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received a favorable ruling, Daisytek may, in its sole and absolute
discretion, determine to proceed instead on the basis of an opinion from
its professional advisor, in form and substance reasonably satisfactory
to it, as to the qualification of the transaction for tax-free treatment.
- Obtaining any material consents necessary to consummate the spin-off
which shall be in full force and effect.
- No court orders, injunctions, decrees, regulations or other legal
restraint prohibiting or restricting the completion of the spin-off shall
exist.
- No events or developments shall have occurred subsequent to the closing
of this offering that, in the sole judgement of Daisytek, would result in
the spin-off having a materially adverse effect on Daisytek, PFSweb, or
their shareholders.
We have agreed to cooperate with Daisytek to accomplish the spin-off and,
at Daisytek's direction, promptly take all actions necessary or desirable to
effect the spin-off. In the event that any of these conditions are not
satisfied, or waived by Daisytek in its sole discretion, Daisytek's rights and
our obligations under the Registration Rights Agreement described below will
become immediately effective.
Substitute Stock Options. In connection with the completion of the
spin-off, all Daisytek stock options held by Daisytek employees who are
transferred to PFSweb will be replaced with options to acquire shares of our
common stock. See "Substitute Stock Options."
Preservation of the Tax-free Status of the Spin-off. Daisytek intends for
the spin-off to qualify as a tax-free distribution under Section 355 of the Code
to Daisytek and its stockholders. Daisytek intends to seek a private letter
ruling (the "IRS Ruling") from the Internal Revenue Service or, in the absence
of a favorable IRS Ruling, an opinion from its professional tax adviser (the
"Tax Opinion") to such effect. In either case, we will be required to make
certain representations and warranties regarding our company and our business
and Daisytek will be required to make certain representations and warranties
regarding it and its business. We have also agreed to certain covenants that are
intended to preserve the tax-free status of the spin-off. We may take any action
otherwise prohibited by these covenants only if Daisytek has determined, in its
sole and absolute discretion, that such action would not jeopardize the tax-free
status of the spin-off. These covenants include:
- Stock Issuance. Prior to the completion of the spin-off, we have agreed
not to issue shares of our capital stock in an amount that would result
in Daisytek owning less than 80% of the total combined voting power of
all outstanding shares of our voting stock and/or less than 80% of any
other class and/or series of PFSweb capital stock (or otherwise cause
Daisytek not to be in control of PFSweb immediately prior to the
spin-off, within the meaning of Section 368(c) of the Code). This
covenant will not prohibit us from issuing stock options to our employees
or outside directors so long as such options will not vest or be
exercisable prior to the effective date of the spin-off.
- Certain Acquisition Transactions. Until two years after the completion of
the spin-off, we have agreed not to enter into or permit any transaction
or series of transactions that would result in a person or persons
acquiring or having the right to acquire shares of our capital stock that
would comprise 50% or more of either the value of all outstanding shares
of our capital stock or the total combined voting power of our
outstanding voting stock.
- Continuation of Active Trade or Business. Until two years after the
completion of the spin-off, we have agreed to continue to conduct the
active trade or business (within the meaning of
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