")
of such Acquisition. Therefore, if the CFC disapproves the
Acquisition, the Buyer shall return the Mexico Stock to Sellers
and Sellers shall return all consideration received from Buyer
with respect to such Mexico Stock within five business days of
the date of such disapproval. In addition, Buyer and Sellers
hereby agree to take all necessary action to obtain CFC approval
of the Acquisition, including the filing of appropriate
notification applications.
1.15 Amendment to Section 7.2. Section 7.2 is hereby amended to
delete the terms "Escrow Agent," "Escrow Agreement" and "Escrow
Payment."
1.16 Amendment to Schedule 1.1. Schedule 1.1 of the Purchase
Agreement is hereby amended to include such additional text as
set forth in Exhibit A attached hereto.
1.17 Amendment to Schedule 1.2(a). Schedule 1.2(a) of the
Purchase Agreement is hereby amended in its entirety to read as
provided in Exhibit B attached hereto.
1.18 Deletion of Exhibit B. Exhibit B of the Purchase Agreement
is hereby deleted.
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ARTICLE II.
2.1 Effect of Amendment. Except as expressly provided in
Article I of this Amendment, nothing shall affect or be deemed to
affect any provisions of the Purchase Agreement, and, except only
to the extent that they may be varied hereby, the Buyer and
Sellers hereby ratify and confirm all of their agreements and
obligations contained in the Purchase Agreement, as amended
hereby.
2.2 Counterparts. This Amendment may be executed in two or
more counterparts, each of which shall be deemed an original, but
which together shall constitute one and the same instrument.
2.3 Governing Law. This Amendment shall be governed by and
construed in accordance with the internal laws of the State of
Florida without giving effect to principles of conflicts of laws.
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IN WITNESS WHEREOF, the parties hereto have executed or
caused this Amendment to be executed by their duly authorized
representatives as of the day and year first above written.
CHS ELECTRONICS,INC.
By:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer
MERISEL, INC.
By:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Chief Executive Officer
MERISEL EUROPE, INC.
By:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Chief Executive Officer
