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EXHIBIT 10.6
ASSET PURCHASE AGREEMENT
Dated as of May 25, 2001
by and among
PFSWEB, INC.,
PRIORITY FULFILLMENT SERVICES, INC.
DAISYTEK, INC.
and
DAISYTEK INTERNATIONAL CORPORATION
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SCHEDULE
2.1A Assets
2.1B Excluded Assets
2.2 Assumed Liabilities
2.4 Employees to Whom Seller May Offer Employment
2.4(c) Wages of Transferring Employees and Assumed Employee Expenses
3.2 Cash Payment Adjustments
3.3 Allocation of Purchase Price
3.5 Proration of Taxes
3.6 Proration of Utilities
3.8 Required Consents
4.2 Authority - Non-contravention
4.3 Leased Real Property
4.4 Personal Property
4.6 Material Permits
4.9 Contract Defaults
4.13 Benefit Plans
4.14 Employees
4.15 Consents
4.16 Insurance
4.17 Contested Taxes
4.21 Guaranteed Agreements
5.3 Purchaser Consents Required
7.2 IBM Agreements
12 Ongoing Expenses
14.1 Expenses
EXHIBITS
A ▇▇▇▇ of Sale and Assignment
B Assumption Agreement
C Termination Agreement
D Transition Agreement
E Private Letter Ruling
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 25th day of May, 2001, by and among Priority Fulfillment
Services, Inc., a Delaware corporation with its principal offices at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("Seller"), PFSweb, Inc., a Delaware
corporation with its principal offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ ("PFSweb"), Daisytek, Inc., a Delaware corporation with its
principal offices at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇ ("Purchaser"), and Daisytek International Corporation, a Delaware
corporation with its principal offices at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("Parent").
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
buy from Seller, all of the assets of Seller used in its business operations
(other than the Excluded Assets) to provide comprehensive outsourcing solutions
to Purchaser and ▇.▇. ▇▇▇▇▇ Company (the "Business"); and
WHEREAS, Purchaser is a wholly-owned subsidiary of Parent and Parent
will benefit from Purchaser's purchase of all of Seller's assets used in the
Business (other than the Excluded Assets); and
WHEREAS, Seller is a wholly-owned subsidiary of PFSweb and PFSweb will
benefit from Seller's sale of all of its assets used in the Business (other than
the Excluded Assets); and
NOW, THEREFORE, for and in consideration of the mutual representations,
warranties, covenants and agreements hereinafter set forth and other good and
valuable consideration, and upon the terms and subject to the conditions
hereinafter set forth, the parties do hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"Action" means any claim, action, suit or arbitration
in each case, by or before any Governing Authority.
"Additional Documents" means the ▇▇▇▇ of Sale and
Assignment, the Assumption Agreement, the Termination Agreement and the
Transition Agreement.
"Affiliate" means, with respect to any specified
Person, any other Person that directly, or indirectly through one or
more intermediaries, Controls, is Controlled by, or is Under Common
Control With, such specified Person.
"Assets" has the meaning specified in Section 2.1.
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"Assumed Contracts" has the meaning specified in
Section 4.8.
"Assumed Employee Expenses" has the meaning specified
in Section 2.4(d).
"Assumed Liabilities" has the meaning specified in
Section 2.2.
"Assumption Agreement" shall mean that certain
Assignment and Assumption Agreement in the form of that attached hereto
as Exhibit B to be executed by Purchaser, Seller and such third parties
as Purchaser may request.
"▇▇▇▇ of Sale and Assignment" shall mean that certain
▇▇▇▇ of Sale and Assignment in the form of that attached hereto as
Exhibit A to be executed by Seller and such Affiliates of Seller as
Purchaser may request.
"BSD" has the meaning specified in Section 7.2.
"BSD Business" has the meaning specified in Section
7.2.
"BSD Group" has the meaning specified in Section 7.2.
"Business" has the meaning set forth in the recitals
of this Agreement.
"Business Day" means any day that is not a Saturday,
a Sunday or other day on which banks are required or authorized by law
to be closed in The City of New York.
"Cash Payment" has the meaning specified in Section
3.2(a).
"CERCLA" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, and the
rules and regulations promulgated thereunder.
"CERCLIS" means the Comprehensive Environmental
Response, Compensation and Liability Information System.
"Claims" means any debts, contracts, leases,
liabilities, arrangements, commitments, obligations, restrictions,
disabilities or duties whatsoever, whether known or unknown, contingent
or absolute, tort or contract.
"Closing" and "Closing Date" have the meanings
specified in Section 8.1.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Control" (including the terms "Controlled By" and
"Under Common Control With"), with respect to the relationship between
or among two or more Persons, means the possession, directly or
indirectly or as trustee, personal representative or executor, of the
power to direct or cause the direction of the affairs or management of
a
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Person, whether through the ownership of voting securities, as trustee,
personal representative or executor, by contract or otherwise,
including, without limitation, the ownership, directly or indirectly,
of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person.
"Controlled Group" has the meaning specified in the
Ruling.
"Deferred Payment" and "Deferred Payments" have the
meanings specified in Section 3.2(b).
"Distributing Group" has the meaning specified in the
Ruling.
"Employee Claims" has the meaning specified in
Section 13.3.
"Encumbrance" means any security interest, pledge,
mortgage, lien (including, without limitation, environmental and tax
liens), charge, encumbrance, adverse claim, preferential arrangement,
or restriction of any kind other than (a) mechanic's, materialman's,
and similar liens for work completed but for which payment is not yet
due; (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting (and which contest has been disclosed on
Schedule 4.17 with respect to Seller) in good faith through appropriate
proceedings; or (c) with respect to leased Assets, the interest of the
lessor, or any party claiming through the lessor, therein.
"Environmental Laws" means any federal, state or
local law or any foreign law, including any statute, rule, regulation,
ordinance, code or rule of common law, now or hereafter in effect and
in each case as amended, including any judicial or administrative
order, consent decree or judgment, relating to the environment, health,
safety or Hazardous Materials, including, without limitation, CERCLA;
CERCLIS; the Resource Conservation and Recovery Act, 42 U.S.C. Sections
6901 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
Sections 1801 et seq.; the Clean Water Act, 33 U.S.C. ▇▇.▇▇. 1251 et
seq.; the Toxic Substances Control Act, 15 U.S.C Sections 2601 et seq.;
the Clean Air Act, 42 U.S.C Sections 7401 et seq.; the Safe Drinking
Water Act, 42 U.S.C Sections 300f et seq.; the Atomic Energy Act, 42
U.S.C Sections 2011 et seq.; the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C Sections 136 et seq.; Emergency Planning and
Community Right-to-Know Act, 42 U.S.C Sections 11001 et seq.; the
Occupational Safety and Health Act, 29 U.S.C Sections 651 et seq.; and
the Superfund Amendments and Reauthorization Act, 42 U.S.C Sections
9601 et seq.
"Environmental Permits" means all permits, written
approvals, U.S. Environmental Protection Agency or state generator
numbers, licenses and other authorizations from applicable Governing
Authorities required under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and the rules and regulations promulgated
thereunder.
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"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
"Excluded Assets" has the meaning specified in
Section 2.1.
"Excluded Claims" has the meaning specified in
Section 2.2.
"GAAP" means United States generally accepted
accounting principles and practices in effect from time to time applied
consistently throughout the periods involved.
"Governmental Actions" means all authorizations,
consents, approvals, waivers, exceptions, variances, franchises,
permissions, permits and licenses of, and filings and declarations
with, by or in respect of, Governing Authorities.
"Governing Authority" means any United States
federal, state, local, possession or foreign governmental, regulatory
or administrative authority, agency or commission, or any political
subdivision thereof, or any court, tribunal or arbitral body (whether
governmental or not).
"Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or
with any Governing Authority.
"Guaranteed Agreements" has the meaning specified in
Section 4.21.
"Guaranty Revocation Date" has the meaning specified
in Section 4.21.
"Hazardous Materials" means (a) petroleum and
petroleum fuels, lubricants and cleaning agents, radioactive materials,
friable asbestos material as defined under 40 C.F.R. 61.141, urea
formaldehyde foam insulation, transformers or other equipment that
contain polychlorinated biphenyls in concentrations of 50 ppm, and
radon gas; (b) any other pollutants, contaminants, wastes, chemicals,
materials or substances defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials",
"toxic substances", "contaminants", "pollutants" or "extremely
hazardous wastes" or words of similar import, under any applicable
Environmental Law or otherwise subject to regulation, control or
remediation under Environmental Laws; and (c) any other pollutant,
contaminant, waste, chemical, material or substance exposure to which
is regulated pursuant to any applicable Environmental Law.
"IBM Agreements" has the meaning specified in Section
7.2.
"IBM Products" has the meaning specified in Section
7.2.
"Income Taxes" means any and all income taxes
(together with any and all interest, penalties, and additional amounts
imposed with respect thereto) imposed by any government or taxing
authority.
"Indemnified Party" has the meaning specified in
Section 13.5.
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"Indemnification Notice" has the meaning specified in
Section 13.5.
"Indemnifying Party" has the meaning specified in
section 13.5.
"IRS" means the Internal Revenue Service.
"Knowledge" (including the terms "to the knowledge
of" or "to the best knowledge of") means, with respect to Seller, the
actual personal knowledge of ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ at the time when the applicable
statement is made.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the
United States, any foreign country or any domestic or foreign state,
county, city or other political subdivision or of any Governing
Authority.
"Leased Real Property" means the "Demised Premises"
defined in that certain Industrial Lease Agreement dated March 31, 1999
between New York Life Insurance Company, as landlord, and Daisytek,
Inc., as tenant, as assigned to Seller pursuant to that certain
Assignment of Industrial Lease Agreement dated May 9, 2000
"Losses" has the meaning specified in Section 13.4.
"Material Adverse Effect" means any circumstance,
change in, or effect on, the Business or the Assets that individually,
or in the aggregate with any other circumstances, changes in, or
effects on, the Business or the Assets, taken as a whole would
materially adversely affect the ability of Purchaser to operate or
conduct the Business in the manner in which it is currently operated or
conducted by Seller or utilize the Assets in the manner in which they
are currently utilized by Seller.
"Material Permits" has the meaning specified in
Section 4.6.
"MMH Certificate" has the meaning set forth in
Section 6.5.
"Objection Period" has the meaning specified in
Section 13.9(a).
"Parent" has the meaning specified in the opening
paragraph.
"Person" means any individual, partnership, firm,
corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a
person under Section 13(d)(3) of the Exchange Act.
"PFS Group" has the meaning specified in Section 7.2.
"PFSweb" has the meaning specified in the opening
paragraph.
"Plans" has the meaning specified in Section 4.13.
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"Private Actions" means all authorizations, consents,
approvals, waivers, exceptions, variances, franchises, permissions,
permits and licenses of (a) Persons other than Governing Authorities
and (b) Governing Authorities acting in private capacities.
"Purchase" has the meaning specified in the Ruling.
"Purchase Price" has the meaning specified in Section
3.1.
"Purchaser" has the meaning specified in the opening
paragraph.
"Purchaser's Losses" has the meaning specified in
Section 13.2.
"Recalculation Notice" has the meaning specified in
Section 3.5.
"Remedial Action" means all action required under any
applicable Environmental Law or Environmental Permit and all action
required by a Governing Authority to (i) clean up, remove, treat or
handle in any other way Hazardous Materials in the environment; (ii)
prevent the release of Hazardous Materials so that they do not migrate,
endanger or threaten to endanger public health or the environment; or
(iii) perform remedial investigations, feasibility studies, corrective
actions, closures, and postremedial or postclosure studies,
investigations, operations, maintenance and monitoring on, about or in
any real property, including, without limitation, Seller's Leased Real
Property.
"Required Consents" means all orders, approvals,
estoppel certificates or consents of the Seller's Board of Directors
and any third parties, including, without limitation, any orders,
approvals, certificates or consents deemed necessary by counsel to
Purchaser which shall be required to consummate the transactions
contemplated hereby, including, without limitation, consents to the
assignment of the Assumed Liabilities listed on Schedule 2.2.
"Ruling" means that certain IRS Private Letter Ruling
120721-01, a copy of which is attached hereto as Exhibit E.
"SASA" has the meaning specified in Section 2.5.
"Seller" has the meaning specified in the opening
paragraph.
"Seller Commercial Software Rights" means packaged
commercially available software programs generally available to the
public through retail dealers in computer software which have been
licensed to Seller and which are used in Seller's business but are in
no way a component of or incorporated in any of Seller's products and
related trademarks, technology and know-how.
"Seller's Bank Account" means the account to be
designated by the Seller in a written notice to Purchaser not less than
five Business Days before the Closing.
"Seller's Losses" has the meaning specified in
Section 13.4.
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"Separation" has the meaning specified in the Ruling.
"Service Level Penalties" has the meaning specified
in the Transition Agreement.
"Services" has the meaning specified in Section 7.2.
"Spin-off" means the transaction in which the Parent
distributed its ownership interest in PFSweb to its stockholders.
"Supplemental Ruling Request" has the meaning
specified in Section 4.11.
"Tax" or "Taxes" means any and all taxes, fees,
levies, duties, tariffs, imposts, and other charges of any kind
(together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any
government or taxing authority, including, without limitation: taxes or
other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the
nature of excise, withholding, ad valorem, stamp, transfer, value
added, or gains taxes; sales and use taxes charged by the U.S. federal
government, any state, country or any other locality; license,
registration and documentation fees; and customs' duties, tariffs, and
similar charges.
"Tax Allocation Agreement" shall mean that certain
Tax Indemnification and Allocation Agreement dated as of December 7,
1999 between the Parent and PFSweb.
"Termination Agreement" shall mean that certain
Termination Agreement in the form of that attached hereto as Exhibit C
to be executed by Purchaser, Parent, Seller and such Affiliates of
Parent and Seller as the other may request.
"TMSA" has the meaning specified in Section 2.5.
"Transferring Employee" has the meaning specified in
Section 2.4(a).
"Transition Agreement" shall mean that certain
Transition Services Agreement in the form of that attached hereto as
Exhibit D to be executed by Parent and PFSweb.
"Vendor Debt" has the meaning specified in Section
9.8.
"WARN Act" means the Worker Adjustment and Retraining
Notification Act of 1988, as amended.
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ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale of Assets. Effective at the Closing, Seller will
sell, convey, transfer, assign and deliver to Purchaser, and Purchaser will
acquire and accept from Seller, the assets and properties listed on Schedule
2.1A (collectively, the "Assets"), free and clear of any and all Encumbrances
provided, however, that "Assets" shall not include, and Seller will not sell,
convey, transfer, assign or deliver to Purchaser, and Purchaser will not acquire
from Seller, (i) the corporate charter, qualifications to conduct business as a
foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of the Seller as a corporation,
(ii) any of the rights of the Seller under this Agreement, (iii) claims (and
benefits to the extent they arise therefrom) that relate to Seller's liabilities
other than the Assumed Liabilities, (iv) all of Seller's cash, bank accounts,
certificates of deposit, securities and accounts receivable, (v) insurance
policies of Seller and proceeds and the deposits related thereto to the extent
such policies are not expressly assumed by Purchaser and Parent, and (vi) the
items listed on Schedule 2.1B (collectively, the "Excluded Assets").
2.2 Assumption of Certain Obligations. Effective at the Closing and
subject to the terms set forth herein, Purchaser shall assume and be liable
solely for the liabilities and obligations of Seller listed on Schedule 2.2,
including the Assumed Employee Expenses (collectively, the "Assumed
Liabilities"). Purchaser will not assume and will not be liable for and Seller
will be liable and will pay for any Claims: (i) of the Seller or of its
Affiliates or (ii) which arise from or relate to the ownership, use, sale,
manufacture, design, possession, operation or control of the Assets or operation
of the Business prior to the Closing Date (collectively, "Excluded Claims");
other than the Assumed Liabilities and only in the amounts set forth on Schedule
2.2. Furthermore, Purchaser will not assume and Seller shall remain liable for
all tax liabilities, including, but not limited to, personal property taxes and
income taxes, incurred, imposed upon or accrued by the Seller through the
Closing Date, as more fully described in Section 3.5.
2.3 Transfer and Conveyance. Seller shall execute and deliver to
Purchaser at the Closing, a ▇▇▇▇ of Sale and Assignment in substantially the
form attached hereto as Exhibit A, the Assumption Agreement in substantially the
form attached hereto as Exhibit B, and all such other assignments, endorsements
and instruments of transfer as shall be necessary or appropriate to carry out
the intent of this Agreement and as shall be sufficient to vest in Purchaser
title to all of the Assets free and clear of any Encumbrances and to evidence
Purchaser's assumption of the Assumed Liabilities.
2.4 Employees and Agents of Seller.
(a) On the Closing Date, Purchaser shall offer the employees of
Seller listed on Schedule 2.4 (the "Transferring Employees") employment with the
Purchaser, on the terms mutually agreed to by the Purchaser and the employee.
Seller hereby agrees to such solicitation and agrees to encourage such employees
to go to work for the Purchaser and not to discourage any individuals who are
offered employment with Purchaser from accepting such employment with Purchaser.
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(b) Purchaser and Parent will not assume sponsorship of any of the
Seller's Plans.
(c) Effective on the Closing, Seller shall terminate the employment
of all Transferring Employees, and indemnify and hold harmless the Purchaser and
Parent against all claims made by any Transferring Employee as set forth in
Section 13.3. Purchaser shall provide all Transferring Employees with wages and
benefits (other than stock options) which are comparable to the wages and
benefits as set forth on Schedule 2.4(c). Purchaser intends to provide certain
key Transferring Employees options to acquire Parent common stock pursuant to
the Parent's stock option plans but Purchaser shall have no obligation to
provide stock options to any Transferring Employee.
(d) Effective as of the Closing Date, the Purchaser shall assume
the liability of the Seller in respect of the Transferring Employees for accrued
but unpaid salaries, wages, vacation and sick pay, but only to the extent such
liability is reflected on Schedule 2.4(c) hereto and not to include vacation
time accrued for any period before the last twelve (12) months (the "Assumed
Employee Expenses"). Except as set forth in the preceding sentence, Seller shall
remain responsible for payment of any and all other Employee Claims as provided
in Section 13.3 hereof.
(e) Seller and Purchaser agree that Purchaser has purchased
substantially all the property used in a separate unit of Seller's trade or
business. Accordingly, pursuant to Rev. Proc. 96-60, 1996-2 C.B. 399, provided
that Seller provides Purchaser with all necessary payroll records for the
calendar year which includes the Closing Date, Purchaser shall furnish a Form
W-2 to each Transferring Employee disclosing all wages and other compensation
paid for such calendar year, and taxes withheld therefrom, and Seller shall be
relieved of the responsibility to do so.
(f) Except as contemplated in this Section 2.4, for a period of one
year after Closing, Purchaser and Parent will not solicit for employment,
directly or indirectly, any employee of Seller or PFSweb. For a period of one
year after Closing, PFSweb and Seller will not solicit for employment, directly
or indirectly, any Transferring Employee or any employee of Purchaser or Parent.
2.5 Termination of Certain Agreements. Each Party will execute the
Termination Agreement, the form of which is attached hereto as Exhibit C that
provides for the termination of the Transaction Management Services Agreement
dated December 7, 1999 between PFSweb, Inc./Priority Fulfillment Services, Inc.
and Daisytek, Inc., (the "TMSA") and the Strategic Alliance Services Agreement
dated July 15, 1999 between ▇.▇. ▇▇▇▇▇ Company, a wholly-owned subsidiary of the
Purchaser, and PFSweb, Inc./Priority Fulfillment Services, Inc. (the "SASA").
Each Party will remain subject to the confidentiality provisions of the TMSA and
the SASA and such sections are hereby incorporated herein.
2.6 Transition Agreement. Each Party will execute and deliver to the
other at the Closing, the Transition Agreement substantially in the form
attached hereto as Exhibit D.
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2.7 Deposits. Effective at the Closing, Seller will sell, convey,
transfer, assign and deliver to Purchaser, and Purchaser will acquire and accept
from Seller, all rights to any deposits or advances made in connection with
leases for Assets.
ARTICLE III
PURCHASE PRICE
3.1 Purchase Price. The purchase price (the "Purchase Price") for the
Assets shall be (a) Ten Million Dollars ($10,000,000) plus (b) the Deferred
Payments plus (c) the mutual execution and delivery of the Termination Agreement
including releases minus (d) the Assumed Employee Expenses (except for the sick
pay portion thereof), subject to the adjustments set forth in Sections 3.5 and
3.6 hereof.
3.2 Method of Payment of Purchase Price Payable at the Closing. The
Purchase Price shall be delivered by Purchaser on the Closing Date and Purchaser
shall assume the Assumed Liabilities on the Closing Date as follows:
(a) by wire transfer of immediately available funds to the Seller's
Bank Account in an amount equal to Ten Million Dollars ($10,000,000) (the "Cash
Payment"), subject to the adjustments as set forth on Schedule 3.2.
(b) by payment of One Hundred Sixty-Six Thousand Six Hundred
Sixty-Six Dollars and Sixty-Six Cents ($166,666.66) on each of July 31, 2001,
August 31, 2001, September 28, 2001, October 31, 2001 and a final payment of
$333,333.44 on November 26, 2001 (each, a "DEFERRED PAYMENT" and collectively,
the "DEFERRED PAYMENTS") for aggregate Deferred Payments equal to One Million
Dollars ($1,000,000); provided that each Deferred Payment shall be subject to
the rights of offset set forth in this Agreement and the Transition Agreement.
(c) by Purchaser's assumption of the obligations for Assumed
Employee Expenses.
(d) by Purchaser's execution of the Termination Agreement in order
to effectuate the releases set forth therein.
(e) by Purchaser's execution and delivery to Seller at the Closing
of an Assumption Agreement in substantially the form attached hereto as Exhibit
B.
3.3 Allocation of Purchase Price. Subject to adjustment as set forth
herein, for tax purposes the Purchase Price shall be allocated among the Assets
and other matters as set forth on Schedule 3.3. Purchaser and Seller shall
report the allocation on Internal Revenue Service Form 8594 in a manner
consistent with the allocation provided in Schedule 3.3, subject to the
adjustments set forth herein.
3.4 Right of Offset for Claims. Parent and Purchaser shall have the
option, in addition to and not in lieu of any other available rights or remedies
hereunder, in the event Seller is determined to owe any indemnification amount
in accordance with the procedures of Article
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XIII of this Agreement, and Seller fails to pay such amount, Parent and
Purchaser shall have the right to offset such amount against the Deferred
Payments and the amounts payable under the Transition Agreement, in each case,
respectively, in accordance with the terms and provisions set forth herein and
therein.
3.5 Proration of Taxes. All real and personal property taxes and
special assessments payable but not yet due with respect to any of the Assets
shall be prorated between Seller and Purchaser as set forth on Schedule 3.5 on
the basis of actual days elapsed between the commencement of the current fiscal
tax year and the Closing Date, based on a 365-day year; provided that all such
taxes and assessments which Seller has agreed to pay on an installment basis
shall be paid in full at or prior to the Closing Date. In connection with such
proration of taxes, in the event that actual tax figures for the year of Closing
are not available at the Closing Date, an estimated, provisional proration of
taxes shall be made using tax figures from the preceding year together with such
increases or decreases thereof as Purchaser and Seller may agree. It is the
intent of the parties that the Seller shall be responsible for all tax
liabilities related to the Assets up to and including the Closing Date, and
Purchaser shall be responsible for all tax liabilities related to the Assets
following the Closing. In the event that one of the parties later receives a
▇▇▇▇ showing such charges to be more or less than originally estimated, such
party shall send notice to the other party within thirty (30) days of such
receipt (the "Recalculation Notice") with a statement indicating the amount
overpaid or underpaid by such other party. The party that underpaid shall pay
the other party within thirty (30) days of receipt of the Recalculation Notice
unless such amount is disputed utilizing the procedures set forth in Section
13.9. All transfer taxes, if any, arising from the sale of the Assets shall be
borne by Seller.
3.6 Proration of Utility Charges and Other Payments. In any case in
which the Closing Date shall fall on a date other than the date on which
payments are due, and for which a final billing has not been obtained by Seller,
with respect to any utility or similar regular periodic charge respecting the
Assets or the Leased Real Property including, but not limited to, common area
maintenance charges, any such utility or similar charge payable with respect to
the current period in which the Closing Date occurs shall be prorated between
Seller and Purchaser on the basis of the actual number of days elapsed from the
first day of such period to the Closing Date as set forth on Schedule 3.6. In
the event that one of the parties later receives a ▇▇▇▇ showing such charges to
be more or less than originally estimated, such party shall send a Recalculation
Notice to the other party within thirty (30) days of such receipt with a
statement indicating the amount overpaid or underpaid by such other party. The
party that underpaid shall pay the other party within thirty (30) days of
receipt of the Recalculation Notice unless such amount is disputed utilizing the
procedures set forth in Section 13.9. Appropriate adjustment shall also be made
at Closing to apportion the Assumed Liabilities so that Seller shall be
responsible for, and enjoy the benefits of, the Assumed Liabilities for the
period prior to and including the Closing Date, and Purchaser shall be
responsible for, and enjoy the benefits of, the Assumed Liabilities for the
period following the Closing Date.
3.7 Additional Rights for Assets. Effective on the Closing Date, Seller
hereby constitutes and appoints Purchaser the true and lawful attorney of
Seller, with full power of substitution, in the name of Seller or Purchaser, but
on behalf of and for the benefit of Purchaser: (i) to demand and receive from
time to time any and all the Assets and to make endorsements and
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give receipts and releases for and in respect of the same and any part thereof;
(ii) to institute, prosecute, compromise and settle any and all Actions that
Purchaser may deem proper in order to assert or enforce any claim, right or
title of any kind in or to the Assets; (iii) to defend or compromise any or all
Actions in respect of any of the Assets; and (iv) to do all such acts and things
in relation to the matters set forth in the preceding clauses (i) through (iii)
as Purchaser shall deem desirable. Seller hereby acknowledges that the
appointment hereby made and the powers hereby granted are coupled with an
interest and are not and shall not be revocable by it in any manner or for any
reason. Seller shall deliver to Purchaser at Closing an acknowledged power of
attorney to the foregoing effect executed by Seller. Purchaser shall indemnify
and hold harmless Seller from any and all Losses caused by or arising out of any
breach of Law by Purchaser in its exercise of such power of attorney.
3.8 Transfer and Conveyance. Notwithstanding anything contained herein
to the contrary, this Agreement shall not constitute an agreement to assign any
Asset or Assumed Contracts if an assignment or attempted assignment of the same
without the consent of another Person would constitute a breach thereof or in
any way impair the rights of Purchaser thereunder or give to any third party any
rights with respect thereto. If any such consent is not obtained prior to the
Closing Date or if an attempted assignment would be ineffective or would impair
Purchaser's rights under any such Asset or Assumed Contract so that it would not
receive all such rights and responsibilities, then, except for those required
consents set forth on Schedule 3.8, (i) Seller shall use commercially reasonable
efforts to provide or cause to be provided to Purchaser, to the extent permitted
by law, the benefits of any such Asset or Assumed Contract and (ii) in
consideration thereof Purchaser shall pay, perform and discharge on behalf of
Seller such of the Seller's liabilities thereunder to the extent that the
Purchaser would have been responsible if such consent or approval had been
obtained. In addition, Seller shall take such other actions as may reasonably be
requested by Purchaser in order to place Purchaser, insofar as reasonably
possible, in the same position as if such Asset or Assumed Contracts had been
transferred as contemplated hereby and so all the benefits and burdens relating
thereto, including possession, use, risk of loss, potential for gain and
dominion, control and command, shall inure to Purchaser. If and when such
consents and approvals are obtained, the transfer of the applicable Asset or
Assumed Contract shall be effected in accordance with the terms of this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND PFSWEB
The Seller and PFSweb, jointly and severally, represent and warrant to
the Purchaser as follows:
4.1 Due Organization and Qualification. Each of Seller and PFSweb 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 or operate its properties and to carry on its business as it is
presently being operated and in the place where such properties are owned,
leased or operated and such business is conducted.
4.2 Corporate Power and Authority. The execution, delivery and
performance of this Agreement and Additional Documents by Seller and PFSweb and
the consummation by them of
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the transactions contemplated hereby and thereby, have been duly authorized by
all requisite corporate action, including, but not limited to, Board of Director
approvals, and no vote of shareholders or further action or approval is required
to permit Seller and PFSweb to consummate the transactions contemplated hereby
and thereby. This Agreement and Additional Documents when executed and delivered
in accordance with the terms thereof, will constitute, the legal, valid and
binding obligations of Seller and PFSweb, enforceable in accordance with their
terms, Seller and PFSweb have full power, authority and legal right to enter
into this Agreement and the Additional Documents and to consummate the
transactions contemplated hereby and thereby. The making and performance of this
Agreement and the Additional Documents and the consummation of the transactions
contemplated hereby and thereby in accordance with the terms hereof and thereof
will not (a) conflict with the Certificate of Incorporation or the Bylaws of
Seller or PFSweb, (b) result in any breach or termination of, or constitute a
default under, or constitute an event that with notice or lapse of time, or
both, would become a default under, or result in the creation of any Encumbrance
upon any of the Assets under, or create any rights of termination, cancellation
or acceleration in any person under, any Assumed Contract, or violate any order,
writ, injunction or decree, to which Seller or PFSweb is a party, by which any
of the Assets, business or operations of Seller or PFSweb may be bound or
affected or under which any of the Assets, business or operations of Seller or
PFSweb receive benefits, except as set forth in Schedule 4.2, (c) result in the
loss or adverse modification of any license, franchise or permit granted to or
otherwise held by Seller or PFSweb required for the Business except as set forth
in Schedule 4.2 or (d) result in the violation of any provisions of law
applicable to Seller or PFSweb, the violation of which would reasonably be
expected to have a Material Adverse Effect. Based upon the Seller's estimate of
its going concern value, the Seller is not insolvent as of the date hereof, will
not be insolvent on the Closing Date and the transfer of the assets contemplated
hereby will not render it insolvent. The transactions contemplated hereby are
not being done with actual intent to hinder, delay, or defraud any entity to
which the Seller is, or reasonably expects to become, indebted on or after the
Closing Date. Based upon the PFSweb's estimate of its going concern value,
PFSweb is not insolvent as of the date hereof, will not be insolvent on the
Closing Date and the transfer of the assets contemplated hereby will not render
it insolvent. The transactions contemplated hereby are not being done with
actual intent to hinder, delay, or defraud any entity to which PFSweb is, or
reasonably expects to become, indebted on or after the Closing Date.
4.3 Real Property.
(a) Schedule 4.3 lists: (i) the address of Leased Real Property,
(ii) the identity of the lessor, lessee and current occupant (if different from
lessee) of the Leased Real Property and (iii) the term pertaining to the Leased
Real Property.
(b) Except as described in Schedule 4.3, Seller has not received
any written notice of any violation of any law, regulation or ordinance relating
to any of the Leased Real Property. Seller has made available to Purchaser true
and correct copies of, if any, all certificates of occupancy, environmental
reports and appraisals which it currently possesses in respect of the Leased
Real Property. Seller, as the lessee of each parcel of Leased Real Property, is
in peaceful and undisturbed possession of such parcel of Leased Real Property,
and there are no contractual legal restrictions to which Seller or PFSweb is a
party which preclude or restrict the ability to use
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the subject premises for the purposes for which they are currently being used
which would reasonably be expected to have a Material Adverse Effect. Except as
set forth in Schedule 4.3, Seller has not leased or subleased any parcel of
Leased Real Property to any other Person, nor has Seller assigned its interest
under any lease or sublease set forth in Schedule 4.3 to any third party.
(c) Seller has delivered to Purchaser correct and complete copies
of all leases and subleases set forth in Schedule 4.3 and any amendments. With
respect to each of these leases and subleases:
(i) such lease or sublease, as amended is legal,
valid, binding, enforceable and in full force and effect with respect
to Seller, and, to the knowledge of Seller, with respect to all other
parties thereto and is the entire agreement between the parties thereto
with respect to such property;
(ii) except as otherwise set forth in Schedule 4.3,
such lease or sublease will not cease to be legal, valid, binding,
enforceable and in full force and effect on terms identical to those
currently in effect as a result of the consummation of the transactions
contemplated by this Agreement, nor will the consummation of the
transactions contemplated hereby constitute a breach or default under
such lease or sublease or otherwise give the landlord a right to
terminate, recapture or modify such lease or sublease;
(iii) except as otherwise disclosed in Schedule 4.3,
with respect to each such lease or sublease: (A) Seller has not
received any notice of cancellation or termination under such lease or
sublease and, no lessor has any right of termination or cancellation
under such lease or sublease except in connection with the default of
Seller thereunder, (B) Seller has not received any notice of a breach
or default by Seller under such lease or sublease, and (C) Seller has
not granted to any other Person any material rights, adverse or
otherwise, under such lease or sublease; or
(iv) except as set forth in Schedule 4.3, neither
Seller nor, to Seller's Knowledge, any other party to such lease or
sublease is in breach or default in any respect, and no event has
occurred that, with notice or lapse of time, would constitute such a
breach or default by Seller or any other party to such lease or
sublease or permit termination or acceleration of such lease or
sublease.
(d) Seller has received no written notice of the commencement of
any condemnation proceedings or eminent domain proceedings of any kind against
the Leased Real Property. To Seller's Knowledge, there are no condemnation
proceedings or eminent domain proceedings of any kind threatened against the
Leased Real Property.
4.4 Personal Property; Title to Property.
(a) Set forth on Schedule 4.4 is a list of all Assets.
(b) Except for the leased Assets as listed on Schedule 4.4, Seller
is the legal and equitable owner and has good and indefeasible title to all of
the Assets, and upon conveyance
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of the Assets to Purchaser by Seller at the Closing, Purchaser will acquire and
hold indefeasible title to all of the Assets, whether real, personal, tangible,
intangible or mixed, free and clear of any and all Encumbrances. Seller enjoys
peaceable possession of all Assets. Except for the Excluded Assets, the Assets
constitute all the assets necessary to conduct the Business as currently
conducted on the date hereof. The Assets listed on Schedule 2.1A constitute all
of the Assets located, as of the Closing Date, at the Leased Real Property. All
of the assets listed in the MMH Certificate continue to be located at the Leased
Real Property as of the Closing Date.
(c) With respect to any leased Assets: (i) the lease agreement is
legal, valid, binding, enforceable, and in full force and effect; (ii) the lease
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby (including the assignments and assumptions
referred to in Section 2.2 above); (iii) no party is in breach or default, and
no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration, under
the lease agreement; and (iv) no party has repudiated any provision of the lease
agreement.
4.5 [Intentionally Omitted]
4.6 Permits. Seller owns and holds all licenses, franchises, permits,
titles and other governmental authorizations (including, without limitation,
motor vehicle titles and current registrations), Environmental Permits,
licenses, and franchises, the absence of any of which would have a Material
Adverse Effect (the "Material Permits"). An accurate list of all such Material
Permits is set forth on Schedule 4.6 hereto. The Material Permits are valid and,
to the extent permitted by Law or the terms thereof, will be transferred to
Purchaser at the Closing, and to Seller's Knowledge no governmental authority
intends to cancel, terminate or not renew any such Material Permit. Seller has
conducted and is conducting the Business in compliance with the requirements,
standards, criteria and conditions set forth in the Material Permits and is not
in violation of any of the foregoing except where such noncompliance or
violation would not have a Material Adverse Effect. Except as specifically
provided on Schedule 4.6, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or adversely affect
the rights and benefits afforded to Seller, or to Purchaser after the Closing,
by any such Material Permits.
4.7 Compliance with Laws. The Seller has not received notice of any
investigation, threatened or contemplated, by any federal, state or local agency
or Governing Authority, which remains unresolved involving the Business or the
Assets, including, but not limited to, the safety aspects of the Assets or the
safe working conditions and environment of its employees at the Leased Property
or employment practices or policies.
4.8 Assumed Contracts. Seller owns all rights granted to Seller under
any contract, agreement, lease or license that Purchaser has elected to assume
as an Assumed Liability (the "Assumed Contracts") and has not made any
assignment, pledge or other transfer of such rights.
4.9 Contract Defaults. Seller is not in default nor has any act
occurred which upon the passage of time will constitute a default by Seller and
Seller has not been declared to be in default in any respect under Assumed
Contract, and such Assumed Contracts are legal, valid and
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binding obligations of the Seller and, to Seller's Knowledge, the other parties
thereto in accordance with their terms and, except to the extent reflected in
Schedule 4.9, have not been amended and no defenses, offsets or counterclaims
thereto have been asserted by any party thereto other than Seller nor has Seller
waived any rights thereunder. Except as set forth on Schedule 4.9, each of the
Assumed Contracts is assumable by the Purchaser and will not cease to be legal,
valid, binding, enforceable and in full force and effect on terms identical to
those currently in effect as a result of the consummation of the transactions
contemplated by this Agreement, nor will the consummation of the transactions
contemplated hereby constitute a breach or default under such contract or
otherwise give the other party thereto a right to terminate, recapture or modify
such contract.
4.10 Litigation. There are no Actions pending against Seller or, to the
knowledge of Seller, threatened against Seller, Seller's business, including,
without limitation, the Business or the Assets, or any property or rights of
Seller, at law or in equity or before or by any Governing Authority. Seller is
not in default with respect to any order, writ, injunction or decree of any
Governing Authority with respect to the Assets, the Business or the operations
or employees of the Business.
4.11 Private Letter Ruling. PFSweb examined the letter from the Parent
to the IRS dated April 6, 2001 requesting a supplemental ruling to PLR 100247-00
(the "Supplemental Ruling Request") and the facts presented and the
representations made therein, to the extent descriptive of PFSweb or the
Controlled Group or the business of PFSweb or the Controlled Group (including,
without limitation, the business purposes for the Separation and the Purchase,
that none of the cash received as part of the Separation will be distributed,
directly or indirectly, to the shareholders of PFSweb, the representations in
the Supplemental Ruling Request to the extent that they relate to PFSweb or the
Controlled Group or the business of PFSweb or the Controlled Group and the
plans, proposals, intentions and policies of PFSweb and the Controlled Group),
shall be treated as having been made by PFSweb and are true, correct, and
complete. Neither the Purchaser nor the Parent will have liability for any
misrepresentations made by PFSweb in this Section 4.11. A breach of the
representations made in this Section 4.11 shall be deemed a Prohibited Action
(as defined in the Tax Allocation Agreement).
4.12 Absence of Undisclosed Liabilities. There are no liabilities,
contingent or otherwise, except as disclosed on Schedule 2.2, for which
Purchaser or Parent would be obligated or which would attach to or follow the
Assets.
4.13 Employee Benefit Plans. Each employee benefit plan within the
meaning of Section 3(3) of ERISA, maintained or contributed to by Seller and
used for any of the Transferring Employees (collectively, the "Plans") is listed
on Schedule 4.13. Neither the Purchaser nor the Parent will have liability under
any of the Plans.
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4.14 Employees; Employee Relations.
(a) Schedule 4.14 sets forth (i) the name and current annual
salary (or rate of pay) and other compensation (including, without limitation,
normal bonus, profit-sharing and other compensation) now payable by Seller to
each Transferring Employee, (ii) any increase to become effective after the date
of this Agreement in the total compensation or rate of total compensation
payable by Seller to each such person, and (iii) all accrued but unpaid vacation
pay owing to any Transferring Employee.
(b) Seller is not a party to, or bound by, the terms of any
collective bargaining agreement that covers any Transferring Employee. Except as
set forth on Schedule 4.14, there are no labor disputes existing or, to the best
knowledge of Seller, threatened that involve, by way of example, strikes, work
stoppages, slowdowns, picketing, or any other interference with work or
production, or any other concerted action by employees that involve any of the
Transferring Employees. No charges or proceedings before the National Labor
Relations Board, or similar agency, exist or, to the best knowledge of Seller,
are threatened that relate to the Business. To the Seller's Knowledge, there are
no attempts being made to organize any employees presently employed in the
Business nor have any employees left or been fired who were attempting to
organize the employees. To Seller's Knowledge, all of the Transferring Employees
will continue to be available on substantially the same terms and conditions to
the Purchaser following Closing.
(c) Except as disclosed on Schedule 4.14, Seller is not a party to
any employment agreement or other agreement with any Transferring Employee. No
Actions have been commenced nor to the Seller's Knowledge are threatened against
Seller by any employee of Seller concerning such employee's work with the
Business under any federal, state or local laws in respect of the employment
relationship of such employee or the independent contractor relationship of any
contractor or consultant, including, but not limited to, Actions under: (i)
anti-discrimination statutes such as Title VII of the Civil Rights Act of 1964,
as amended (or similar state or local laws prohibiting discrimination because of
race, sex, religion, national origin, age and the like); (ii) the Fair Labor
Standards Act or other federal, state or local laws regulating hours of work,
wages, overtime and other working conditions; (iii) requirements imposed by
federal, state or local Governing contracts such as those imposed by Executive
Order 11246; (iv) state laws with respect to tortious employment conduct, such
as slander, harassment, false light, invasion of privacy, negligent hiring or
retention, intentional infliction of emotional distress, assault and battery, or
loss of consortium; (v) the Occupational Safety and Health Act, as amended, as
well as any similar state laws, or other regulations respecting safety in the
workplace; or (vi) any state or federal statutes, rules or regulations
classifying persons as employees rather than independent contractors. Seller is
not subject to any settlement or consent decree with any present or former
employee, employee representative or any Governing Authority relating to claims
of discrimination or other claims in respect to employment practices and
policies; and no Governing Authority has issued a judgment, order, decree or
finding with respect to the labor and employment practices (including practices
relating to discrimination) of Seller involving the Business.
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(d) Since December 7, 1999, Seller has not incurred any liability
or obligation under the WARN Act or similar state laws.
(e) The Seller does not owe any wages, salaries or bonuses to
Transferring Employees for services rendered prior to the Closing Date that are
not Assumed Employee Expenses and no claims have been made for any such amount
by any Transferring Employee.
4.15 Consents. Except as set forth in Schedule 4.15 no consent,
approval, authorization or order of any court, Governing Authority or any other
person or under any Assumed Contract is required to permit Seller to convey the
Assets free of Encumbrances, assign the Assumed Contracts or to otherwise
consummate the transactions contemplated by this Agreement.
4.16 Insurance. Set forth on Schedule 4.16 is a summary description of
all policies of fire, casualty, liability and other forms of insurance and all
fidelity bonds held by Seller covering the Assets or the Business together with
a list of all prepaid amounts, deposits and claims made other than health claims
made by employees under group health plans.
4.17 Taxes. PFSweb and Seller have paid all Taxes which have become due
or have been assessed against it or the Assets and all Taxes which any taxing
authority has proposed or asserted to be owing, except for Taxes which are not
yet due and payable or which it is contesting as set forth on Schedule 4.17. All
Tax liabilities to which the properties of Seller may have been subjected have
been discharged, except for Taxes assessed but not yet payable. There are no Tax
claims for unpaid Taxes which are due and owing presently being asserted against
Seller, PFSweb or the Assets and to Seller's Knowledge there is no basis for any
such claim. Neither Seller nor PFSweb has granted any extension to any taxing
authority of the limitation period during which any Tax liability against the
Assets may be asserted thereby. The Assets will be conveyed to Purchaser at
Closing free and clear of any claims or Encumbrances for Taxes incurred prior to
the Closing Date, except for Taxes which are not yet due and payable.
4.18 Environmental Laws and Regulations. Except as set forth in the
Mock OSHA Safety Survey prepared by Operations Excellence Inc. for a survey
conducted from March 28, 2001 to March 29, 2001, (i) to Seller's Knowledge, the
operations of the Leased Real Property and any use, storage, treatment, disposal
or transportation of Hazardous Materials which has occurred in or on the Leased
Real Property from December 7, 1999 to the Closing Date have been in compliance
with Environmental Law, except for such noncompliance as would not reasonably be
expected to have a Material Adverse Effect; (ii) to Seller's Knowledge, from
December 7, 1999 to the Closing Date, no release, leak, discharge, spill,
disposal or emission of Hazardous Materials has occurred in, on or under the
Leased Real Property in a quantity or manner which violates or requires further
investigation or Remedial Action under Environmental Law; (iii) to Seller's
Knowledge, there is no pending or threatened litigation or administrative
investigation or proceeding concerning the Leased Real Property involving
Hazardous Materials or Environmental Laws; and (iv) to Seller's Knowledge, there
are no above-ground or underground storage tank systems located at the Leased
Real Property, except for two above ground diesel fuel tanks.
4.19 Absence of Certain Changes or Events. Neither Seller nor PFSweb
has suffered any event or circumstance which could reasonably be expected to
preclude Purchaser from using
21
the Assets in the manner previously used by Seller in the Business or received
any notice of any claim asserted against it by any Governing Authority which
could reasonably be expected to preclude Purchaser from using the Assets in the
manner previously used by Seller in the Business.
4.20 [Intentionally Omitted]
4.21 Agreements with Guaranties. Schedule 4.21 sets forth a list of all
agreements to which the Seller or PFSweb is a party and for which the Parent or
the Purchaser has guaranteed the performance and all amounts owing thereunder
(the "Guaranteed Agreements"). With respect to each Guaranteed Agreement,
neither Seller nor PFSweb is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default by
Seller or PFSweb, or permit termination, modification, or acceleration, under
such agreement. Seller and PFSweb have been notified by the Parent and the
Purchaser of their intent, subject to Section 7.3, to notify, after June 15,
2001, all parties holding guaranties in connection with the Guaranteed
Agreements that, effective upon Closing or such other date as otherwise required
by the terms of any guaranties in connection with the Guaranteed Agreements (the
"Guaranty Revocation Date"), Parent and Purchaser will no longer act as
guarantor under the Guaranteed Agreements for amounts incurred from the Guaranty
Revocation Date.
4.22 True, Correct and Complete Information. No representation or
warranty by Seller and PFSweb contained in this Agreement, in the schedules
attached hereto or in any certificate furnished by Seller and PFSweb to
Purchaser in connection herewith or pursuant hereto contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make any statement herein or therein, in light of the circumstances in
which it was made, not misleading.
4.23 Broker's and Finder's Fees. Neither Seller nor PFSweb has made any
agreement with any Person, or taken any action which would cause any Person, to
become entitled to an agent's, broker's or finder's fee or commission in
connection with the transactions contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT
Purchaser and Parent, jointly and severally, represent and warrant to
the Seller as follows:
5.1 Organization and Authority. Each of Purchaser and Parent 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 or lease its properties and to carry on its business as it is presently
being operated and in the place where such properties are owned or leased and
such business is conducted. The execution, delivery and performance of this
Agreement by each of Purchaser and Parent, and all other agreements by and among
the parties, and the consummation by it of the transactions contemplated hereby
and thereby, have been duly authorized by all requisite corporate action and no
further action or approval is required in order to permit Purchaser and/or
Parent to consummate the transactions contemplated hereby and thereby. This
Agreement constitutes, and all other agreements by and among the parties, when
22
executed and delivered in accordance with the terms thereof, will constitute the
legal, valid and binding obligations of each of Purchaser and/or Parent,
enforceable in accordance with their terms. Each of Purchaser and Parent has
full power, authority and legal right to enter into this Agreement and all other
agreements by and among the parties and to consummate the transactions
contemplated hereby and thereby. The making and performance of this Agreement,
and all other agreements by and among the parties, and the consummation of the
transactions contemplated hereby and thereby in accordance with the terms hereof
and thereof will not conflict with the Certificate of Incorporation or the
Bylaws of Purchaser or Parent.
5.2 Corporate Power and Authority. The execution, delivery and
performance of this Agreement and Additional Documents by Purchaser and Parent
and the consummation by them of the transactions contemplated hereby and
thereby, have been duly authorized by all requisite corporate action, including,
but not limited to, Board of Director approvals, and no further action or
approval is required to permit Purchaser and Parent to consummate the
transactions contemplated hereby and thereby. This Agreement and Additional
Documents when executed and delivered in accordance with the terms thereof, will
constitute, the legal, valid and binding obligations of Purchaser and Parent,
enforceable in accordance with their terms. Purchaser and Parent have full
power, authority and legal right to enter into this Agreement and the Additional
Documents and to consummate the transactions contemplated hereby and thereby.
The making and performance of this Agreement and the Additional Documents and
the consummation of the transactions contemplated hereby and thereby in
accordance with the terms hereof and thereof will not (a) conflict with the
Certificate of Incorporation or the Bylaws of Purchaser and Parent, (b) result
in any breach or termination of, or constitute a default under, or constitute an
event that with notice or lapse of time, or both, would become a default under,
or result in the creation of any Encumbrance upon any of the assets of, or
create any rights of termination, cancellation or acceleration in any person
under any contract of, or violate any order, writ, injunction or decree, to
which Purchaser and Parent is a party, by which any of the assets, business or
operations of Purchaser and Parent may be bound or affected or under which any
of the assets, business or operations of Purchaser and Parent receive benefits,
or (c) result in the violation of any provisions of law applicable and material
to Purchaser and Parent.
5.3 Consents. Except as set forth on Schedule 5.3, no consent,
approval, authorization or order of any court, Governing Authority or any other
person is required in order to permit Purchaser or Parent to consummate the
transactions contemplated by this Agreement.
5.4 True, Correct and Complete Information. No representation or
warranty by Purchaser and Parent contained in this Agreement, in the schedules
attached hereto or in any certificate furnished by Purchaser and Parent to
Seller in connection herewith or pursuant hereto contains any untrue statement
of a material fact or omits to state any material fact necessary in order to
make any statement herein or therein, in light of the circumstances in which it
was made, not misleading.
5.5 Broker's and Finder's Fees. Purchaser and Parent have not made any
agreement with any Person, or taken any action which would cause any Person, to
become entitled to an agent's, broker's or finder's fee or commission in
connection with the transactions contemplated by this Agreement.
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5.6 Private Letter Ruling. Parent hereby represents and warrants, on
its own behalf and on behalf of each member of the Distributing Group, that (i)
it has examined the Supplemental Ruling Request, and (ii) the facts presented
and the representations made therein, to the extent descriptive of Parent or the
Distributing Group or the business of Parent or the Distributing Group
(including, without limitation, the business purposes for the Separation and the
Purchase, the representations in the Supplemental Ruling Request to the extent
that they relate to Parent or the Distributing Group or the business of Parent
or the Distributing Group and the plans, proposals, intentions and policies of
Parent and the Distributing Group), shall be treated as having been made by
Parent and are true, correct, and complete. Neither the Seller nor PFSweb will
have liability for any misrepresentations made by the Parent in connection
therewith. A breach of the representations made in this Section 5.6 shall be
deemed a Prohibited Action (as defined in the Tax Allocation Agreement).
ARTICLE VI
COVENANTS OF SELLER
The Seller covenants and agrees with Purchaser as follows:
6.1 Notices. Seller will timely give all notices required to be given
relating to the transactions contemplated hereby, including without limitation,
(i) required to be given to employees and (ii) any notices required to be given
to all creditors or claimants against Seller.
6.2 Access to Books, Records and Properties.
(a) Seller agrees to provide Purchaser, its accountants, counsel
and other representatives, during normal business hours and upon reasonable
notice, for a period of four years (plus such longer period of time should the
statute of limitations for any matter for which Purchaser has or is asserted to
have liability which relates to information or records which the Seller has)
after the Closing Date, access to the books, records, income tax returns,
contracts and other underlying data and documentation of Seller relating to the
Assets, Business or Transferring Employees during the period prior to the
Closing Date and to make available to Purchaser, personnel of Seller in
Purchaser's review thereof for the purpose of enabling them to determine and
calculate any tax liabilities in connection with the Assets, Business or the
Transferring Employees. Seller agrees that, for such four-year period, it will
preserve and keep intact all such books and records.
(b) Purchaser agrees to provide Seller, its accountants, counsel
and other representatives, during normal business hours and upon reasonable
notice, for a period of four years (plus such longer period of time should the
statute of limitations for any matter for which Seller has or is asserted to
have liability which relates to information or records which the Seller has)
after the Closing Date, access to the books, records, income tax returns,
contracts and other underlying data and documentation of Purchaser relating to
the Assets, Business or Transferring Employees during the period prior to the
Closing Date and to make available to Seller, personnel of Purchaser in Seller's
review thereof for the purpose of enabling them to determine and calculate any
tax liabilities in connection with the Assets, Business or Transferring
Employees. Purchaser agrees that, for such four-year period, it will preserve
and keep intact all such books and records.
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6.3 Approvals of Third Parties. As soon as practicable after the date
hereof, the Seller will use its best efforts to secure all necessary consents,
approvals and clearances of third parties that Parent or Purchaser has
requested, but that were not obtained prior to the Closing and were waived by
the Parent and Purchaser as conditions to the closing.
6.4 Obligations under Guaranteed Agreements. Seller and PFSweb each
hereby agree to perform and discharge all of their obligations under such
Guaranteed Agreements. The obligations of Seller and PFSweb under this Section
6.4 will expire when Seller and PFSweb have paid all obligations under the
Guaranteed Agreements and all guarantees of Purchaser and Parent under the
Guaranteed Agreements have terminated.
6.5 Certificate of Memphis Material Handling, Inc. Seller shall deliver
to Purchaser on or before June 15, 2001 a certificate from an authorized officer
of Memphis Material Handling, Inc. (the "MMH Certificate") certifying that the
list of assets they prepared contains a list of every Asset located in Building
H, known as ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ in Memphis, Tennessee, as identified in a survey
conducted from April 11, 2001 through April 13, 2001.
ARTICLE VII
COVENANTS OF PURCHASER AND PARENT
7.1 Approvals. Purchaser and Parent will each take all necessary
corporate and other action and file all documents required to obtain, and will
use its reasonable efforts to obtain, all approvals of regulatory authorities,
consents and approvals required of it to carry out the transactions contemplated
by this Agreement and will cooperate with the Seller to obtain all such
approvals and consents required by Purchaser and Parent.
7.2 BSD. Seller and its Affiliates, Priority Fulfillment Services
Canada, Inc. and Priority Fulfillment Services Europe B.V. (collectively, the
"PFS Group"), provide certain services ("Services") to Purchaser's subsidiary,
Business Supplies Distributors, Inc. ("BSD") and its Affiliates, BSD (Canada),
Inc. and Business Supplies Distributors Europe B.V., (collectively, including
Priority Fulfillment Services Australia pty Ltd and Priority Fulfillment
Services de Mexico S.A. de C.V., the "BSD Group"), in connection with the
purchase and sale by the BSD Group (the "BSD Business") of various IBM products
(the "IBM Products") pursuant to various IBM Master Distributor Agreements set
forth on Schedule 7.2 hereof (the "IBM Agreements"). Parent covenants and agrees
that between the date hereof and December 31, 2001 (i) it will provide
reasonable cooperation to Seller in connection with the proposed transition and
transfer of the BSD Business and the IBM Agreements to the PFS Group or its
designee and (ii) it will not become a master distributor of IBM products, as
provided in the IBM Agreements or, so long as the PFS Group is a master
distributor of IBM products, become a second master distributor of IBM products.
Nothing contained herein shall restrict Parent or its Affiliates (other than the
BSD Group) from continuing to conduct its business as it is currently being
conducted, which includes the distribution and sale of IBM products.
7.3 Agreements with Guaranties. Parent and Purchaser will not rescind,
revoke or terminate any guaranty if, under the terms of the applicable
Guaranteed Agreement, such action
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would, with or without notice or lapse of time, constitute a breach or default
by Seller or PFSweb, or permit termination or acceleration under such Guaranteed
Agreement and prior to June 15, 2001, Seller has provided written notice of such
potential breach, default, termination or acceleration.
ARTICLE VIII
DATE AND PLACE OF CLOSING
8.1 Date and Place of Closing. Subject to satisfaction or waiver of the
conditions to the obligations of the parties, the purchase and sale of the
Assets pursuant to this Agreement will occur at a closing (the "Closing") to be
held in the offices of ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇, P.C., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or such other place as mutually agreed to by the
parties, at midnight Dallas, Texas time, on May 25, 2001, or such other date as
the parties may mutually agree upon (the "Closing Date") to be effective on such
Closing Date. The parties may mutually agree to close this transaction via the
prior delivery of the closing documents, the facsimile of executed signature
pages and the wiring of the Cash Payment.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF PURCHASER AND PARENT
The obligations of Purchaser and Parent to cause the purchase of the
Assets and the other transactions contemplated hereby to occur at Closing shall
be subject to the satisfaction on or prior to the Closing Date of all of the
following conditions, except such conditions as Purchaser and Parent may waive
in writing:
9.1 Representations and Warranties of Seller. All of the
representations and warranties of Seller contained in this Agreement and in any
Schedule or other disclosure in writing from Seller shall have been true and
correct when made, and shall be true and correct on and as of the Closing Date
with the same force and effect as though such representations and warranties had
been made on and as of the Closing Date, except for such representations as are
made as of a different date which shall be true and correct as of such different
date.
9.2 Covenants of Seller. All of the covenants and agreements herein on
the part of Seller to be complied with or performed on or before the Closing
Date shall have been fully complied with and performed.
9.3 Seller's Certificate. There shall be delivered to Purchaser a
certificate dated as of the Closing date and signed by the President or a Vice
President of Seller to the effect set forth in Sections 9.1 and 9.2, which
certificate shall have the effect of a representation and warranty made by
Seller on and as of the Closing Date.
9.4 Litigation. At the Closing Date, there shall not be pending or
threatened any litigation in any court or any proceeding before any Governing
Authority (i) in which it is sought to restrain, invalidate, set aside or obtain
damages in respect of the consummation of the purchase and sale of the Assets or
the other transactions contemplated hereby; (ii) that could, if adversely
determined, result in any Material Adverse Effect; or (iii) as a result of
which, in the
26
reasonable judgement of Purchaser, Purchaser would be deprived of the material
benefits of its ownership of the Assets.
9.5 Satisfactory to Purchaser's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement or incidental
thereto and all other related matters shall have been satisfactory to ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇, P.C., counsel for Purchaser.
9.6 No Material Adverse Effect. There shall not have occurred any
Material Adverse Effect. Purchaser shall receive a certificate from Seller,
dated as of the Closing Date and in form and substance satisfactory to
Purchaser, as to the fulfillment of the conditions set forth in this Section
9.6.
9.7 Consents. Seller shall have obtained all orders, approvals,
estoppel certificates or consents of third parties, including, without
limitation, any orders, approvals, certificates or consents deemed necessary by
counsel to Purchaser which shall be required to consummate the transactions
contemplated hereby, including, without limitation, consents to the assignment
of the Assumed Liabilities listed on Schedule 2.2.
9.8 [Intentionally Omitted]
9.9 Assurance from Tax Advisors. Purchaser and Parent shall have
received assurance from their tax advisors, in form and substance reasonably
acceptable to each of Purchaser and Parent, that the Transaction will not affect
the tax-free status of the Spin-off.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to cause the sale of the Assets and the other
transactions contemplated hereby to occur at Closing shall be subject to the
satisfaction on or prior to the Closing Date of all of the following conditions,
except such conditions as Seller may waive in writing.
10.1 Representations and Warranties of Purchaser and Parent. All of the
representations and warranties of Purchaser and Parent contained in this
Agreement and in any Schedule or other disclosure in writing from Purchaser or
Parent shall have been true and correct when made, and shall be true and correct
on and as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date,
except for such representations as are made as of a different date which shall
be true and correct as of such different date.
10.2 Covenants of Purchaser and Parent. All of the covenants and
agreements herein on the part of the Purchaser and Parent to be complied with or
performed on or before the Closing Date shall have been fully complied with and
performed.
10.3 Purchaser's/Parent's Certificate. There shall be delivered to
Seller a certificate dated as of the Closing Date and signed by the President or
a Vice President of Purchaser and
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Parent to the effect set forth in Sections 10.1 and 10.2, which certificate
shall have the effect of a representation and warranty made by Purchaser and
Parent on and as of the Closing Date.
10.4 Satisfactory to Seller's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement or incidental
thereto and all other related legal matters shall have been satisfactory to
▇▇▇▇▇ & Samson, P.A., counsel for Seller.
10.5 Assurance from Tax Advisors. Seller shall have received assurance
from its tax advisors, in form and substance reasonably acceptable to Seller,
that the transaction contemplated hereby will not affect the tax-free status of
the Spin-off.
ARTICLE XI
CLOSING
11.1 Performance by Seller. At the Closing, concurrently with
performance by Purchaser and Parent of their respective obligations to be
performed at the Closing:
(a) Conveyances. Seller shall execute and deliver to Purchaser, in
form and substance acceptable to Purchaser (i) a ▇▇▇▇ of Sale and Assignment in
substantially the form attached hereto as Exhibit A conveying to Purchaser all
items of personalty included among the Assets, assignments of each of the
contracts, leases, arrangements and commitments listed on Schedule 2.1A; (ii)
all other assignments, endorsements and instruments of transfer as shall be
necessary or appropriate to carry out the intent of this Agreement and as shall
be sufficient to vest in Purchaser title to all of the Assets and all right,
title and interest of Seller thereto and (iii) all other Additional Documents to
which Seller is a party. If requested by Purchaser, such documents shall be in a
form suitable for recording and shall be consented to by any third parties to
such agreements.
(b) Records. Except as may be necessary for the proper fulfillment
of its obligations under the Transition Agreement, Seller shall deliver to
Purchaser all documents, agreements, reports, books, records and accounts
pertaining specifically to the Assets that are in Seller's possession,
including, but not limited to, the list of Material Permits attached as Schedule
4.6.
(c) Certificates. Seller shall execute and deliver to Purchaser
such certificates as may be reasonably requested by the Purchaser, including,
but not limited to, an Incumbency Certificates and an officer's certificates
certifying that the representations and warranties contained herein are true.
(d) Certificates of Authorities. Seller shall deliver to Purchaser
(i) certificates of the Secretary of State of Delaware, each dated as of a date
not more than twenty (20) days prior to the Closing Date, attesting to the
organization, existence and good standing of Seller and PFSweb and (ii) a copy,
certified by an authorized officer of each of Seller and PFSweb, of resolutions
duly adopted by the Board of Directors of each of Seller and PFSweb duly
authorizing the transactions contemplated in this Agreement.
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(e) Opinion of Seller's Counsel. Seller shall deliver to Purchaser
the legal opinion of its counsel, ▇▇▇▇▇ & Samson, P.A., dated the Closing Date,
as to the matters set forth in Sections 4.1 and 4.2, such opinion to be
reasonably satisfactory to Purchaser.
(f) Consents. Seller shall deliver to Purchaser the Required
Consents.
(g) Tax Proration Schedule. Seller shall deliver to Purchaser the
tax proration schedule attached hereto as Schedule 3.5.
(h) Expenses Owed for TMSA and SASA. The parties shall mutually
agree upon an invoice and payment schedule for all services performed under the
TMSA and the SASA through the date of termination.
(i) Other Actions. Seller shall take all such other steps as may
be necessary or appropriate to put Purchaser in actual and complete ownership
and possession of the Assets.
11.2 Performance by Purchaser. At the Closing, concurrently with the
performance by Seller of its obligations to be performed at the Closing,
Purchaser shall:
(a) Purchase Price. Deliver to Seller the funds specified in
Section 3.1.
(b) Assumption Agreement. Deliver to Seller the Assumption
Agreement.
(c) Certificates of Authorities. Deliver the following to Seller
(i) a certificate of the Secretary of State of Delaware, dated as of a date not
more than twenty (20) days prior to the Closing Date, attesting to the
organization, existence and good standing of Purchaser and Parent and (ii) a
copy, certified by an authorized officer of Purchaser and Parent, of resolutions
duly adopted by the Board of Directors of each of Purchaser and Parent duly
authorizing the transactions contemplated in this Agreement.
(d) Expenses Owed for TMSA and SASA. At closing, Purchaser shall
pay all invoices rendered by Seller to Purchaser under either the TMSA or the
SASA, provided the invoices are delivered to Purchaser prior to the Closing Date
for services already rendered and said invoices have been approved by
Purchaser's personnel. The parties shall mutually agree upon an invoice and
payment schedule for all services performed under the TMSA and the SASA through
the date of termination.
(e) Opinion of Purchaser's Counsel. Purchaser shall deliver to
Seller the legal opinion of its counsel, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇, P.C., dated
the Closing Date, as to the matters set forth in Sections 5.1 and 5.2, such
opinion to be reasonably satisfactory to Seller.
(f) Additional Documents. Execute and deliver to Seller the
Additional Documents to which Purchaser and/or Parent is a party, as the case
may be.
11.3 Other Instruments. In addition to the foregoing, Purchaser, Parent
and Seller agree as follows:
(a) Further Action by Seller. At any time and from time to time,
at or after the Closing, upon request of Purchaser, Seller shall do, execute,
acknowledge and deliver or shall
29
cause to be done, executed, acknowledged and delivered all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney and assurances as
may reasonably be required to evidence, vest in and confirm to Purchaser full
and complete title to, possession of, and the right to use and enjoy, the
Assets.
(b) Further Action by Purchaser and Parent. At any time and from
time to time, at or after the Closing, upon request of Seller, each of Purchaser
and Parent shall do, execute, acknowledge and deliver or shall cause to be done,
executed, acknowledged and delivered all such further acts and assurances as may
reasonably be required to better assure and confirm to Seller the assumption by
Purchaser of the obligations to render performance that are to be assumed by
Purchaser pursuant to this Agreement.
ARTICLE XII
ONGOING EXPENSES
The parties agree to continue making the payments as agreed by the
parties, including, but not limited to, those set forth on Schedule 12.
ARTICLE XIII
SURVIVAL AND INDEMNIFICATION
13.1 Survival of Covenants, Agreements, Representations and Warranties.
(a) Covenants and Agreements. All covenants and agreements made
hereunder or pursuant hereto or in connection with the transactions contemplated
hereby shall survive the Closing and shall continue in full force and effect
thereafter according to their terms.
(b) Representations and Warranties. All representations and
warranties contained herein shall survive the Closing and shall continue in full
force and effect thereafter for a period of one year following the Closing,
except that (a) the representations and warranties contained in Section 4.17
(Taxes) hereof shall survive until the earlier of (i) the expiration of the
applicable periods (including any extensions) of the respective statutes of
limitation applicable to the payment of the taxes to which such representations
and warranties relate without an assertion of a deficiency in respect thereof by
the applicable taxing authority or (ii) the completion of the final audit and
determinations by the applicable taxing authority and final disposition of any
deficiency resulting therefrom; and (b) the representations and warranties
contained in Sections 4.1 and 5.1 (Due Organization and Qualification); Sections
4.2 and 5.2 (Corporate Power and Authority); Section 4.4 (Personal Property;
Title to Property) and Section 4.18 (Environmental Laws and Regulations) hereof
shall survive until one day after the expiration of the applicable periods
(including any extensions) of the respective statutes of limitation.
(c) Claims Made Prior to Expiration. Notwithstanding the foregoing
survival periods set forth in this Section 13.1, the termination of a survival
period shall not affect the rights of an Indemnified Party in respect of any
claim made by such party with specificity, in good faith and in writing to the
Indemnifying Party in accordance with Section 13.5 and Section 14.9 hereof prior
to the expiration of the applicable survival period.
30
13.2 Purchaser's Losses. Seller and PFSweb, jointly and severally,
agree to indemnify and hold harmless Purchaser, Parent, their Affiliates and
their directors, officers, employees, representatives, agents and attorneys
from, against, for and in respect of any and all damages (including, without
limitation, amounts paid in settlement with Seller's consent, which may not be
unreasonably withheld), penalties, fines, interest and monetary sanctions,
losses, obligations, liabilities, claims, deficiencies, costs and expenses,
including, without limitation, reasonable attorneys' fees and other costs and
expenses incident to any suit, action, investigation, claim or proceeding
(hereinafter referred to collectively as "Purchaser's Losses") suffered,
sustained, incurred or required to be paid by any of them by reason of (i) any
representation or warranty made by Seller or PFSweb in or pursuant to this
Agreement being untrue or incorrect in any respect; (ii) any failure by Seller
or PFSweb to observe or perform its covenants and agreements set forth in this
Agreement; and (iii) any failure by Seller or PFSweb to satisfy and discharge
any liability or obligation not expressly assumed by Purchaser or Parent
pursuant to this Agreement. Furthermore, Seller agrees that in the event that
the representation made by the Seller in the last sentence of Section 4.4(b) is
found to be inaccurate, in addition to all other remedies available to Purchaser
and its Affiliates (including, without limitation, seeking such damages it can
show it has sustained by reason of such breach), the Seller will execute and
deliver all other assignments, endorsements and instruments of transfer as shall
be necessary or appropriate to vest in Purchaser title to all of the assets
necessary to make such representation accurate.
13.3 Employee Compensation and Benefits. Seller agrees to indemnify and
hold Purchaser, and its directors, officers, employees, representatives, agents
and attorneys harmless from and against any and all claims made by employees or
persons claiming to be employees of Seller for wages, salaries, bonuses,
pension, workmen's compensation, medical insurance, disability, vacation,
severance, pay in lieu of notice, sick benefits or other compensation or benefit
arrangements to the extent the same are based on employment service rendered to
Seller prior to the Closing Date or injury or sickness occurring prior to the
Closing Date and are not Assumed Liabilities or Assumed Employee Expenses
(collectively, "Employee Claims"). Employee Claims do not include insurance
premium adjustments, increases or other charges incurred by Purchaser or Parent
in connection with providing health care or other insurance benefits following
the Closing Date for Transferring Employees as the result of any pre-existing
condition of any such Transferring Employee.
13.4 Seller's Losses. Purchaser and Parent, jointly and severally,
agree to indemnify and hold harmless the Seller, PFSweb, their Affiliates and
their directors, officers, employees, representatives, agents and attorneys
from, against, for and in respect of any and all damages (including, without
limitation, amounts paid in settlement with Purchaser's consent, which may not
be unreasonably withheld), penalties, fines, interest and monetary sanctions,
losses, obligations, liabilities, claims, deficiencies, costs and expenses,
including, without limitation, reasonable attorneys' fees and other costs and
expenses incident to any suit, action, investigation, claim or proceeding
(hereinafter referred to collectively as "Seller's Losses"; Seller's Losses or
Purchaser's Losses are sometimes referred to herein as "Losses") suffered,
sustained, incurred or required to be paid by any of them by reason of (i) any
representation or warranty made by Purchaser or Parent in or pursuant to this
Agreement being untrue or incorrect in any respect; (ii) any failure by
Purchaser or Parent to observe or perform its covenants and agreements set
31
forth in this Agreement; or (iii) any failure by Purchaser or Parent to satisfy
and discharge any Assumed Liability.
13.5 Notice of Loss. Except to the extent set forth in the next
sentence, a party to this Agreement shall not have any liability under the
indemnity provisions of this Agreement with respect to a particular matter
unless a notice (the "Indemnification Notice") setting forth in reasonable
detail the breach which is asserted has been given to the Indemnifying Party (as
hereafter defined). Notwithstanding the preceding sentence, failure of the
Indemnified Party to give notice hereunder shall not release the Indemnifying
Party from its obligations under this Article XIII, except to the extent the
Indemnifying Party is actually prejudiced by such failure to give notice. With
respect to Purchaser's Losses and Employee Claims, Seller shall be the
"Indemnifying Party" and Purchaser and the other Persons described in Section
13.2 shall be the "Indemnified Party." With respect to Seller's Losses,
Purchaser, shall be the "Indemnifying Party" and Seller and the other Persons
described in Section 13.4 shall be the "Indemnified Party."
13.6 Right to Defend. Upon receipt of notice of any suit, action,
investigation, claim or proceeding for which indemnification might be claimed by
an Indemnified Party, the Indemnifying Party shall be entitled to defend,
contest or otherwise protect against such suit, action, investigation, claim or
proceeding at its own cost and expense, and the Indemnified Party must cooperate
in any such defense or other action, including the assertion of any counterclaim
or crossclaim. The Indemnified Party shall have the right, but not the
obligation, to participate at its own expense in a defense thereof by counsel of
its own choosing, but the Indemnifying Party shall be entitled to control the
defense unless the Indemnified Party has relieved the Indemnifying Party from
liability with respect to the particular matter or the Indemnifying Party fails
to assume defense of the matter. If the Indemnifying Party shall fail to defend,
contest or otherwise protect in a timely manner against any such suit, action,
investigation, claim or proceeding, the Indemnified Party shall have the right,
but not the obligation, to defend, contest or otherwise protect against the same
and make any compromise or settlement thereof and recover the entire cost
thereof from the Indemnifying Party including reasonable attorneys' fees,
disbursements and all amounts paid as a result of such suit, action,
investigation, claim or proceeding or the compromise or settlement thereof;
provided, however, that the Indemnified Party must send a written notice to the
Indemnifying Party of any such proposed settlement or compromise, which
settlement or compromise the Indemnifying Party may reject, in its reasonable
judgment, within 30 days of its receipt of such written notice. A failure by the
Indemnifying Party to reject such settlement or compromise within such thirty
(30) day period shall be deemed an acceptance of such settlement or compromise.
The Indemnified Party shall have the right to effect a settlement or compromise
over the objection of the Indemnifying Party; provided, that if (i) the
Indemnifying Party is contesting such claim in good faith or (ii) the
Indemnifying Party has assumed the defense from the Indemnified Party and the
Indemnifying Party has a net worth in excess of the amount being sought, the
Indemnified Party waives any right to indemnity therefor. If the Indemnifying
Party undertakes the defense of such matters, the Indemnified Party shall not,
so long as the Indemnifying Party does not abandon the defense thereof, be
entitled to recover from the Indemnifying Party any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof other than the reasonable costs of investigation undertaken by the
Indemnified Party with the prior written consent of the
32
Indemnifying Party and other than such amounts incurred where a conflict of
interest is reasonably determined to exist by the Indemnified Party such that
more than one legal counsel is reasonably needed.
13.7 Cooperation. Each of Parent, Purchaser and the Seller and each of
their affiliates, successors and assigns shall cooperate with each other in the
defense of any suit, action, investigation, proceeding or claim by a third party
and, during normal business hours, shall afford each other access to their books
and records and employees relating to such suit, action, investigation,
proceeding or claim and shall furnish each other all such further information
that they have the right and power to furnish as may reasonably be necessary to
defend such suit, action, investigation, proceeding or claim, including, without
limitation, reports, studies, correspondence and other documentation relating to
Environmental Protection Agency, Occupational Safety and Health Administration,
and Equal Employment Opportunity Commission matters.
13.8 Satisfaction of Amounts Owed. Until the Deferred Payments have
been made pursuant to Section 3.2, if Seller is determined to owe an
indemnification amount pursuant to the procedures set forth in this Article
XIII, then the amount due the Indemnified Party hereunder may, in addition to
and not in lieu of any other rights or remedies, be recovered by (i) offsetting
such amount against the Deferred Payments or (ii) offsetting such amount against
amounts due under the Transition Agreement.
13.9 Right to Dispute.
(a) If the Indemnifying Party notifies the Indemnified Party that
it does not dispute the claim described in such Indemnification Notice or fails
to notify the Indemnified Party within ten (10) business days of receiving the
Indemnification Notice pursuant to Section 13.5 (the "Objection Period") that
the Indemnifying Party disputes the claim described in such Indemnification
Notice, the loss in the amount specified in such Indemnification Notice will be
conclusively deemed a liability of the Indemnifying Party under Section 13.2,
13.3 or 13.4, as the case may be, and the Indemnifying Party shall pay the
amount of such loss to the Indemnified Party on demand. If the Indemnifying
Party has disputed its liability with respect to such claim within the Objection
Period, the Indemnifying Party and the Indemnified Party will proceed in good
faith to negotiate a resolution of such dispute, and if not resolved through
negotiations within fifteen (15) days of the Indemnifying Party disputing the
claim, such dispute shall be resolved by arbitration in accordance with Section
13.9(b).
(b) Any dispute submitted to arbitration pursuant to this Section
13.9 shall be finally and conclusively determined by arbitration conducted
pursuant to the commercial arbitration rules of the American Arbitration
Association in Dallas, Texas. Any decision made by the arbitrators shall be
final, binding and conclusive on the Indemnified Party and the Indemnifying
Party and entitled to be enforced to the fullest extent permitted by law and
entered in any court of competent jurisdiction. The expenses of each party to
any arbitration, including but not limited to such party's attorneys' fees, if
any, and the expenses and fees of the arbitrators shall be recoverable or borne
as determined by the arbitrators.
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(c) In the event Seller disputes any claim for indemnification as
provided in paragraph (a) above, Purchaser and Parent may not exercise their
right of offset set forth herein (including Sections 3.4 and 13.8) as to such
claim until such claim has been finally determined in accordance with the
arbitration provisions of the preceding paragraph (b); provided, however,
Purchaser and Parent shall not be obligated to pay the Deferred Payments to
Seller or pay amounts due under the Transition Agreement to the extent of such
disputed amounts, but shall instead pay such disputed amounts into the Joint
Deposit Account (as such term is defined in the Transition Agreement) pursuant
to the terms of the Transition Agreement, with such amounts to be paid out upon
resolution of the dispute as provided herein or in the Transition Agreement, as
applicable.
13.10 Limitations on Losses.
(a) In case any event shall occur that would otherwise entitle
any party to assert a claim for indemnification hereunder, no Losses shall be
deemed to have been sustained by such party to the extent of (i) any actual tax
benefit or savings realized by such party with respect thereto (net of any tax
cost attributable to the receipt of any indemnification payment hereunder) or
(ii) any proceeds (net of deductibles, taxes and collection costs) received by
such party from any insurance policies maintained by or on behalf of such party
with respect to losses (net of any increase in insurance premiums attributable
to such recovery). The parties agree to submit a claim under any applicable
insurance policies prior to or promptly following making a request for
indemnification hereunder.
(b) The sum of all Losses incurred by any party seeking
indemnification must exceed, on a cumulative basis, Twenty-Five Thousand Dollars
($25,000) before such party shall be entitled to indemnification hereunder;
provided, however, once such cumulative Losses exceed Twenty-Five Thousand
Dollars ($25,000), such party shall be entitled to indemnification for all
Losses.
(c) Except for the representations and warranties expressly set
forth herein and the Schedules hereto, no party hereto makes any representation
or warranty of any kind or nature regarding the Assets, the Business or any
other matter, fact or circumstance, and any and all other warranties, whether
express or implied, including warranties of merchantability or fitness for a
particular purpose, are hereby expressly disclaimed. Parent and the Purchaser
acknowledge that they (and their authorized agents and representatives ) have
conducted their own investigation and due diligence review of the Assets and the
Business and have reviewed the operations, facilities, books and records of the
Seller and have met with and interviewed such employees and other personnel as
they deemed appropriate.
(d) The indemnification obligations of Seller, Parent and
Purchaser hereunder shall, except in the case of fraud, intentional breach,
intentional misconduct, or intentional misrepresentation, constitute the sole
and exclusive remedies of the parties, respectively, for the recovery of money
damages with respect to the matters for which indemnification is provided
hereunder; provided, that the foregoing shall not be construed as limiting in
any way whatsoever any remedy other than for the recovery of money damages to
which any party may be entitled.
34
ARTICLE XIV
MISCELLANEOUS
14.1 Expenses. Except as otherwise expressly provided herein or on
Schedule 14.1, the Seller, the Parent and the Purchaser shall each pay its own
expenses in connection with the preparation of this Agreement, and the
consummation of the transactions contemplated hereby, including, without
limitation, fees of their own counsel, auditors and other experts, whether or
not such transactions be consummated.
14.2 Entire Agreement. This Agreement (including the exhibits and
schedules hereto) and the Additional Documents constitute the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter thereof,
including, but not limited to the Letter of Intent between the Parent and the
Seller dated March 21, 2001, and no party shall be liable or bound to the other
in any manner by any representations or warranties not set forth herein.
Notwithstanding the foregoing, this Agreement and the Additional Documents shall
not supersede, replace, amend or modify any of the terms or provisions of the
following agreements dated December 7, 1999 to which Parent and PFSweb are a
party: Master Separation Agreement, Tax Indemnification and Allocation
Agreement, and Initial Public Offering and Distribution Agreement (each as
supplemented by the Agreement dated April 6, 2001).
14.3 Publicity. Except as otherwise required by law, no party hereto
shall issue any press release or make any public statement, in either case
relating to this Agreement or the matters contained herein, without obtaining
the prior written approval of the other parties hereto to the content and manner
of presentation and publication thereof, which consent shall not be unreasonably
withheld or delayed. Each party hereby agrees that if the other party determines
in its good faith opinion that it must make a disclosure regarding this
transaction, including, but not limited to, the filing of copies of agreements
or other documents with the Securities and Exchange Commission, in order to
comply with applicable securities laws, that such party may make such disclosure
and such party's only obligation shall be to provide a copy of such proposed
disclosure to the other party prior to making such disclosure publicly and to
seek confidential treatment of the portions of such agreements or documents
which the other party reasonably deems appropriate.
14.4 Successors and Assigns. No party may assign either this Agreement
or any of its rights, interests, or obligations hereunder without the prior
written approval of the other parties; provided, however, that the Purchaser may
(i) assign any or all of its rights and interests hereunder to one or more of
its Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Purchaser nonetheless
shall remain responsible for the performance of all of its obligations
hereunder). Nothing in this Agreement, express or implied, is intended to confer
upon any party, other than the parties and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
such agreements.
14.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
35
14.6 Headings. The headings of the paragraphs and subparagraphs of this
Agreement are inserted for convenience of reference only and shall not be deemed
to constitute part of this Agreement or to affect the construction hereof.
14.7 Use of Certain Terms. As used in this Agreement, the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular paragraph, subparagraph or
other subdivision.
14.8 Modification and Waiver. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof, and this Agreement may be modified or amended by a written
instrument executed by Parent, Purchaser and Seller. No supplement, modification
or amendment of this Agreement shall be binding unless executed in writing by
all of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
14.9 Notices. All notices of communication required or permitted
hereunder shall be in writing and may be given by (a) depositing the same in
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, (b) delivering the same
in person to an officer or agent of such party, (c) sending by a nationally
recognized overnight delivery service or (d) telecopying the same with
electronic confirmation of receipt.
(i) If to Seller and/or PFSweb:
PFSweb, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇▇ & Samson, P.A.
▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
36
(ii) If to Purchaser and/or to Parent:
c/o Daisytek International
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, Esq.
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address or counsel as any party hereto shall specify pursuant
to this Section 14.9 from time to time.
14.10 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAWS PRINCIPLES THEREOF.
14.11 Time. Time is of the essence with respect to this Agreement.
14.12 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
14.13 Remedies Cumulative. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
[Remainder of Page Left Intentionally Blank]
37
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed in counterparts all as of the date first above written.
SELLER:
PRIORITY FULFILLMENT SERVICES, INC.
Name:
----------------------------------------
Title:
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PFSWEB:
PFSWEB, INC.
Name:
----------------------------------------
Title:
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PURCHASER:
DAISYTEK, INC.
Name:
----------------------------------------
Title:
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PARENT:
DAISYTEK INTERNATIONAL CORPORATION
Name:
----------------------------------------
Title:
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