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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 0-17156
MERISEL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4172359
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
200 CONTINENTAL BOULEVARD
EL SEGUNDO, CALIFORNIA 90245-0948
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (310) 615-3080
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01
Par Value
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. [_]
As of March 21, 1994 the aggregate market value of voting stock held by non-
affiliates of the Registrant based on the last sales price as reported by the
Nasdaq National Market was $505,927,874 (23,531,529 shares at a closing price
of $21.50).
As of March 21, 1994 the Registrant had 29,661,880 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for the fiscal year
ended December 31, 1993 are incorporated by reference into Part III.
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INDEX TO FORM 10-K
MERISEL, INC.
PAGE REFERENCE
PART I
<TABLE>
<S> <C>
Item 1. Business.......................................................... 1
Item 2. Properties........................................................ 11
Item 3. Legal Proceedings................................................. 12
Item 4. Submission of Matters to a Vote of Security Holders............... 12
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.................................................................. 13
Item 6. Selected Financial Data........................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation..................................................... 15
Item 8. Financial Statements and Supplementary Data....................... 22
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure..................................................... 36
PART III
Item 10. Directors and Executive Officers of the Registrant............... 37
Item 11. Executive Compensation........................................... 37
Item 12. Security Ownership of Certain Beneficial Owners and Management... 37
Item 13. Certain Relationships and Related Transactions................... 37
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 38
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PART I
ITEM 1. BUSINESS.
OVERVIEW
Merisel, Inc. (together with its subsidiaries, "Merisel" or the "Company") is
the largest worldwide publicly-held wholesale distributor of microcomputer
hardware and software products. Through its full-line, channel-specialized
distribution business, Merisel combines the comprehensive product selection and
operational efficiency of a full-line distributor with the customer support of
a specialty distributor offering dedicated sales organizations to each of its
customer groups. On January 31, 1994, the Company completed the acquisition
(the "ComputerLand Acquisition") of certain assets of ComputerLand
Corporation's United States franchise and aggregator business ("the
ComputerLand Business"). The ComputerLand Business is a leading aggregator, or
master reseller, of computer systems and related products from major
microcomputer manufacturers, including Apple, Compaq, Hewlett-Packard and IBM,
to a network of approximately 750 independently-owned computer product
resellers in the United States. With the acquisition of the ComputerLand
Business, the Company has become the industry's only "Master Distributor,"
combining the strengths of a full-line, channel specialized distributor with
those of a master reseller. As a Master Distributor, the Company believes it is
uniquely positioned to offer a wider selection of microcomputer products to
more categories of customers than any of its competitors.
At December 31, 1993, Merisel stocked over 25,000 products from more than 900
of the microcomputer hardware and software industry's leading manufacturers
including Apple, AST, Borland, Colorado Memory Systems, Compaq, Creative Labs,
Digital Equipment Corporation, Epson, Hayes, Hewlett-Packard, IBM, Intel,
Lotus, Microsoft, NEC, Novell, Okidata, Sun Microsystems, Symantec, Texas
Instruments, 3Com, Toshiba, WordPerfect and Wyse. Merisel sells products to
over 65,000 computer resellers worldwide, including value-added resellers,
large retail chains and franchisees, computer superstores, mass merchants,
Macintosh and Unix resellers, system integrators and original equipment
manufacturers. The Company currently maintains 20 distribution centers that
serve North America, Europe, Latin America, Australia and other international
markets. For the fiscal year ended December 31, 1993, the Company's net sales
by geographic region were generated as follows: United States, 63%; Canada,
13%; Europe, 17%; and other international markets, 7%.
THE INDUSTRY
The microcomputer products distribution industry is large and growing,
reflecting both increasing demand worldwide for computer products and the
increasing use of wholesale distribution channels by manufacturers for the
distribution of their products. The industry moves product from manufacturer to
end-user through a complex combination of distribution agreements between
manufacturers, wholesale distributors, aggregators and resellers. Historically,
there have been two types of companies within the industry: those that sell
directly to the end-user ("resellers") and those that sell to resellers
("wholesale distributors" and "aggregators", which are also called "master
resellers").
Resellers sell directly to end-users, including large corporate accounts,
small- and medium-sized businesses and home users. The major reseller channels
are dealers and corporate resellers, value-added sellers ("VARs"), mail-order
firms and retailers (computer superstores, office supply chains and mass
merchants). VARs, which account for one of the largest segments of the overall
reseller channel, typically add value by combining proprietary software and/or
services with off-the-shelf hardware and software.
Wholesale distributors generally purchase a wide range of products in bulk
directly from manufacturers and then ship products in smaller quantities to
many different types of resellers, who typically include dealers, VARs, system
integrators, mail order resellers, computer products superstores and mass
merchants. Aggregators, or master resellers, are functionally similar to
wholesale distributors, but they focus on selling relatively few product lines,
typically high-volume, brand name computer systems, to a captive network of
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franchised dealers and affiliates. The larger computer manufacturers, such as
Apple, Compaq, Hewlett-Packard and IBM, have historically required resellers to
purchase their products from an affiliated aggregator, such as the ComputerLand
Business. Wholesale distributors have not been authorized to sell these
manufacturers' key microcomputer components, except on a limited basis. These
restrictions have been eased recently, and may continue to ease and eventually
be eliminated, with the result that the distinction between wholesale
distributors and master resellers may blur. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Acquisition of
ComputerLand Business."
With the acquisition of the ComputerLand Business, the Company has become the
industry's only Master Distributor, combining the strengths of a full-line,
channel-specialized distributor with those of a master reseller.
BUSINESS STRATEGY
Merisel has achieved its leading position by pursuing a strategy of offering
the industry's leading products and services to its customers at competitive
prices, providing superior cost-effective service through operational
excellence, expanding the Company's international business and targeting its
various customer groups using dedicated sales forces and marketing programs.
Providing Leading Products and Services. The Company's objective is to offer
the broadest range of leading product brands in each of the product categories
it carries. By stocking the leading brands, the Company generates sales of both
those product brands as well as other products, as reseller customers often
prefer to deal with a single source for many of their product needs. The
Company continuously evaluates new products, the demand for its current
products and its overall product mix and seeks to develop distribution
relationships with suppliers of products that enhance the Company's product
offerings. The Company believes that the size of its reseller customer base,
its international distribution capability and the breadth and quality of its
marketing support programs give it a competitive advantage over smaller,
regional distributors in developing supplier relationships.
As a result of the ComputerLand Acquisition, the Company, through the
ComputerLand Business, is now able to offer to the ComputerLand Business'
franchisees and affiliates a broad range of microcomputer systems and other
products from Apple, Compaq, Hewlett-Packard and IBM. Although the Company
distributes certain products of these leading manufacturers through its
wholesale distribution arrangements, neither the Company nor its direct
wholesale distribution competitors have been authorized to sell these
manufacturers' key microcomputer systems in the United States, except on a
limited basis. Instead, these manufacturers historically have distributed their
products directly to resellers and through aggregators such as ComputerLand
Corporation. See "--The Industry."
The Company believes that an opportunity exists to generate additional,
higher-margin revenues by offering fee-based services and information to
manufacturers and resellers. In 1993, the Company formed the Channel Services
Group to provide a variety of these services, including telemarketing,
merchandising and electronic software services.
Achieving Operational Excellence. The Company believes that high levels of
customer service and operating efficiency, or "operational excellence," are
significant factors in achieving and maintaining success in the highly
competitive microcomputer products distribution industry. The Company measures
operational excellence by such standards as "ease of doing business," accuracy
and efficiency in delivering products and expediting the delivery of services
and information. Merisel constantly strives to improve its operational
processes. In furtherance of this strategy, the Company is in the process of
significantly upgrading and improving its computer operating systems as well as
its warehouse management systems. See "--Operations and Distribution." In
addition, the Company is reorganizing its European operations, adding new
management personnel and centralizing certain functions to achieve economies of
scale. Merisel will seek to continue to refine the operational systems at its
foreign sales offices and distribution centers in order to
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increase the uniformity and efficiency of the Company's worldwide operations.
See "--International Operations." These changes are intended to enhance the
Company's ability to offer faster, more efficient and accurate service to its
customers.
Expanding Internationally. Merisel believes that it generates the largest
volume of international sales of any U.S.-based distributor, and is the largest
wholesale distributor of computer products in Canada and a leading distributor
in Europe, Mexico, Australia and Latin America. See "--International
Operations." The Company believes that many international markets will continue
to offer substantial growth and profit opportunities, due to the immature and
fragmented nature of the microcomputer distribution industry in these markets.
Merisel believes it is well positioned to capitalize on the opportunities
presented in a number of these markets because of the current scope of its
international operations and its ability to offer a broader range of products
and specialized services than many of its competitors. The Company's strategy
is to expand its international operations through internal growth and the
possible acquisition of existing distributors or the establishment of new
operations in other countries.
Targeting Customer Groups. Merisel serves a variety of different reseller
channels, which have diverse product, financing and support needs. Merisel was
the first full-line distributor in the industry to offer its various customer
groups a channel-dedicated sales force as well as customized product offerings,
financing programs and marketing and technical support programs, all of which
are tailored to address the differing needs of these customer groups. The
Company intends to continue to monitor the markets it serves to identify
customer opportunities and develop sales and marketing programs that serve
these groups more effectively. In furtherance of this strategy, on January 31,
1994 the Company completed the ComputerLand Acquisition.
PRODUCTS AND MANUFACTURER SERVICES
Merisel provides its manufacturers with access to one of the largest bases of
computer resellers worldwide while offering these manufacturers the means to
reduce the inventory, credit, marketing and overhead costs associated with
establishing a direct relationship with these resellers. This factor, along
with Merisel's access to financial resources and its economies of scale, has
allowed the Company to establish and develop long-term business relationships
with many of the leading manufacturers in the microcomputer industry. Merisel
distributes over 25,000 hardware and software products, including products for
the MS-DOS, OS/2, Macintosh, Apple and Unix operating environments. For the
fiscal year ended December 31, 1993, net worldwide sales of hardware and
accessories accounted for approximately 60% of the Company's sales, and sales
of software products accounted for the remaining 40% of net sales.
Merisel's suppliers include many of the leading microcomputer software and
hardware manufacturers, such as Apple, AST, Borland, Colorado Memory Systems,
Compaq, Creative Labs, Digital Equipment Corporation, Epson, Hayes, Hewlett-
Packard, IBM, Intel, Lotus, Microsoft, NEC, Novell, Okidata, Sun Microsystems,
Symantec, Texas Instruments, 3Com, Toshiba, WordPerfect and Wyse. In October
1993, Merisel was selected as one of two distributors in the U.S. of Sun
Microsystem's products. Software products include business applications such as
spreadsheets, word processing programs and desktop publishing and graphics
packages, as well as a broad offering of operating systems, including local
area network operating systems, advanced language and utility products.
Hardware products offered by the Company include computer systems, printers,
monitors, disk drives and other storage devices, modems and other connectivity
products, plug-in boards and accessories. The ComputerLand Acquisition
increased the Company's ability, through the ComputerLand Business, to
distribute the product offerings of Apple, Compaq, Hewlett-Packard and IBM to
the ComputerLand Business' franchisees and affiliates. See "--The Industry."
In addition to providing manufacturers access to one of the largest bases of
computer resellers worldwide, the Company also offers manufacturers the
opportunity to efficiently offer a number of special promotions, training
programs and marketing services targeted to the needs of specific reseller
groups. Merisel runs a variety of special promotions for manufacturers'
products, ranging from price discounts and bundled purchase discounts to
specialized computer reseller marketing programs, including the Vantage and
Frequent Buyer Programs. These promotional programs are designed to encourage
computer resellers to increase their
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volume of purchases, motivate resellers to purchase within a limited time
period and highlight specific manufacturers' products or promotion
opportunities. Additionally, Merisel provides marketing consultation services
for manufacturers' strategic marketing campaigns, as well as the opportunity to
be included in Merisel-sponsored trade advertisements. Merisel employs
marketing program specialists to work with designated manufacturers to develop
and carry out marketing programs such as dealer commission programs, sales
contests and other promotions. Merisel can also provide dedicated marketing
support and targeted customer information from its database to enhance
manufacturers' product promotions.
The Company also offers two exclusive training programs: Softeach, a two-day
worldwide seminar series whereby manufacturers train resellers about their
products, and Selteach, a training seminar series that gives manufacturers an
opportunity to provide product information to Merisel's United States sales
force. In 1993, Merisel offered Softeach seminars in 11 cities and 26
countries. Merisel, through third-party consultants, also conducts training
classes regarding certain Novell, 3Com, The Santa Cruz Operation, Digital
Equipment Corporation, Sun Microsystems, Microsoft and Lotus products for its
reseller customers.
Merisel generally enters into written distribution agreements with the
manufacturers of the products it distributes. As is customary in the industry,
these agreements usually provide non-exclusive distribution rights and often
contain territorial restrictions which limit the countries in which Merisel is
permitted to distribute the products. The agreements generally provide Merisel
with stock balancing and price protection provisions which reduce in part
Merisel's risk of loss due to slow-moving inventory, supplier price reductions,
product updates or obsolescence. The Company's agreements generally have a term
of at least one year, but often contain provisions permitting earlier
termination by either party upon written notice. Some of these agreements
contain minimum purchase amounts. Failure to purchase at such minimum levels
could result in the termination of the agreement.
Although Merisel regularly stocks products and accessories supplied by more
than 900 manufacturers, 45% of the Company's net sales in 1993 (as compared to
46% in 1992 and 47% in 1991) were derived from products supplied by Merisel's
ten largest manufacturers, with the sale of products manufactured by Microsoft
accounting for approximately 16% of net sales in 1993 (as compared to 17% in
1992 and 15% in 1991). The loss of the ability to distribute a particularly
popular product could result in losses of sales unrelated to that product. The
loss of a direct relationship between the Company and any of its key suppliers
could have an adverse impact on the Company's business and financial results.
CUSTOMERS AND CUSTOMER SERVICES
Merisel sells to more than 65,000 computer resellers worldwide. Merisel's
customers include VARs, large hardware and software retail chains and
franchisees, computer superstores, mass merchants, Macintosh, Unix and other
corporate resellers, systems integrators, and original equipment manufacturers
as well as independently owned retail outlets and consultants. Merisel's
smaller customers often do not have the resources to establish a large number
of direct purchasing relationships or stock significant product inventories.
Consequently, they tend to purchase a high percentage of their products from
distributors. Larger resellers often establish direct relationships with
manufacturers for their more popular products, but utilize distributors for
slower-moving products and for fill-in orders of fast-moving products which may
not be available on a timely basis from manufacturers. No single customer
accounted for more than 2.0% of Merisel's net sales in 1991, 1992 or 1993.
In Merisel's wholesale distribution business, the Company offers its
customers a single source of supply, prompt delivery, financing programs and
customer support.
Single Source Provider. Merisel offers computer resellers a single source for
over 25,000 competitively priced hardware and software products. By purchasing
from Merisel, the reseller only needs to comply with a single set of ordering,
billing and product return procedures and may also benefit from attractive
volume pricing. In addition, resellers are allowed, within specified time
limits, to return slow-moving products from one manufacturer in exchange for
more popular products from other manufacturers. Merisel's policy is to
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not grant cash refunds. Merisel has recently initiated a program that provides
incentives to ComputerLand franchisees and Datago affiliates to make all their
product purchases from Merisel and the ComputerLand Business.
Prompt Delivery. In most areas of the world serviced by the Company, orders
received by 5:00 p.m. local time are typically shipped the same day, provided
the required inventory is in stock. Merisel maintains sufficient inventory
levels in the United States to fill consistently in excess of 95% of all units
ordered on the day of receipt. Merisel typically delivers products from its
regional warehouses via United Parcel Service and other common carriers, with
customers in most areas in the United States receiving orders within one to two
working days of shipment. Merisel also will provide overnight air handling if
requested and paid for by the customer. These services allow computer resellers
to minimize inventory investment and provide responsive service to their
customers. For larger customers in the United States, Merisel also provides a
fulfillment service so that orders are shipped directly to the computer
resellers' customer, thereby reducing the need for computer resellers to
maintain inventories of certain products. The Company's foreign subsidiaries
may have lower fill rates and longer delivery times due to differing market
requirements and the smaller size of their operations.
Financing Programs. Merisel's credit policy for qualified resellers
eliminates the need to establish multiple credit relationships with a large
number of manufacturers. In addition, the Company arranges floor plan and lease
financing through a number of credit institutions and offers a program that
permits credit card purchases by qualified customers. To allow certain
resellers to purchase larger orders in the United States, the Company offers a
"financing desk" which seeks to arrange alternative financing such as escrow
programs and special bid financing from financial institutions.
Customer Support. Merisel offers a number of customer loyalty programs,
including the Vantage and Frequent Buyer Programs, which provide incentives to
resellers to aggregate their purchases through Merisel. The Vantage Programs
offer Merisel's top-volume customers within the VAR and value-added dealer
channels increased levels of service and pricing advantages. Merisel's Frequent
Buyer Program awards resellers with credits based on the dollar amount of their
purchases from Merisel, which credits are redeemable for travel, education,
merchandise and for revenue-generating activities such as product promotions
and advertisements. The cost of the Frequent Buyer Program is funded by
cooperative marketing dollars paid by Merisel's suppliers.
Merisel furnishes its computer resellers with a series of publications
containing detailed information on products, pricing, promotions and
developments in the industry. Merisel publishes a Confidential Reseller Price
Book, which lists Merisel's current product offerings. Merisel also publishes
the Hot List, which ranks Merisel's current best-selling hardware and software
products in four different reseller channels. In addition, Merisel's On-Line
Literature Library offers over 20,000 data sheets of product information
literature on a fax-back system and on CD-ROM.
Merisel provides training and product information to its reseller customers
through its well-respected Softeach program, a worldwide series of training
forums whereby manufacturers conduct seminars on how to sell their products.
Softeach is held periodically in major cities throughout the United States,
Canada, Australia and Europe. In 1993, the Company believes that over 15,000
computer resellers attended Softeach seminars held in 11 countries worldwide.
Merisel also provides computer resellers with a technical support "hotline," as
well as specialized technical support for virtually all product lines sold by
Merisel. In addition, Merisel's Technical Support department provides regular
product training seminars to Merisel's sales representatives to help them
become more product-knowledgeable.
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SALES AND MARKETING
To reach diverse customer segments, the Company has organized its Sales
department for its wholesale distribution business in the United States into
three channel segments.
DEALER CHANNEL. This channel is composed of the following specialized sales
divisions:
. The RETAILER division serves franchisees, independent retail chains and
storefronts, corporate resellers and direct-mail marketers.
. The RESELLER FULFILLMENT division serves the needs of direct marketers
such as Dell, IBM and Zenith through the fulfillment of orders for
third-party hardware and software products.
. The MAJOR ACCOUNTS division serves Merisel's large franchisee accounts,
computer superstores and computer retail chains through a specialized
staff that offers enhanced services, volume purchase agreements,
corporate office coordination, marketing programs and sales report
data.
. The MACINTOSH division provides expertise in sale and support of third-
party Macintosh products worldwide through its own separate marketing,
sales, products and technical support and purchasing departments.
VAR CHANNEL. This channel is composed of the following specialized sales
divisions:
. The VAR division provides value-added resellers with highly
knowledgeable sales representatives, a comprehensive line of computer
systems, Unix and connectivity products, education, financial services
and technical support.
. The ADVANCED PRODUCTS division (formerly the UNIX division) is
primarily dedicated to selling and supporting Sun Microsystems and Sun-
complimentary products through its own sales, marketing, operations and
technical support departments.
. The OEM division supports Merisel's customers who integrate and/or
manufacture microprocessor-based systems and solutions utilizing OEM
versions of Merisel's hardware and software products.
. The recently created SYSTEM INTEGRATOR division supports large system
and network integrators who require specialized programs and services.
CONSUMER CHANNEL.
. The CONSUMER PRODUCTS division targets mass merchants such as Circuit
City, Montgomery Ward and Office Depot by providing inventory selection
and control services, specialized marketing programs and other support
services tailored to the needs of mass-market merchandisers.
For each of the Company's international subsidiaries, the number and type of
specialized sales divisions vary based on market requirements, the size of the
subsidiary's sales force and the products carried by the subsidiary.
The Company's sales force is comprised of field sales representatives who
manage relations with the larger accounts and inside telemarketing sales
representatives who receive product orders and answer customer inquiries. When
a customer calls Merisel, screen synchronization technology causes a sales
profile to appear on the sales representative's computer screen before
greetings are exchanged. Customer orders generally are placed via a toll-free
telephone call to Merisel's inside sales representatives and are entered on
Merisel's SalesNet order entry system, a proprietary local area network created
by Merisel to speed the process of taking and processing orders. Using the
SalesNet database, sales representatives can immediately enter customer orders,
obtain descriptive information regarding products, check inventory status,
determine customer credit availability and obtain special pricing and promotion
information. Merisel also offers Dial-Up SalesNet, a system that allows a
customer, through the use of its own personal computer and a modem, to access
Merisel's database to examine pricing, credit information, product description
and availability and promotional information and to place orders directly into
Merisel's order processing system. For certain of its larger customers, the
Company has installed electronic data interchange (EDI) systems which allow
participating customers to directly access the Company's mainframe computer
system for order processing and account information.
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OPERATIONS AND DISTRIBUTION
The Company operates 20 distribution centers around the world, including
eight in the United States, two in Canada, five in Europe, four serving Latin
America and one in Australia. All of these distribution centers are leased,
except for one facility in Mexico, which is owned by the Company.
The Company's United States, Canadian and United Kingdom operations, other
than the ComputerLand Business, are conducted using a mainframe-based computer
system, originally implemented in the early 1980s, that operates on hardware
owned and operated by a third-party service provider. In recent years, the
Company has experienced a significant increase in both its sales volume and in
the number and type of transactions processed by the computer system. The
Company believes that the ability of its existing computer system in North
America to process the significantly increased sales volumes contemplated for
1994 and the first three quarters of 1995 is limited without certain
modifications to the system. The Company is in the process of implementing such
modifications and believes such modifications will be successful. If, however,
there is a delay in implementing the modifications, or if the system, as
modified, performs below anticipated service levels, the existing system may
not be able to accommodate anticipated increases in sales volumes and
transaction requirements in the fourth quarter of 1994. As a result, the
Company is making a significant investment in new advanced computer and
warehouse management systems for its North American operations.
These new systems are designed to accommodate substantially higher sales
volumes as well as provide greater transaction accuracy and operating
efficiency and more flexibility to accommodate a variety of transaction types.
The Company began designing the new computer system in early 1993 and currently
anticipates that it will convert to the new system in late 1994 and the first
half of 1995. The Company presently estimates that its aggregate investment in
the new computer systems, including costs of system design, hardware, software,
installation and training, will be approximately $20 million. The Company
installed its first new warehouse management system, which includes infrared
bar coding equipment and advanced computer hardware and software systems, in
one warehouse in 1993 and anticipates installation in its remaining North
American warehouses during 1994 and 1995.
The design and implementation of these new systems are complex projects and
involve risks that unanticipated problems may delay implementation of the new
systems or cause them to perform below anticipated service levels. The Company
therefore is making a substantial investment in the design and installation of
these systems and is dedicating a significant number of its personnel on a
full-time basis to these projects. In the event the Company experiences
significant delays in implementation of these new systems or such systems fail
to perform at anticipated service levels, the Company may not be able to
accommodate anticipated increases in sales volumes and transaction processing
requirements after the third quarter of 1995.
INTERNATIONAL OPERATIONS
The Company distributes microcomputer products throughout the world. Merisel
formed its first international subsidiary in 1982 and now operates in Canada,
the United Kingdom, France, Germany, Australia, Switzerland, Austria and
Mexico. Merisel also has a subsidiary based in Miami, Florida, which primarily
sells products to customers in Latin America and in other parts of the world
where Merisel does not have a physical presence. In June 1990, the Company
began limited distribution of products in Russia as part of a joint venture.
Management believes that its international microcomputer distribution
operations are larger than the operations of any other U.S.-based microcomputer
distributor. The Company also believes that certain of the markets for
microcomputer products outside the United States are less mature and therefore
present opportunities for further growth. Accordingly, the Company will seek to
further expand its international operations through internal growth and the
possible acquisition of existing distributors or establishment of new
operations in other countries.
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The products and services offered by Merisel's international subsidiaries are
generally similar to those offered in the United States, although the breadth
of the subsidiaries' product lines and the range of manufacturers' and
customers' services offered by the subsidiaries are usually smaller due to the
smaller size of the subsidiaries and differing market requirements. Certain
subsidiaries provide products or services not offered in the United States due
to differing manufacturer relationships and market requirements. Operationally,
the management and distribution systems at the Company's international
subsidiaries vary depending on the size of the subsidiary, its length of
operation and local market requirements. As each subsidiary expands, the
Company seeks to implement systems and procedures that are more similar to
those used in the United States.
In Europe, the Company is revising its distribution strategy in response to
the reduction in cross-border shipment barriers instituted by the European
Economic Community in 1993. With the reduction of cross-border shipping
barriers, the Company believes it can more efficiently ship to a large number
of countries from a centralized master warehouse or warehouses, supplemented by
smaller warehouses in various locations across Europe. At present, the Company
maintains a full warehouse in each of the countries in which it has operations,
with the exception of Austria. The Company is currently undertaking
preparations for development of a master warehouse in Northern Europe for use
beginning in mid-to-late 1995.
The Company's European operations are managed through a European
headquarters, which operates with a staff of pan-European managers to oversee
the Company's various European subsidiaries and operations. Merisel currently
is increasing its European management team and planning the computer system
revisions and other operational changes required to implement its centralized
distribution strategy.
Because the Company conducts business in a number of countries, that portion
of operating results and cash flows that is non-U.S. dollar denominated is
subject to certain currency fluctuations. The Company generally employs forward
exchange contracts to limit the impact of fluctuations in the relative values
of some of the currencies in which it does business.
In addition, international operations may also be subject to risks such as
the imposition of governmental controls, export license requirements,
restrictions on the export of certain technology, political instability, trade
restrictions, changes in tariffs, difficulties in staffing and managing
international operations and collecting accounts receivable and the impact of
local economic conditions and practices. As the Company continues to expand its
international operations, its success will be dependent, in part, on its
ability to anticipate and deal with these and other risks. There can be no
assurance that these or other factors will not have an adverse effect on the
Company's international operations.
For segment information regarding Merisel's United States and international
operations, see Note 11 of Notes to Consolidated Financial Statements.
COMPUTERLAND BUSINESS
On January 31, 1994, the Company, through its wholly-owned subsidiary,
Merisel FAB, Inc. ("Merisel FAB"), completed the ComputerLand Acquisition. As a
result of the ComputerLand Acquisition, Merisel, through the ComputerLand
Business, will now operate as a master reseller of computer systems and related
products from the major microcomputer manufacturers to a network of
approximately 750 independently-owned product resellers composed of two
customer groups: ComputerLand franchisees, with whom Merisel acts as franchisor
by licensing the ComputerLand name and providing both product supply and
various support services, and resellers purchasing under the ComputerLand
Business' Datago Program, which are independent dealers and value-added
resellers that purchase products from the ComputerLand Business on a cost-plus
basis, but do not license the ComputerLand name. For its fiscal year ended
September 30, 1993, the ComputerLand Business generated revenues of
approximately $1.1 billion and income from operations of $16.6 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Acquisition of ComputerLand Business."
8
<PAGE>
In connection with its purchase of the ComputerLand Business, Merisel
purchased substantially all of the ComputerLand Business' franchise and third-
party reseller agreements as well as substantially all of the rights in the
United States to ComputerLand Corporation's trademarks, trade names, service
marks, copyrights, patents and logos. Merisel paid approximately $80 million in
cash at the closing of the ComputerLand Acquisition for the acquired assets. In
addition, Merisel has agreed to make an additional payment in 1996 of up to $30
million, the amount of which will be determined based upon the growth in
Merisel FAB's and the Company's sales of products of designated manufacturers
to specified customers over the two-year period ending January 31, 1996.
Substantially all of the ComputerLand Business' 66 employees became employees
of Merisel FAB in connection with the ComputerLand Acquisition. Merisel did not
purchase the order fulfillment systems, warehouses or inventory used by the
ComputerLand Business. Instead, the Company eventually intends to integrate
these functions into its facilities and systems. As an interim strategy Merisel
and ComputerLand Corporation have entered into the Services Agreement pursuant
to which ComputerLand Corporation will continue to provide products and
distribution and other support services to the ComputerLand Business for two
years following the ComputerLand Acquisition.
Following its sale of the ComputerLand Business, ComputerLand Corporation
continues to operate as a reseller of computer products and services through
its company-owned locations throughout the United States and also retains its
international operations. ComputerLand Corporation recently changed its name to
Vanstar, Inc., but may continue to use the ComputerLand name in connection with
operation of its existing company-owned locations in the United States until
August 1994. Merisel FAB can sell franchises throughout the United States,
except that Merisel FAB may not sell franchises in areas with such ComputerLand
Corporation company-owned locations until August 1994.
The ComputerLand Business' franchisees operate locations under the
ComputerLand name. The ComputerLand Business currently sells products to
franchisees at cost and receives a royalty based upon gross sales of the
franchisee, irrespective of whether the products sold were purchased from the
ComputerLand Business. During 1994, the ComputerLand Business may offer
franchisees the opportunity to revise such franchisees' pricing structure by
selling products to franchisees at cost plus a mark-up and reducing or
eliminating the royalty on overall franchisee sales provided the franchisee
achieves minimum purchase targets. Franchisees typically enter into a ten-year
exclusive contract, renewable at the option of the franchisee. In addition to
the use of the ComputerLand name, the ComputerLand Business provides
franchisees a range of services including sales and marketing materials,
management and sales support services and a proprietary-dealer management
software system. At February 1, 1994, the ComputerLand Business had agreements
with franchisee groups operating 198 locations, located primarily in secondary
metropolitan markets in the United States.
The ComputerLand Business' Datago resellers are independent dealers and
value-added resellers. These resellers generally enter into non-exclusive one-
year renewable contracts cancelable at the option of either party on short
notice. These contracts typically entitle Datago resellers to purchase the full
range of the ComputerLand Business' products at cost plus a mark-up, depending
on the dollar volume of products purchased. At February 1, 1994, the
ComputerLand Business had approximately 549 active Datago resellers. During its
fiscal year ended September 30, 1993, no individual franchisee or Datago
reseller accounted for more than 10% of the ComputerLand Business revenues.
Following the ComputerLand Acquisition, the Company has undertaken an effort
to add additional resellers as customers of the ComputerLand Business under its
Datago program. Later in 1994, the Company intends to begin adding new
ComputerLand franchisees, focusing in particular on locations where no reseller
is using the ComputerLand name. In adding new Datago resellers and ComputerLand
franchisees, the Company will seek to offer programs that permit customers to
leverage their purchases from both the ComputerLand Business and Merisel's
existing wholesale distribution business.
9
<PAGE>
The ComputerLand Business offers its franchisees and Datago resellers a
selection of major microcomputer equipment and peripherals provided by
approximately 70 suppliers. For its fiscal year ended September 30, 1993,
approximately 76% of the ComputerLand Business revenues were generated by sales
of Apple, Compaq, Hewlett-Packard and IBM products. The loss of any one of
these four manufacturers, or a change in the way any of these manufacturers
markets, prices or distributes its products, could have a material adverse
effect on the ComputerLand Business' operations and financial results. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Acquisition of ComputerLand Business." In addition to the products
supplied directly by the ComputerLand Business, franchisees and Datago
resellers may purchase other products offered by the Company's wholesale
distribution business pursuant to separate agreements negotiated on their
behalf by Merisel FAB.
Under the two-year Services Agreement, ComputerLand Corporation will continue
to purchase and warehouse manufacturers' products and fulfill reseller orders
for substantially all of the products offered by Merisel FAB. Merisel FAB will
purchase such products from ComputerLand Corporation, rather than directly from
the supplier, and will pay ComputerLand Corporation a service fee for
performing these distribution functions. Resellers will continue to place
product orders with Merisel FAB through the order placement system operated by
ComputerLand Corporation. ComputerLand Corporation will typically ship products
to a customer within two days of receipt of an order. During the term of the
Services Agreement, Merisel FAB will be dependent upon ComputerLand Corporation
to purchase and maintain inventories of products sufficient to meet resellers'
requirements and to receive and fulfill orders at acceptable service levels.
Merisel FAB and ComputerLand Corporation will jointly maintain supplier
relationships. In the event that ComputerLand Corporation becomes unable to
perform its obligations under the Services Agreement, there may be an adverse
effect on the operations and financial results of the ComputerLand Business.
The Services Agreement contains provisions for monetary penalties in the event
that ComputerLand Corporation fails to achieve agreed-upon service levels, as
well as provisions permitting Merisel FAB to take over a portion of
ComputerLand Corporation's operations to fulfill such obligations under certain
circumstances.
Substantially all of the ComputerLand Business' sales to its customers
currently are financed on behalf of such customers by floor plan financing
companies, and the ComputerLand Business typically receives payment from these
financing companies within three business days from the date of sale. Such
floor plan financing is typically subsidized for the ComputerLand Business'
customers by its suppliers. Any material change in the availability or the
terms of financing offered by such financing companies or the subsidies
provided by suppliers could require Merisel FAB to provide such financing to
its customers, thereby substantially increasing the working capital necessary
to operate its business.
The Company does not have experience in operating a master reseller business
such as the ComputerLand Business, with its different merchandising strategy
and customer base. While the Company believes that the personnel hired as part
of the ComputerLand Acquisition, together with the Company's senior management,
will successfully manage the ComputerLand Business, no assurances can be given
as to the future performance levels or operating results of the ComputerLand
Business.
COMPETITION
Competition in the microcomputer products distribution industry is intense
and is based primarily on price, brand selection, breadth and availability of
product offering, speed of delivery, level of training and technical support,
marketing services and programs and ability to influence a buyer's decision.
Certain of Merisel's competitors have substantially greater financial
resources than Merisel. Merisel's principal competitors include large United
States-based international distributors such as Ingram Micro and Tech Data
Corporation, non-U.S. based international distributors such as Computer 2000,
national distributors such as Gates/FA Distributing, Inc. and Robec, Inc. and
regional distributors and franchisors. The Company competes internationally
with a variety of national and regional distributors on a country-by-country
basis.
10
<PAGE>
Merisel also competes with manufacturers that sell directly to computer
resellers, sometimes at prices below those charged by Merisel for similar
products. The Company believes its broad product offering, product
availability, prompt delivery and support services may offset a manufacturer's
price advantage. In addition, many manufacturers focus their direct sales to
large computer resellers because of the high costs associated with dealing with
a large number of small-volume computer reseller customers.
The ComputerLand Business is subject to competition from other franchisors
and aggregators in obtaining and retaining franchisees and third-party
resellers, as well as competition from wholesale distributors with respect to
sales of products to customers in the ComputerLand Business' network. See "--
The Industry." The Company believes that the ComputerLand Business' pricing,
brand selection, product availability and service levels are competitive in the
industry. With respect to brand selection, the Company believes that a
significant factor in the ComputerLand Business' ability to attract customers
is the fact that it is able to offer computer systems and other hardware
products from Apple, Compaq, Hewlett-Packard and IBM. These manufacturers
historically have sold their products directly to resellers and through a
limited number of master resellers such as the ComputerLand Business. The loss
of any of these manufacturers, or any change in the way any such manufacturers'
markets, prices or distributes its products, could have a material adverse
effect on the ComputerLand Business' operations and financial results. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Acquisition of ComputerLand Business." The ComputerLand Business'
principal competitors are Intelligent Electronics, MicroAge and InaCom, all of
which maintain networks of franchisees and third-party dealers and which carry
products of one or more of the Company's major manufacturers. Certain of the
ComputerLand Business' competitors have greater financial resources than the
Company.
EMPLOYEES
As of December 31, 1993 Merisel had 2,502 employees. Merisel considers its
relations with its employees to be excellent.
ITEM 2. PROPERTIES.
The Company maintains distribution centers in the following locations:
<TABLE>
<CAPTION>
DISTRIBUTION
COUNTRY/AREA SERVED CENTERS
- ------------------- ------------
<S> <C>
United States.................... 8
Australia........................ 1
Canada........................... 2
France........................... 1
Germany.......................... 1
Latin America/Caribbean.......... 1*
Mexico........................... 3
Russia........................... 1
Switzerland...................... 1
United Kingdom................... 1
---
Total............................ 20
===
</TABLE>
- --------
*Located in Miami, Florida
All of the Company's distribution centers are leased, except for one facility
in Mexico, which is owned by the Company. Merisel FAB is located in a 10,120
square-foot facility in Pleasanton, California. The facility has been subleased
from ComputerLand for a two-year period ending January 31, 1996. Merisel FAB's
customers receive product shipments directly from ComputerLand Corporation's
two warehouses located in Livermore, California and Indianapolis, Indiana.
11
<PAGE>
The Company's world headquarters are located in El Segundo, California, and
the Company also maintains sales offices in various domestic and international
locations. The Company believes that its facilities currently provide
sufficient space for its present needs, and that suitable additional space will
be available on reasonable terms, if needed.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in certain legal proceedings arising in the ordinary
course of business, none of which is expected to have a material impact on the
financial condition or business of Merisel.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
12
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock is traded in the over-the-counter market and is
quoted on the Nasdaq National Market under the symbol MSEL. The following table
sets forth the quarterly high and low sale prices for the Common Stock as
reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR 1992
First quarter.......................................... $14 7/8 $ 8 3/4
Second quarter......................................... 14 3/8 7 7/8
Third quarter.......................................... 11 5/8 6 5/8
Fourth quarter......................................... 11 7 1/8
FISCAL YEAR 1993
First quarter.......................................... 13 10 1/8
Second quarter......................................... 12 3/4 9 3/4
Third quarter.......................................... 16 1/2 10 3/8
Fourth quarter......................................... 18 1/2 13 7/8
FISCAL YEAR 1994
First quarter (through March 21, 1994)................. 22 1/8 16 5/8
</TABLE>
On March 21, 1994, the closing sale price for the Company's Common Stock was
$21.50 per share. As of March 21, 1994, there were 1,020 record holders of the
Company's Common Stock.
Merisel has never declared or paid any dividends to stockholders. Certain of
the Company's debt agreements currently prohibit the payment of dividends by
the Company. At this time, the Company intends to continue its policy of
retaining earnings for the continued development and expansion of its business.
13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1989 1990 1991 1992 1993
-------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:(1)
Net sales................ $629,362 $1,192,411 $1,585,446 $2,238,715 $3,085,851
Cost of sales............ 562,950 1,073,553 1,427,491 2,036,292 2,827,315
-------- ---------- ---------- ---------- ----------
Gross profit............. 66,412 118,858 157,955 202,423 258,536
Selling, general &
administrative expenses. 45,641 102,361 119,682 150,905 187,152
-------- ---------- ---------- ---------- ----------
Operating income......... 20,771 16,497 38,273 51,518 71,384
Interest expense......... 3,472 13,720 15,972 15,742 17,810
Other (income) expense... 636 (776) 823 1,299 2,722
-------- ---------- ---------- ---------- ----------
Income before income
taxes................... 16,663 3,553 21,478 34,477 50,852
Provision for income
taxes................... 6,417 2,918 10,652 14,812 20,413
-------- ---------- ---------- ---------- ----------
Net income............... $ 10,246 $ 635 $ 10,826 $ 19,665 $ 30,439
======== ========== ========== ========== ==========
PER SHARE DATA:
Net income per share..... $0.81 $0.03 $0.43 $0.67 $1.00
Weighted average number
of shares............... 12,678 21,766 24,897 29,274 30,454
BALANCE SHEET DATA:
Working capital.......... $ 89,502 $ 212,993 $ 92,510 $ 294,626 $ 359,765
Total assets............. 215,838 431,706 508,586 667,313 936,283
Long-term and
subordinated debt....... 51,355 158,949 25,316 153,433 208,500
Total debt............... 55,648 160,597 164,632 179,124 259,429
Stockholders' equity..... 48,643 114,283 125,537 198,882 223,857
</TABLE>
- --------
(1) Merisel's fiscal year is the 52- or 53-week period ending on the Saturday
nearest to December 31. For clarity of presentation throughout this Annual
Report on Form 10-K, Merisel has described year ends presented as if the
year ended on December 31. Except for 1992, all fiscal years presented were
52 weeks in duration. In April 1990, the Company acquired Microamerica,
Inc. ("Microamerica") in a transaction accounted for as a purchase. Prior
to the purchase, the Company operated under the name Softsel Computer
Products, Inc. ("Softsel"). The selected financial data set forth above
includes that of Softsel prior to the acquisition of Microamerica and that
of the combined equity subsequent to that date. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
OVERVIEW
The Company was founded in 1980 and has grown both through internal growth
and through acquisitions of other computer products distributors. By 1989, the
Company had achieved annual revenues of $629.4 million, principally through
internal expansion. In April 1990, the Company acquired Microamerica, Inc.
("Microamerica"), another worldwide distributor of microcomputer products, with
net sales of approximately $526 million for the year ended December 31, 1989.
In the years following the Microamerica acquisition, the Company's revenues
increased from $1.6 billion in 1991 to $2.2 billion in 1992 and to $3.1 billion
in 1993, reflecting substantial growth in both domestic and international sales
as the worldwide market for computer products expanded and manufacturers
increasingly turned to wholesale distributors for distribution of their
products. The Company's net income as a percentage of sales, or net margin,
improved over this period, largely as a result of management's success in
reducing selling, general and administrative expenses and interest expense,
expressed as a percentage of sales, to more than offset declines in the
Company's gross margin to more than offset lower gross margins.
On January 31, 1994, the Company completed the acquisition of certain assets
of the ComputerLand Business from ComputerLand Corporation. See "Business--
ComputerLand Business." For its fiscal year ended September 30, 1993, the
ComputerLand Business generated revenues of approximately $1.1 billion, gross
profit of $54.7 million and income from operations of $16.6 million. See "--
Acquisition of ComputerLand Business."
The Company anticipates that it will continue to experience downward pressure
on gross margins due to industry price competition. In addition, the Company's
recently acquired ComputerLand Business generates lower gross margins than the
Company's existing wholesale distribution business. However, the ComputerLand
Business has lower selling, general and administrative expenses as a percentage
of sales than the Company's existing wholesale distribution business. See "--
Acquisition of ComputerLand Business." Although Merisel expects that it will be
able to continue to reduce selling, general and administrative expenses as a
percentage of sales, no assurance can be given as to whether such reductions
will, in fact, occur or as to the actual amount of any such reductions. To the
extent gross margins continue to decline and the Company is not successful in
reducing selling, general and administrative expenses as a percentage of sales,
the Company will experience a negative impact on its operating income.
15
<PAGE>
RESULTS OF OPERATIONS
For the periods indicated, the following table sets forth selected items from
the Company's Consolidated Statements of Income, expressed as a percentage of
net sales:
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
-------------------------
YEAR ENDED DECEMBER 31,
-------------------------
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
Net sales............................................ 100.0% 100.0% 100.0%
Cost of sales........................................ 90.0 91.0 91.6
------- ------- -------
Gross profit......................................... 10.0 9.0 8.4
Selling, general and administrative expenses......... 7.5 6.7 6.1
------- ------- -------
Operating income..................................... 2.5 2.3 2.3
Interest expense..................................... 1.0 0.7 0.6
Other expense........................................ 0.1 0.1 0.1
------- ------- -------
Income before income taxes........................... 1.4 1.5 1.6
Provision for income taxes........................... 0.7 0.6 0.6
------- ------- -------
Net income........................................... 0.7% 0.9% 1.0%
======= ======= =======
</TABLE>
YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992
The Company's net sales increased 37.8% to $3.1 billion in 1993 from $2.2
billion in 1992, reflecting significant growth in both domestic and
international sales. The Company believes this increase is due principally to
the establishment of new relationships with manufacturers in various markets
around the world, the introduction of new products by existing manufacturers,
increased customer demand for computer products and increased use of wholesale
distribution by manufacturers in their distribution channels. The Company's
1992 fiscal year included 53 weeks due to the timing of the fiscal year end,
while the 1993 fiscal year contained 52 weeks. See Note 1 of Notes to
Consolidated Financial Statements.
Geographically, the Company's 1993 net sales were generated as follows:
United States, $1.95 billion, or 63%; Canada, $395 million, or 13%; Europe,
$532 million, or 17%; and other international markets, $207 million, or 7%.
From 1992 to 1993, these geographic regions experienced sales growth rates of
32.3%, 30.7%, 64.1% and 51.4%, respectively. The Company's higher sales growth
rate in Europe has resulted in part from the addition of significant new
manufacturer relationships in various European markets. In the United States,
the Company's sales increase is due in part to new product offerings from
computer systems and other hardware manufacturers. In the United States,
hardware and accessories accounted for 60.5% of net sales, and software
accounted for 39.5% of net sales in 1993, as compared to 55.9% and 44.1%,
respectively, in 1992. For additional information on the Company's operating
results by geographic region, see Note 11 of Notes to Consolidated Financial
Statements.
Gross profit increased 27.7% to $258.5 million in 1993 from $202.4 million in
1992, reflecting the higher 1993 net sales. Gross margin declined to 8.4% in
1993 from 9.0% in 1992, principally as a result of continuing competitive
pricing pressures worldwide.
Selling, general and administrative ("SG&A") expenses increased 24.0% to
$187.2 million in 1993 from $150.9 million in 1992, primarily as a result of
increased expenses associated with the Company's 37.8% increase in net sales.
SG&A expenses as a percentage of sales declined to 6.1% in 1993 from 6.7% in
1992, reflecting economies of scale resulting from higher sales volumes as well
as improved operating efficiencies. The Company's number of full-time
equivalent employees increased from 1,939 at December 31, 1992 to 2,502 at
December 31, 1993.
16
<PAGE>
Operating income increased 38.6% to $71.4 million in 1993 from $51.5 million
in 1992, despite small operating losses at the Company's Swiss, Austrian and
French operations. Operating income as a percentage of sales was 2.3% in both
1993 and 1992, as the decline in gross margin of 0.6% in 1993 was offset by a
corresponding decline in SG&A as a percentage of sales.
Interest expense increased 13.1% to $17.8 million in 1993 from $15.7 million
in 1992, but declined as a percentage of sales to 0.6% in 1993 from 0.7% in
1992. The increase in interest expense reflects higher average borrowings,
principally to finance the Company's higher sales levels, offset in part by
lower average interest rates in 1993.
Other expense increased to $2.7 million in 1993 from $1.3 million in 1992,
but other expense as a percentage of sales remained at 0.1% in both 1992 and
1993. Other expense in 1993 includes the fees paid by the Company in connection
with the sale of an interest in its trade accounts receivables pursuant to an
accounts receivable securitization program instituted in the third quarter of
1993. See "--Liquidity and Capital Resources." The Company intends to continue
this program in future periods, and other expense is therefore anticipated to
increase as additional fees are incurred.
Provision for income taxes increased 37.8% to $20.4 million in 1993,
reflecting the Company's 47.5% increase in income before income taxes. The
Company's effective tax rate decreased to 40.1% in 1993 from 43.0% in 1992,
primarily as a result of a $1.7 million income tax benefit related to the
restructuring of the Company's Swiss operations in 1993. In addition, net
losses of certain of the Company's subsidiaries that derive no tax benefit from
such losses under local tax laws decreased in 1993.
Net income increased 54.8% to $30.4 million in 1993 from $19.7 million in
1992, while net income per share increased to $1.00 from $0.67. The Company's
weighted average number of shares outstanding increased from 29,274,000 shares
in 1992 to 30,454,000 shares in 1993, reflecting the issuance of 4,600,000
shares in a public offering of the Company's Common Stock in March 1992 and the
exercise of employee stock options.
YEAR ENDED DECEMBER 31, 1992 COMPARED TO YEAR ENDED DECEMBER 31, 1991
Net sales increased 41.2% to $2.2 billion in 1992 from $1.6 billion in 1991.
The Company believes that this increase in net sales was due primarily to an
increase in market share, customer demand, sales of new products from existing
manufacturers and the establishment of new relationships with manufacturers and
customers. In addition, the Company's 1992 fiscal year included 53 weeks due to
the timing of the fiscal year end. See Note 1 of Notes to Consolidated
Financial Statements.
Hardware and accessories sales accounted for 56.6% of United States net sales
in 1992, with software sales accounting for the remaining 43.4%. In 1991,
hardware and accessories sales accounted for 57.6% of United States net sales,
with software sales accounting for the remaining 42.4%.
Geographically, the Company's 1992 net sales were generated as follows:
United States, $1.48 billion, or 66%; Canada, $303 million, or 14%; Europe,
$324 million, or 14%; and other international markets, $137 million, or 6%. The
increase in net sales achieved by the European operations was primarily the
result of significant sales growth by the Company's United Kingdom and German
subsidiaries. This increase was offset in part by lower than expected sales
levels in Switzerland and France. For additional information on the Company's
operating results by geographic region, see Note 11 of Notes to Consolidated
Financial Statements.
Gross profit increased 28.2% to $202.4 million in 1992 from $158.0 million in
1991, reflecting the increase in net sales in 1992. Gross margin decreased to
9.0% in 1992 from 10.0% in 1991, reflecting continued competitive pressures on
pricing.
17
<PAGE>
SG&A expenses increased 26.1% to $150.9 million in 1992 from $119.7 million
in 1991, but declined as a percentage of net sales to 6.7% in 1992 from 7.5% in
1991. The absolute dollar increase in SG&A expenses was primarily due to costs
associated with the Company's 41.2% increase in net sales. The decrease in SG&A
expenses as a percentage of net sales was the result of economies of scale
resulting from higher sales volume as well as improved operating efficiencies.
The Company's number of full-time equivalent employees increased to 1,939 at
December 31, 1992 from 1,450 at December 31, 1991.
Operating income increased 34.6% to $51.5 million in 1992 from $38.3 million
in 1991, despite continuing operating losses in the Company's Swiss and
Austrian subsidiaries and an operating loss at the Company's French subsidiary.
Operating income as a percent of sales decreased to 2.3% in 1992 from 2.5% in
1991. The 0.2% decrease in operating income as a percent of net sales reflects
the fact that the decrease in gross margin of 1.0% more than offset the
decrease SG&A expenses as a percentage of net sales of 0.8%.
Interest expense decreased 1.4% to $15.7 million in 1992 from $16.0 million
in 1991 and decreased as a percentage of net sales to 0.7% in 1992 from 1.0% in
1991. The decrease in interest expense is attributable to both the Company's
lower average borrowings in 1992 and a reduction in average funding cost. The
Company's average borrowings under all lines of available credit decreased 2.5%
to $151.2 million in 1992 from $155.0 million in 1991. The decrease in average
borrowings is a result of a public offering of 4,600,000 shares of the
Company's common stock in March 1992, providing net proceeds of $55.7 million,
partially offset by an increase in working capital requirements related to the
Company's growth and an increase in the Company's investing activities,
principally property and equipment expenditures. See "--Liquidity and Capital
Resources."
The Company's provision for income taxes increased by 39.1% to $14.8 million
in 1992 from $10.7 million in 1991, reflecting the Company's increased income
before income taxes. The Company's effective tax rate declined to 43.0% in 1992
from 49.6% in 1991. The lower effective tax rate reflects the fact that,
although certain of the Company's foreign subsidiaries incurred losses with no
corresponding tax benefit, such losses comprised a smaller percentage of the
Company's consolidated income before taxes in 1992 as compared to 1991.
Net income increased 81.6% to $19.7 million in 1992 from $10.8 million in
1991. Net income per share increased to $0.67 in 1992 from $0.43 in 1991. The
Company's weighted average number of shares increased to 29,274,000 shares in
1992 from 24,896,600 shares in 1991, primarily as a result of a public offering
of 4,600,000 shares of the Company's common stock in March 1992.
VARIABILITY OF QUARTERLY RESULTS AND SEASONALITY
Historically, the Company has experienced variability in its net sales and
operating margins on a quarterly basis and expects these patterns to continue
in the future. Management believes that the factors influencing quarterly
variability include: (i) the overall growth in the microcomputer industry; (ii)
shifts in short-term demand for the Company's products resulting, in part, from
the introduction of new products or updates of existing products; and (iii) the
fact that virtually all sales in a given quarter result from orders booked in
that quarter. Due to the factors noted above, as well as the fact that the
Company participates in a highly dynamic industry, the Company's revenues and
earnings may be subject to significant volatility, particularly on a quarterly
basis.
Additionally, the Company's net sales in the fourth quarter have been higher
than in its other three quarters. Management believes that the pattern of
higher fourth quarter sales is partially explained by customer buying patterns
relating to calendar year-end business purchases and holiday period purchases.
For a tabular presentation of certain quarterly financial data with respect to
1992 and 1993, see Note 12 of Notes to Consolidated Financial Statements.
18
<PAGE>
ACQUISITION OF COMPUTERLAND BUSINESS
Through the ComputerLand Acquisition, Merisel now operates the ComputerLand
Business, a leading master reseller of computer systems and related products
from the major microcomputer manufacturers to a network of approximately 750
independently-owned computer products resellers, including ComputerLand
franchisees and affiliated resellers purchasing through the Datago program. See
"Business--ComputerLand Business."
For its fiscal year ended September 30, 1993, the ComputerLand Business
generated net sales of $1.1 billion, gross profit of $54.7 million and income
from operations of $16.6 million. Gross margin and SG&A expenses as a
percentage of sales for this period were 5.1% and 3.6%, respectively,
reflecting the lower margins and lower SG&A expenses incurred in the master
reseller, or aggregator, business as compared to the Company's existing
wholesale distribution business. The ComputerLand Business' operating margin as
a percentage of sales for this period was 1.5%.
As a master reseller, the ComputerLand Business supplies a significantly
smaller number of products to a significantly smaller number of customers than
the Company's existing distribution business. Master resellers focus on
supplying computer systems and other higher-volume products to their customers
while the Company's existing business supplies a wide range of products to many
different types of customers. Certain of the larger computer manufacturers,
such as Apple, Compaq, Hewlett-Packard and IBM, have historically required
resellers to purchase their products from an affiliated aggregator, such as the
ComputerLand Business. Wholesale distributors have not been authorized to sell
these manufacturers' key microcomputer components, except on a limited basis.
For the fiscal year ended September 30, 1993, approximately 76% of the
ComputerLand Business' revenues were generated from the sale of products from
four manufacturers: Apple, Compaq, Hewlett-Packard and IBM. The loss of any one
of these four manufacturers, or a change in the way any of these manufacturers
markets, prices or distributes its products, could have a material adverse
effect on the ComputerLand Business' operating and financial results.
Specifically, to the extent that one of the leading four manufacturers changes
its current system of limiting authorization to sell its products to master
resellers, the ComputerLand Business' sales levels would be adversely affected.
The Company believes, however, that its existing wholesale distribution
business may benefit from such changes.
Substantially all of the ComputerLand Business' franchisees are
electronically linked for the purposes of order placement and other
communications, reducing the need for sales representatives and support
personnel in comparison to the Company's existing business. In addition,
substantially all of the ComputerLand Business' customers finance their orders
through "floor plan" financing companies or pay on a C.O.D. basis, reducing the
need for credit and collection personnel and reducing financing costs because
of improved cash flow.
As a result of the foregoing as well as other factors, master resellers such
as the ComputerLand Business tend to generate both lower gross margins and
lower operating expenses as a percentage of sales than those generated by the
Company in its existing distribution business.
Competition among master resellers is intense (see "Business--Competition"),
and the ComputerLand Business may experience downward pressures on its gross
margins due to competitive pricing decisions. Under the Services Agreement,
ComputerLand Corporation will perform a significant portion of the ComputerLand
Business' distribution functions for a contractually agreed-upon fee for a two-
year period. As a result of this outsourcing arrangement, the ComputerLand
Business does not directly control the costs of those distribution functions,
and therefore will be limited in its ability to lower its costs in response to
a lower gross margin environment during the two-year term of the Services
Agreement. Due to this limitation, the Services Agreement provides that the
service fee, as a percentage of sales volume, decreases if the ComputerLand
Business' sales volume increases over a specified amount. Further, in the event
sales volume
19
<PAGE>
does not increase over a specified amount, and the ComputerLand Business' gross
margin declines, the Service Agreement provides for a limited reduction in the
service fee to offset partially the decline in gross margin. Notwithstanding
these contractual provisions, a material decline in the ComputerLand Business'
gross margins could have a material adverse effect on the Company's results of
operations.
Substantially all of the ComputerLand Business' sales to its customers
currently are financed on behalf of such customers by floor plan financing
companies. The ComputerLand Business typically receives payment from these
financing companies within three business days from the date of sale, resulting
in reduced cash requirements for the ComputerLand Business as compared to the
Company's existing wholesale distribution business. This floor plan financing
is typically subsidized for the ComputerLand Business' customers by its
manufacturers. Any material change in the availability or the terms of
financing offered by such financing companies or in the subsidies provided by
manufacturers could require the ComputerLand Business to provide such financing
to its customers, thereby substantially increasing the working capital
necessary to operate its business.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its growth and cash needs primarily through
borrowings, income from operations, the public and private sales of its
securities and securitizations of its accounts receivable.
Net cash used for operating activities in 1993 was $125.4 million, as
compared to net cash used for operating activities in 1992 of $58.6 million.
The primary uses of cash in 1993 were increases in accounts receivables of
$194.2 million, reflecting the Company's higher sales volumes, especially in
December 1993, and greater sales to customers with extended credit terms, and
inventories of $142.9 million, reflecting the Company's higher sales volumes.
Sources of cash from operating activities included net income, after adjustment
for non-cash items, of $55.9 million and an increase in accounts payable of
$166.3 million.
Net cash used for investing activities in 1993 was $25.1 million, principally
reflecting significant investments in new computer systems, new warehouse
management systems and new distribution facilities and equipment. The Company
presently anticipates that its capital expenditures for 1994 will be
approximately $25 million, principally for development and implementation of
new computer systems in North America, new warehouse management systems, new
computer systems for the Company's European operations and a new distribution
center in Europe. See "Business--Operations and Distribution" and "Business--
International Operations."
Net cash provided by financing activities in 1993 was $156.8 million,
comprised principally of net borrowings under domestic revolving lines of
credit of $70.1 million, net borrowings under foreign bank facilities of $10.2
million and proceeds from the sale of an interest in the Company's trade
accounts receivables of $75.0 million pursuant to a receivables securitization
program.
To provide capital for the Company's operating and investing activities, the
Company and its subsidiaries, including Merisel Americas, Merisel Europe and
Merisel FAB, maintain a number of credit facilities. Merisel Americas and
Merisel Europe are co-borrowers under a $150 million unsecured revolving bank
credit facility expiring on May 31, 1997. At March 18, 1994, $140.9 million was
outstanding under this facility, comprised of $135.9 million in direct
borrowings and $5 million in outstanding letters of credit. A portion of the
net proceeds of the Offering will be used to reduce the balance due under this
facility. See "Use of Proceeds." To provide for its anticipated working capital
needs, on December 23, 1993, Merisel FAB entered into a $10 million unsecured
revolving credit agreement. This agreement expires on January 29, 1995. At
March 18, 1994, no amount was outstanding under this agreement. The Company and
its subsidiaries also maintain various local lines of credit, primarily to
facilitate overnight and other short-term borrowings. The total amount of
outstanding borrowings under these lines as of December 31, 1993 was $50.9
million.
20
<PAGE>
Merisel Americas has also entered into a $75 million trade accounts
receivable securitization agreement pursuant to which it sells on an ongoing
basis an undivided interest of up to $75 million in designated trade
receivables to a syndicate of purchasers. The receivables are sold at face
value and fees paid in connection with such sales are recorded by the Company
as other expense. This facility expires in September 1994. Merisel Americas
currently is negotiating an amendment to this facility to increase its amount
to $150 million and to extend its expiration date to November 1994. The net
proceeds from the increase in this facility will be used to reduce the amount
of outstanding borrowings under Merisel Americas' and Merisel Europe's $150
million revolving bank credit facility.
To finance the ComputerLand Acquisition, the Company borrowed $65 million
under an unsecured credit agreement with a bank lender. This agreement expires
on January 29, 1995, but is subject to mandatory prepayment upon any debt or
equity issuance by the Company. Merisel FAB also borrowed $16 million, the
balance of the ComputerLand Acquisition purchase price, under a separate credit
agreement, which was repaid in full on February 15, 1994.
Merisel Americas also has outstanding $100 million of 8.58% senior notes due
June 30, 1997, and $22 million of 11.28% subordinated notes due in five equal
annual principal installments, beginning in March 1996. See Notes 5 and 6 of
Notes to Consolidated Financial Statements.
In connection with the ComputerLand Acquisition, Merisel FAB and ComputerLand
Corporation entered into the Services Agreement pursuant to which ComputerLand
will provide significant distribution and other support services to Merisel FAB
for up to two years. See "Business--ComputerLand Business." Under the Services
Agreement, Merisel FAB has been granted $20 million in extended credit terms on
its product purchases from ComputerLand Corporation. ComputerLand Corporation
has agreed to use this $20 million account receivable from Merisel FAB to
purchase 1,103,144 shares of the Company's Common Stock at a per share price of
$18.13, if and when a registration statement covering the resale of such shares
is declared effective by the Securities and Exchange Commission. It is
presently anticipated that the Company will file such a registration statement
in March 1994.
Merisel believes that its existing cash balances, together with the proceeds
of an offering of 5 million shares of the Company's Common Stock anticipated to
occur in the second quarter of 1994, income from operations, proceeds of
receivables securitizations and borrowings under lines of credit will be
sufficient to meet its working capital and capital investment needs through at
least the next twelve months.
ASSET MANAGEMENT
Merisel attempts to manage its inventory position to maintain levels
sufficient to achieve high product availability and same-day order fill rates.
Inventory levels may vary from period to period, due in part to increases or
decreases in sales levels, Merisel's practice of making large-volume purchases
when it deems the terms of such purchases to be attractive and the addition of
new manufacturers and products. The Company has negotiated agreements with many
of its manufacturers which contain stock balancing and price protection
provisions intended to reduce, in part, Merisel's risk of loss due to slow
moving or obsolete inventory or manufacturer price reductions. In the event of
a manufacturer price reduction, the Company generally receives a credit for
products in inventory. In addition, the Company has the right to return a
certain percentage of purchases, subject to certain limitations. Historically,
price protection and stock return privileges as well as the Company's inventory
management procedures have helped to reduce the risk of loss of carrying
inventory.
The Company offers credit terms to qualifying customers and also sells on a
prepay, credit card and cash-on-delivery basis. With respect to credit sales,
the Company attempts to control its bad debt exposure through monitoring of
customers' creditworthiness and, where practicable, through participation in
credit associations that provide credit rating information about its customers.
In certain foreign markets, the Company may elect to purchase credit insurance
for certain accounts.
21
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
Merisel, Inc.:
We have audited the accompanying consolidated balance sheets of Merisel, Inc.
and subsidiaries as of December 31, 1992 and 1993, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1993. Our audits also
included the financial statement schedules listed at Item 14. These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Merisel, Inc. and subsidiaries at
December 31, 1992 and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1993 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
Deloitte & Touche
Los Angeles, California
February 22, 1994
22
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1992 1993
-------- --------
<S> <C> <C>
A S S E T S
CURRENT ASSETS:
Cash.......................................................... $ 133 $ 14
Accounts receivable (net of allowance for doubtful accounts of
$11,160 and $16,543 at December 31, 1992 and 1993,
respectively)................................................ 296,192 393,252
Inventories................................................... 299,526 442,392
Prepaid expenses and other current assets..................... 5,029 15,443
Deferred income tax benefit................................... 5,620 8,942
-------- --------
Total current assets........................................ 606,500 860,043
PROPERTY AND EQUIPMENT, NET..................................... 24,857 39,858
COST IN EXCESS OF NET ASSETS ACQUIRED, NET...................... 34,186 32,832
OTHER ASSETS.................................................... 1,770 3,550
-------- --------
TOTAL ASSETS.................................................. $667,313 $936,283
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.............................................. $248,545 $414,841
Accrued liabilities........................................... 30,149 26,811
Short-term bank debt.......................................... 25,691 50,929
Income taxes payable.......................................... 7,489 7,697
-------- --------
Total current liabilities................................... 311,874 500,278
-------- --------
DEFERRED INCOME TAX LIABILITY................................... 916 1,787
-------- --------
LONG-TERM DEBT.................................................. 131,433 186,500
-------- --------
SUBORDINATED DEBT............................................... 22,000 22,000
-------- --------
MINORITY INTEREST............................................... 2,208 1,861
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized 1,000,000 shares;
none issued or outstanding
Common stock, $.01 par value; authorized 50,000,000 shares;
outstanding 29,297,200 and 29,604,300 at December 31, 1992
and 1993, respectively....................................... 293 296
Additional paid-in capital.................................... 139,319 140,775
Retained earnings............................................. 61,073 91,512
Cumulative translation adjustment............................. (1,803) (8,726)
-------- --------
Total stockholders' equity.................................. 198,882 223,857
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................... $667,313 $936,283
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1991 1992 1993
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES.................................. $ 1,585,446 $ 2,238,715 $ 3,085,851
COST OF SALES.............................. 1,427,491 2,036,292 2,827,315
----------- ----------- -----------
GROSS PROFIT............................... 157,955 202,423 258,536
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.................................. 119,682 150,905 187,152
----------- ----------- -----------
OPERATING INCOME........................... 38,273 51,518 71,384
INTEREST EXPENSE........................... 15,972 15,742 17,810
OTHER EXPENSE.............................. 823 1,299 2,722
----------- ----------- -----------
INCOME BEFORE INCOME TAXES................. 21,478 34,477 50,852
PROVISION FOR INCOME TAXES................. 10,652 14,812 20,413
----------- ----------- -----------
NET INCOME................................. $ 10,826 $ 19,665 $ 30,439
=========== =========== ===========
NET INCOME PER SHARE....................... $ 0.43 $ 0.67 $ 1.00
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES.......... 24,896,600 29,274,000 30,454,000
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NOTES
COMMON STOCK ADDITIONAL CUMULATIVE RECEIVABLE
----------------- PAID-IN RETAINED TRANSLATION COMMON
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT STOCK TOTAL
---------- ------ ---------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1990................... 24,261,400 $243 $ 82,473 $30,582 $ 1,566 $(581) $114,283
Exercise of stock op-
tions and other....... 189,500 2 204 206
Amortization of de-
ferred compensation... 148 148
Cumulative translation
adjustment............ 74 74
Net income............. 10,826 10,826
---------- ---- -------- ------- -------- ----- --------
BALANCE AT DECEMBER 31,
1991................... 24,450,900 245 82,825 41,408 1,640 (581) 125,537
Exercise of stock op-
tions and other....... 246,300 2 676 678
Amortization of de-
ferred compensation... 124 124
Payments on notes due
from sale of stock.... 581 581
Issuance of common
stock from public
offering.............. 4,600,000 46 55,694 55,740
Cumulative translation
adjustment............ (3,443) (3,443)
Net income............. 19,665 19,665
---------- ---- -------- ------- -------- ----- --------
BALANCE AT DECEMBER 31,
1992................... 29,297,200 293 139,319 61,073 (1,803) 198,882
Exercise of stock op-
tions and other....... 307,100 3 1,456 1,459
Cumulative translation
adjustment............ (6,923) (6,923)
Net income............. 30,439 30,439
---------- ---- -------- ------- -------- ----- --------
BALANCE AT DECEMBER 31,
1993................... 29,604,300 $296 $140,775 $91,512 $ (8,726) -- $223,857
========== ==== ======== ======= ======== ===== ========
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
----------------------------------
1991 1992 1993
----------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................... $ 10,826 $ 19,665 $ 30,439
Adjustments to reconcile net income to net
cash provided by (used for) operating activi-
ties:
Depreciation and amortization............... 8,420 9,185 10,476
Provision for bad debts..................... 13,404 15,471 17,441
Deferred income taxes....................... (1,182) (789) (2,451)
Amortization of deferred compensation....... 148 124
Changes in assets and liabilities, net of
the effects from acquisitions:
Accounts receivable....................... (60,785) (91,298) (194,214)
Inventories............................... (34,267) (72,010) (142,866)
Prepaid expenses and other assets......... 70 (1,257) (6,613)
Accounts payable.......................... 54,644 59,080 166,296
Accrued liabilities....................... 3,292 2,592 (4,124)
Income taxes payable...................... 6,785 629 208
--------- ---------- ----------
Net cash provided by (used for)
operating activities................... 1,355 (58,608) (125,408)
--------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment............ (5,938) (9,969) (24,576)
Proceeds from sale of property and equipment.. 1,004
Investments in unconsolidated affiliates...... (844)
Acquisitions, net of cash acquired............ (685)
Cash acquired in connection with acquisition
of subsidiary................................ 15
--------- ---------- ----------
Net cash (used for) investing activi-
ties................................... (5,938) (9,954) (25,101)
--------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under foreign bank facilities...... 7,197 12,790 10,237
Net (repayments) borrowings under new or ex-
isting revolving lines of credit............. (3,162) 29,500 70,067
Repayment of prior revolving lines of credit.. (128,394)
Borrowings under senior notes................. 100,000
Proceeds from sale of account receivables..... 75,000
Net proceeds from sale of common stock........ 55,740
Proceeds from issuance of common stock........ 206 679 1,459
Payments received from notes due from sale of
stock........................................ 581
--------- ---------- ----------
Net cash provided by financing activi-
ties................................... 4,241 70,896 156,763
--------- ---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH......... 74 (2,742) (6,373)
--------- ---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS....... (268) (408) (119)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.. 809 541 133
--------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD........ $ 541 $ 133 $ 14
========= ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMA-
TION--
Cash paid (received) during the year for:
Interest.................................... $ 15,125 $ 10,582 $ 20,741
Income taxes................................ (927) 14,811 20,924
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITY--On April 1, 1992, the
Company purchased a 50% interest in a Mexican distribution company. The Company
paid cash in exchange for newly issued stock. In 1993, the Company paid
$214,000 and accrued $786,000 to reflect its minimum liability for the acquisi-
tion of an additional 10% interest in the Mexican distributor. (See Note 9).
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1991, 1992 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General--Merisel, Inc. ("Merisel" or the "Company") is a worldwide
distributor of microcomputer hardware and software. The consolidated financial
statements include the accounts of Merisel and its consolidated subsidiaries.
All significant intercompany balances and transactions have been eliminated in
consolidation.
Revenue Recognition, Returns and Sales Incentives--The Company recognizes
revenue from hardware and software sales as products are shipped. The Company,
subject to certain limitations, permits its customers to exchange products or
receive credits against future purchases. The Company offers its customers
several sales incentive programs which, among others, include funds available
for cooperative promotion of product sales. Customers earn credit under such
programs based upon volume of purchases. The cost of these programs is
partially subsidized by marketing allowances provided by the Company's
manufacturers. The allowance for sales returns and costs of customer incentive
programs is accrued concurrently with the recognition of revenue.
Cash Equivalents--The Company considers all highly liquid investments
purchased with initial maturities of three months or less to be cash
equivalents.
Inventories--Inventories are valued at the lower of cost or market; cost is
determined on the average cost method.
Property and Depreciation--Property and equipment are stated at cost less
accumulated depreciation. Depreciation is provided on the straight-line method
over the estimated useful lives of the assets, generally three to seven years.
Leasehold improvements are amortized over the shorter of the life of the lease
or the improvement.
Cost in Excess of Net Assets Acquired--Cost in excess of net assets acquired
results principally from the acquisition in 1990 of Microamerica, Inc. and is
being amortized over a period of forty years using the straight-line method.
Accumulated amortization was $2,533,000 and $3,468,000 at December 31, 1992 and
1993, respectively.
Income Taxes--Deferred income taxes represent the amounts which will be paid
or received in future periods based on the tax rates that are expected to be in
effect when the temporary differences are scheduled to reverse.
The Company intends to invest the undistributed earnings of its foreign
subsidiaries indefinitely. At December 31, 1992 and 1993, the cumulative amount
of undistributed earnings on which the Company has not recognized United States
income taxes was approximately $11 million and $15 million, respectively.
However, it is anticipated that United States income taxes on such amounts
would be substantially offset by available foreign income tax credits.
The Company adopted Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes," effective January 1, 1992. The adoption of this
statement had no material effect on the Company's financial statements.
Disclosures about the Fair Values of Financial Instruments--The fair values
of financial instruments, other than long-term debt, closely approximate their
carrying value. The estimated fair value of long-term
27
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
debt including current maturities, based on reference to quoted market prices,
exceeded the carrying value by approximately $6,000,000 and $8,700,000 as of
December 31, 1992 and 1993, respectively.
Foreign Currency Translation--Assets and liabilities of foreign subsidiaries
are translated into United States dollars at the exchange rate in effect at the
close of the period. Revenues and expenses of these subsidiaries are translated
at the average exchange rate during the period. The aggregate effect of
translating the financial statements of foreign subsidiaries is included in a
separate component of stockholders' equity entitled Cumulative Translation
Adjustment. In the normal course of business, the Company advances funds to
certain of its foreign subsidiaries, which are not expected to be repaid in the
foreseeable future. Translation adjustments resulting from these advances are
included in Cumulative Translation Adjustment. In an attempt to minimize
foreign exchange transaction gains and losses, forward contracts are used to
hedge short-term advances to foreign subsidiaries and inventory purchases.
Gains and losses on the transactions being hedged are offset by the gains or
losses on these contracts. At December 31, 1993, the Company had approximately
$85 million of short-term forward contracts outstanding. In 1991, 1992 and
1993, there were net foreign currency gains of $70,000, $843,000 and $283,000,
respectively.
Net Income per Share--Net income per share is computed by dividing net income
by the weighted average number of shares of common stock and common stock
equivalents (common stock options) outstanding during the related period,
unless such inclusion is antidilutive. The weighted average number of shares
includes shares issuable upon the assumed exercise of stock options less the
number of shares assumed purchased with the proceeds available from such
exercise.
Fiscal Periods--The Company's fiscal year is the 52- or 53-week period ending
on the Saturday nearest to December 31 and its fiscal quarters are the 13- or
14-week periods ending on the Saturday nearest toMarch 31, June 30, September
30, and December 31. For clarity of presentation, the Company has described
year-ends presented as if the years ended on December 31 and quarter-ends
presented as if the quarters ended on March 31, June 30, September 30, and
December 31. The 1991 and 1993 fiscal years were 52 weeks, while the 1992
fiscal year was 53 weeks in duration. All quarters were 13 weeks except for the
quarter ended December 31, 1992 which was 14 weeks in duration.
2. SALE OF ACCOUNTS RECEIVABLE
In September 1993, the Company entered into a trade accounts receivable
securitization agreement with a securitization company, pursuant to which the
securitization company may purchase on an ongoing basis for a one year period
up to $75 million of an undivided interest in designated accounts receivable.
At December 31, 1993, $75 million of net accounts receivable were sold under
this agreement. Fees of $685,000, incurred in connection with the sale of
accounts receivable, were included in Other Expense in 1993.
28
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1992 1993
-------- --------
<S> <C> <C>
Land and building........................................ $ 478 $ 390
Equipment................................................ 28,731 37,988
Furniture and fixtures................................... 5,749 7,886
Leasehold improvements................................... 9,991 11,514
Construction in progress................................. 2,265 10,687
-------- --------
Total.................................................... 47,214 68,465
Less accumulated depreciation and amortization........... (22,357) (28,607)
-------- --------
Property and equipment, net.............................. $ 24,857 $ 39,858
======== ========
</TABLE>
4. INCOME TAXES
The components of income before income taxes consisted of the following (in
thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1991 1992 1993
---------- ---------- ----------
<S> <C> <C> <C>
Domestic.................................... $ 20,723 $ 31,208 $ 46,080
Foreign..................................... 755 3,269 4,772
---------- ---------- ----------
Total....................................... $ 21,478 $ 34,477 $ 50,852
========== ========== ==========
</TABLE>
The provision for income taxes consisted of the following (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1991 1992 1993
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal................................ $ 8,772 $ 10,046 $ 15,552
State.................................. 2,137 2,596 3,994
Foreign................................ 925 2,341 3,318
---------- ---------- ----------
Total current.......................... 11,834 14,983 22,864
---------- ---------- ----------
Deferred:
Domestic............................... (1,944) (744) (2,636)
Foreign................................ 762 573 185
---------- ---------- ----------
Total deferred......................... (1,182) (171) (2,451)
---------- ---------- ----------
Total provision........................ $ 10,652 $ 14,812 $ 20,413
========== ========== ==========
</TABLE>
29
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred tax liabilities and assets were comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1992 1993
------ -------
<S> <C> <C>
Deferred tax liabilities
State taxes.............................................. $ 138 $ 203
Depreciation............................................. 1,468 3,343
------ -------
Total.................................................... $1,606 $ 3,546
====== =======
Deferred tax assets
Net operating loss of foreign subsidiaries............... $5,200 $ 3,200
Expense accruals......................................... 5,104 8,642
Other, net............................................... 1,206 2,059
------ -------
11,510 13,901
Valuation allowances..................................... (5,200) (3,200)
------ -------
Total.................................................... $6,310 $10,701
====== =======
</TABLE>
The major elements contributing to the difference between the federal
statutory tax rate and the effective tax rate are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1991 1992 1993
---------- ---------- ----------
<S> <C> <C> <C>
Statutory rate.......................... 34.0% 34.0% 35.0%
Foreign income subject to tax at other
than statutory rate.................... 1.1 1.2 1.0
Utilization of net operating losses of
foreign subsidiary..................... (3.3)
State income taxes, less effect of fed-
eral deduction......................... 6.0 4.6 4.1
Foreign losses without tax benefits..... 5.5 3.7 2.6
Goodwill amortization................... 1.4 0.7 0.5
Other................................... 1.6 (1.2) 0.2
---------- ---------- ----------
Effective tax rate...................... 49.6% 43.0% 40.1%
========== ========== ==========
</TABLE>
5. DEBT
At December 31, 1993, the Company had unsecured senior borrowing commitments
of $250 million, which consisted of $100 million of 8.58% senior notes
("Senior Notes"), and a $150 million revolving credit agreement ("Revolver").
The Senior Notes are due on June 30, 1997, and the Revolver is due on May 31,
1997.
At December 31, 1993, there was $100 million outstanding under the Senior
Notes, and $86.5 million outstanding under the Revolver. In addition, the
Company had $5 million in outstanding letters of credit under its Revolver.
Advances under the Revolver bear interest at specific rates based upon market
reference rates and the Company's performance relative to specific levels of
debt to total capitalization. The combined average interest rate at December
31, 1993 was approximately 4.7%. The Company is also required to pay a
commitment fee on the unused available funds on the Revolver.
The Senior Notes and Revolver agreements both contain various covenants,
including those which prohibit the payment of cash dividends, require a
minimum amount of tangible net worth and place limitations on the acquisition
of assets. The agreements also require the Company to maintain certain
specified financial ratios, including interest coverage, total debt to total
capitalization and inventory turnover.
At December 31, 1993, approximately $102 million of outstanding debt was
advanced to foreign subsidiaries. In addition, the Company and its
subsidiaries have various unsecured lines of credit denominated
30
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
in their local currencies under which they may borrow an aggregate of $81
million. The Company had borrowings under the lines of credit of $27.6 million
and $50.9 million outstanding at December 31, 1992 and 1993, respectively.
6. LONG-TERM SUBORDINATED DEBT
On March 30, 1990, the Company sold an aggregate of $22,000,000 of privately
placed subordinated notes. The notes provide for interest at the rate of 11.28%
per annum and are repayable in five equal annual installments beginning March
1996. The subordinated debt agreement contains certain restrictive covenants,
including those that limit the Company's ability to incur debt, acquire the
stock of or merge with other corporations, or sell certain assets and prohibits
the payment of dividends. The subordinated debt agreement also requires the
Company to maintain specified financial ratios similar in nature, but generally
less restrictive, than those described in Note 5.
7. COMMITMENTS AND CONTINGENCIES
The Company leases its facilities and certain equipment under noncancelable
operating leases. Future minimum rental payments, under leases that have
initial or remaining noncancelable lease terms in excess of one year are
$12,333,000 in 1994, $9,409,000 in 1995, $8,707,000 in 1996, $7,712,000 in
1997, $7,420,000 in 1998 and $22,402,000 thereafter. Certain of the leases
contain inflation escalation clauses and requirements for the payment of
property taxes, insurance, and maintenance expenses. Rent expense for 1991,
1992 and 1993 was $8,889,000, $11,007,000, and $12,617,000, respectively.
The Company is involved in certain legal proceedings arising in the ordinary
course of business, none of which is expected to have a material impact on the
Company's financial statements.
8. EMPLOYEE STOCK OPTIONS AND BENEFIT PLANS
Under the Company's stock option plans, incentive stock options may be
granted to employees and nonqualified options may be granted to employees,
directors, and consultants. The plans authorized the issuance of an aggregate
of 4,616,200 shares upon exercise of options granted thereunder. The optionees,
option prices, vesting provisions, dates of grant and number of shares granted
under the plans are determined primarily by the Board of Directors, though
incentive stock options must be granted at prices which are no less than the
fair market value of the Company's common stock at the date of grant. Options
granted under the plans expire ten years from the date of grant. The following
summarizes activity in the plans for the three years ended December 31, 1993:
<TABLE>
<CAPTION>
OPTION EXERCISES PRICE
NUMBER --------------------------
OF OPTIONS PER SHARE TOTAL
---------- -------------- -----------
<S> <C> <C> <C>
Outstanding, December 31, 1990....... 1,734,790 $ 1.11--$ 8.41 $ 9,157,000
Granted.............................. 1,048,830 3.00 3,147,000
Exercised............................ (58,110) 1.11-- 3.00 (123,000)
Canceled............................. (1,285,080) 2.20-- 8.41 (7,924,000)
---------- -----------
Outstanding, December 31, 1991....... 1,440,430 1.11-- 8.41 4,257,000
Granted.............................. 741,500 11.38 8,434,000
Exercised............................ (239,580) 1.11-- 6.25 (685,000)
Canceled............................. (78,810) 3.00-- 6.25 (446,000)
---------- -----------
Outstanding, December 31, 1992....... 1,863,540 1.11--11.38 11,560,000
Granted.............................. 327,000 11.75--11.88 3,883,000
Exercised............................ (307,100) 1.11--11.38 (1,051,000)
Canceled............................. (27,300) 3.00--11.38 (266,000)
---------- -----------
Outstanding, December 31, 1993....... 1,856,140 2.20--11.88 $14,126,000
========== ===========
</TABLE>
31
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A total of 1,032,000 and 1,089,500 options were exercisable under the stock
option plans at December 31, 1992 and 1993, respectively.
During 1987, the Company's Board of Directors authorized the issuance of
350,000 nonqualified stock options to an officer of the Company for the
purchase of common stock at an exercise price of $.01 per share. The options
vested over five years from the date of grant and are exercisable for a period
of up to ten years. The difference between the fair market value of the common
stock underlying the nonqualified stock options as of the date of grant and
the exercise price, an aggregate of $1,484,000, was amortized as compensation
expense over the five-year vesting period. Compensation expense related to
these stock options was $148,000 and $124,000 in 1991 and 1992, respectively.
As of December 31, 1993, 150,000 options remained outstanding.
The Company offers a 401(k) savings plan under which all employees who are
21 years of age with at least one month of service are eligible to
participate. The plan permits eligible employees to make contributions up to
certain limitations, with the Company matching certain of those contributions.
The Company's contributions vest 25% per year. The Company contributed
$285,000, $378,000 and $443,000 to the plan during the years ended December
31, 1991, 1992 and 1993, respectively.
9. ACQUISITIONS
Effective April 1, 1992, the Company purchased a fifty percent interest in a
computer products distribution company in Mexico. Merisel paid cash, which was
retained by the Mexican distributor in exchange for newly issued common stock.
In 1993, the Company paid $214,000 and accrued $786,000 to reflect its minimum
liability for the acquisition of an additional 10% interest in the Mexican
distributor. The Company will purchase the remaining forty percent interest
over the next two years at a price to be determined based upon the
distributor's operating results during that period, subject to a minimum price
of $4 million. Pro forma income statement information related to this
acquisition has not been provided as the financial statement impact is not
significant.
10. SUBSEQUENT EVENT
On January 31, 1994, the Company, through its wholly-owned subsidiary,
Merisel FAB, Inc. ("Merisel FAB"), acquired certain assets of the United
States Franchise and Distribution Division of ComputerLand Corporation. The
Company paid approximately $80 million in cash at closing for the acquired
assets. In addition, the Company has agreed to make an additional payment in
1996 of up to $30 million. This payment will be based upon the growth of the
Company's sales of products of designated vendors to specified customers over
the two-year period ending January 31, 1996. Merisel FAB has also entered into
a Distribution and Services Agreement with ComputerLand Corporation whereby
ComputerLand Corporation will provide products and distribution and other
support services to Merisel FAB for two years following the acquisition.
11. SEGMENT INFORMATION
The Company's operations involve a single industry segment--the wholesale
distribution of micro-computer hardware and software products. The geographic
areas in which the Company operates are the
32
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
United States, Canada, Europe (United Kingdom, France, Germany, Switzerland,
and Austria), and Other International (Latin America and Australia in 1991, and
Latin America, Australia and Mexico in 1992 and 1993). Net sales, operating
income (before interest, other nonoperating expenses and income taxes) and
identifiable assets by geographical area were as follows (in thousands):
<TABLE>
<CAPTION>
UNITED OTHER CON-
STATES CANADA EUROPE INTERNATIONAL ELIMINATIONS SOLIDATED
---------- -------- -------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
1991:
Net sales:
Unaffiliated customers. $1,045,161 $257,718 $211,215 $ 71,352 $1,585,446
Transfers between geo-
graphical areas....... 36,142 28 $(36,170)
---------- -------- -------- -------- -------- ----------
Total.................. $1,081,303 $257,718 $211,215 $ 71,380 $(36,170) $1,585,446
========== ======== ======== ======== ======== ==========
Operating income
(loss)................ $ 34,430 $ 3,091 $ 1,416 $ (664) $ 38,273
========== ======== ======== ======== ==========
Identifiable assets.... $ 333,964 $ 87,810 $ 81,218 $ 24,782 $(19,188) $ 508,586
========== ======== ======== ======== ======== ==========
1992:
Net sales:
Unaffiliated customers. $1,475,222 $302,512 $324,180 $136,801 $2,238,715
Transfers between geo-
graphical areas....... 39,047 502 $(39,549)
---------- -------- -------- -------- -------- ----------
Total.................. $1,514,269 $302,512 $324,180 $137,303 $(39,549) $2,238,715
========== ======== ======== ======== ======== ==========
Operating income
(loss)................ $ 45,151 $ 5,489 $ (664) $ 1,542 $ 51,518
========== ======== ======== ======== ==========
Identifiable assets.... $ 414,161 $100,592 $126,953 $ 50,917 $(25,310) $ 667,313
========== ======== ======== ======== ======== ==========
1993:
Net sales:
Unaffiliated customers. $1,951,411 $395,375 $531,938 $207,127 $3,085,851
Transfers between geo-
graphical areas....... 40,193 113 $(40,306)
---------- -------- -------- -------- -------- ----------
Total.................. $1,991,604 $395,375 $531,938 $207,240 $(40,306) $3,085,851
========== ======== ======== ======== ======== ==========
Operating income....... $ 59,945 $ 7,421 $ 372 $ 3,646 $ 71,384
========== ======== ======== ======== ==========
Identifiable assets.... $ 588,711 $123,844 $192,097 $ 68,951 $(37,320) $ 936,283
========== ======== ======== ======== ======== ==========
</TABLE>
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected financial information for the quarterly periods for the fiscal years
ended 1992 and 1993 is presented below (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
1992
------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales......................... $487,103 $512,735 $554,250 $684,627
Gross profit...................... 46,442 47,920 47,749 60,312
Net income........................ 4,140 4,442 3,535 7,548
Net income per share.............. 0.16 0.15 0.12 0.25
<CAPTION>
1993
------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales......................... $692,458 $713,422 $731,442 $948,529
Gross profit...................... 59,423 59,132 61,556 78,425
Net income........................ 6,353 6,072 6,108 11,906
Net income per share.............. 0.21 0.20 0.20 0.39
</TABLE>
33
<PAGE>
SCHEDULE II
MERISEL, INC. AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND
EMPLOYEES (OTHER THAN RELATED PARTIES)
DECEMBER 31, 1991, 1992 AND 1993
<TABLE>
<CAPTION>
BALANCE AT
DECEMBER 31,
DEDUCTIONS 1991
------------------- ------------------
BALANCE AT AMOUNTS AMOUNTS
DECEMBER 31, COLLECTED/ WRITTEN
NAME OF DEBTOR (1) 1990 ADDITIONS CANCELLED OFF CURRENT NONCURRENT
- ------------------ ------------ --------- ---------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
John J. Connors......... $497,000 $ 6,000 $127,000 -- -- $376,000
Norman H. Gauthier...... $100,000 -- -- -- -- $100,000
Michael A. Gumbert...... $100,000 -- -- -- -- $100,000
Michael D. Pickett...... $233,000 $13,000 -- -- -- $246,000
<CAPTION>
BALANCE AT
DECEMBER 31,
DEDUCTIONS 1992
------------------- ------------------
BALANCE AT AMOUNTS AMOUNTS
DECEMBER 31, COLLECTED/ WRITTEN
NAME OF DEBTOR 1991 ADDITIONS CANCELLED OFF CURRENT NONCURRENT
- -------------- ------------ --------- ---------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
John J. Connors......... $376,000 -- $ 76,000 -- -- $300,000
Norman H. Gauthier...... $100,000 -- -- -- -- $100,000
Michael A. Gumbert...... $100,000 -- -- -- -- $100,000
Michael D. Pickett...... $246,000 $ 3,000 $249,000 -- -- --
<CAPTION>
BALANCE AT
DECEMBER 31,
DEDUCTIONS 1993
------------------- ------------------
BALANCE AT AMOUNTS AMOUNTS
DECEMBER 31, COLLECTED/ WRITTEN
NAME OF DEBTOR 1992 ADDITIONS CANCELLED OFF CURRENT NONCURRENT
- -------------- ------------ --------- ---------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
John J. Connors......... $300,000 $ 8,000 $119,000 -- -- $189,000
Norman H. Gauthier...... $100,000 -- $ 42,000 $58,000 -- --
Michael A. Gumbert...... $100,000 -- -- -- -- $100,000
</TABLE>
34
<PAGE>
SCHEDULE VIII
MERISEL, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1991, 1992 AND 1993
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
DECEMBER 31, COSTS AND DECEMBER 31,
1990 EXPENSES DEDUCTIONS 1991
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Accounts receivable--Doubtful
accounts.................... $ 6,553,000 $13,404,000 $10,732,000 $ 9,225,000
Accounts receivable--Other
(1)......................... 1,142,000 11,143,000 10,338,000 1,947,000
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
DECEMBER 31, COSTS AND DECEMBER 31,
1991 EXPENSES DEDUCTIONS 1992
------------ ----------- ----------- ------------
Accounts receivable--Doubtful
accounts.................... $ 9,225,000 $15,471,000 $13,536,000 $11,160,000
Accounts receivable--Other
(1)......................... 1,947,000 13,117,000 11,868,000 3,196,000
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
DECEMBER 31, COSTS AND DECEMBER 31,
1992 EXPENSES DEDUCTIONS 1993
------------ ----------- ----------- ------------
Accounts receivable--Doubtful
accounts.................... $11,160,000 $17,441,000 $12,058,000 $16,543,000
Accounts receivable--Other
(1)......................... 3,196,000 22,565,000 21,498,000 4,263,000
</TABLE>
- --------
(1) Accounts receivable--Other includes allowances for sales returns and
uncollectible cooperative advertising credits.
35
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
36
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by this item is hereby incorporated by reference
from the Registrant's definitive Proxy Statement for the fiscal year ended
December 31, 1993, which Proxy Statement will be filed with the Securities and
Exchange Commission on or about April 30, 1994.
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this item is hereby incorporated by reference
from the Registrant's definitive Proxy Statement for the fiscal year ended
December 31, 1993, which Proxy Statement will be filed with the Securities and
Exchange Commission on or about April 30, 1994.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information called for by this item is hereby incorporated by reference
from the Registrant's definitive Proxy Statement for the fiscal year ended
December 31, 1993, which Proxy Statement will be filed with the Securities and
Exchange Commission on or about April 30, 1994.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by this item is hereby incorporated by reference
from the Registrant's definitive Proxy Statement for the fiscal year ended
December 31, 1993, which Proxy Statement will be filed with the Securities and
Exchange Commission on or about April 30, 1994.
37
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) List of documents filed as part of this Report:
(1) FINANCIAL STATEMENTS INCLUDED IN ITEM 8:
Independent Auditors' Report
Consolidated Balance Sheets at December 31, 1992 and 1993.
Consolidated Statements of Income for each of the three years in the
period ended December 31, 1993.
Consolidated Statements of Changes in Stockholders' Equity for each
of the three years in the period ended December 31, 1993.
Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 1993.
Notes to Consolidated Financial Statements.
(2) FINANCIAL STATEMENT SCHEDULES INCLUDED IN ITEM 8:
Schedule II--Amounts Receivable from Related Parties and
Underwriters, Promoters and Employees (other than Related Parties).
Schedule VIII--Valuation and Qualifying Accounts.
Schedules other than those referred to above have been omitted because
they are not applicable or are not required under the instructions
contained in Regulation S-X or because the information is included
elsewhere in the Consolidated Financial Statements or the Notes thereto.
(3) EXHIBITS
The exhibits listed on the accompanying Index of Exhibits are filed
as part of this Annual Report.
(b) No Reports on Form 8-K were filed during the quarter ended December 31,
1993.
38
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
DATE: MARCH 24, 1994
Merisel, Inc.
/s/ James L. Brill
By______________________________________
James L. Brill
Senior Vice President, Finance,
Chief Financial Officer and
Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Michael D. Pickett March 24, 1994
- ------------------------------------
Michael D. Pickett Co-Chairman of the Board of
Directors, President and Chief
Executive Officer
(Principal Executive Officer)
/s/ Robert S. Leff March 17, 1994
- ------------------------------------
Robert S. Leff Co-Chairman of the Board of
Directors and Senior Vice
President--
Business Development
/s/ David S. Wagman March 16, 1994
- ------------------------------------
David S. Wagman Vice-Chairman of the Board of
Directors
/s/ James L. Brill March 24, 1994
- ------------------------------------
James L. Brill Senior Vice President--Finance,
Chief Financial Officer,
Secretary and Director
(Principal Financial Officer)
/s/ Gary A. Schultz March 24, 1994
- ------------------------------------
Gary A. Schultz Corporate Controller
(Principal Accounting Officer)
/s/ Dr. Arnold Miller March 24, 1994
- ------------------------------------
Dr. Arnold Miller Director
/s/ Joseph Abrams March 24, 1994
- ------------------------------------
Joseph Abrams Director
/s/ Lawrence J. Schoenberg March 16, 1994
- ------------------------------------
Lawrence J. Schoenberg Director
March , 1994
- ------------------------------------
Dwight Steffensen Director
March , 1994
- ------------------------------------
David L. House Director
</TABLE>
39
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of Registrant.(1)
3.2 Amendment to Certificate of Incorporation of Registrant dated August 22,
1990.(6)
3.3 Bylaws, as amended, of Merisel, Inc.(8)
10.1 Microamerica Substitute Stock Option Plan of Registrant together with
related forms of Stock Option Agreements.(4)*
10.2 1983 Stock Option Plan of Softsel Computer Products, Inc., as amended,
together with Form of Incentive Stock Option Agreement and Form of
Nonqualified Stock Option Agreement under the 1983 Employee Stock Option
Plan.(7)*
10.3 1983 Employee Stock Option Plan of Softsel Computer Products, Inc., as
amended, together with Form of Incentive Stock Option Agreement and Form
of Nonqualified Stock Option Agreement under the 1983 Employee Stock
Option Plan.(7)*
10.4 1991 Employee Stock Option Plan of Merisel, Inc. together with Form of
Incentive Stock Option Agreement and Form of Nonqualified Stock Option
Agreement under the 1991 Employee Stock Option Plan.(8)*
10.5 Merisel, Inc. 1992 Stock Option Plan for Nonemployee Directors.(10)*
10.6 Incentive Stock Option Agreements between Registrant and Michael D.
Pickett dated as of October 1, 1986 and March 4, 1987.(1)*
10.7 Nonqualified Stock Option Agreement between Registrant and Michael D.
Pickett dated as of December 11, 1987.(1)*
10.8 Amendment to Stock Option Agreements together with Joint Escrow
Instructions between Michael D. Pickett and Registrant dated as of August
11, 1988.(1)*
10.9 Softsel Computer Products, Inc. Executive Deferred Compensation Plan.(9)*
10.10 Merisel, Inc. 1993 Management Incentive Program.*
10.11 Employment Agreement between Registrant and Michael D. Pickett dated as of
August 14, 1992.(11)*
10.12 Merisel, Inc. Amended and Restated 401(k) Retirement Savings Plan.*
10.13 Asset Transfer, Assignment and Assumption Agreement dated as of December
23, 1993 by and between Registrant and Merisel Americas, Inc.
10.14 Asset Transfer, Assignment and Assumption Agreement dated as of December
23, 1993 by and between Registrant and Merisel Europe, Inc.
10.15 Lease between Registrant and Pacifica Holding Company dated April 6,
1989.(2)
10.16 Lease Agreement dated October 27, 1988 by and between Rosewood Development
Corporation and Microamerica, Inc. re: property located in Marlborough,
Massachusetts.(3)
10.17 Lease Agreement dated May 23, 1990 by and between Kilroy-Freehold El
Segundo Company and Softsel/Microamerica, Inc., re: property located in El
Segundo, California.(5)
10.18 Lease Agreement dated October 1991 by and between Koll Hayward Associates
II and Merisel, Inc.(9)
10.19 Asset Purchase Agreement dated January 31, 1994 between ComputerLand
Corporation, Merisel FAB, Inc. and, for purposes of Section 2.2 thereof,
the Registrant. Portions of this agreement have been omitted pursuant to
Rule 24b-2 of the Securites Exchange Act of 1934, as amended.(12)
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.20 Guaranty Agreement dated January 31, 1994 between ComputerLand Corporation
and the Registrant.(12)
10.21 Distribution and Services Agreement dated January 31, 1994 between
ComputerLand Corporation and Merisel FAB, Inc. A copy of this agreement
has been omitted pursuant to Rule 24b-2 of the Securities Act of 1934, as
amended.
10.22 Stock Purchase Agreement dated January 31, 1994 between the Registrant and
ComputerLand Corporation.(12)
10.23 Credit Agreement dated December 23, 1993 between the Registrant and
NationsBank of Texas, N.A. ("Credit Agreement")(12)
10.24 Amendment No. 1 to Credit Agreement dated January 31, 1994.(12)
10.25 Amended and Restated Senior Note Purchase Agreement by and among each of
the purchasers named therein and Merisel Americas, Inc., dated as of
December 23, 1993.
10.26 Amended and Restated Subordinated Note Purchase Agreement by and among
each of the purchasers named therein and Merisel Americas, Inc., dated as
of December 23, 1993.
10.27 Revolving Credit Agreement dated as of December 23, 1993 among Merisel
Americas, Inc., Merisel Europe, Inc., the Registrant, the lender parties
thereto, Citicorp USA, Inc., as agent, and Citibank, N.A., as designated
issuer.
10.28 Assumption and Second Amendment dated as of December 23, 1993 made by
Merisel Americas, Inc. in favor of and by CIESCO L.P., Citibank, N.A. and
Citicorp North America, Inc.
21 Subsidiaries of the Registrant.
23 Consent of Deloitte & Touche.
</TABLE>
- -------
*Management contract or executive compensation plan or arrangement.
(1) Filed as an exhibit to the Form S-1 Registration Statement of Softsel
Computer Products, Inc., No. 33-23700, and incorporated herein by this
reference.
(2) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1989 of Softsel Computer Products, Inc., and
incorporated herein by this reference.
(3) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended March 31, 1990 of Softsel Computer Products, Inc., and incorporated
herein by this reference.
(4) Filed as an exhibit to the Form S-8 Registration Statement of Softsel
Computer Products, Inc., No. 33-34296, filed with the Securities and
Exchange Commission April 12, 1990, and incorporated herein by this
reference.
(5) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended June 30, 1990 of Softsel Computer Products, Inc., and incorporated
herein by this reference.
(6) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1990, and incorporated herein by this reference.
(7) Filed as an exhibit to the Form S-8 Registration Statement of Softsel
Computer Products, Inc., No. 33-35648, filed with the Securities and
Exchange Commission June 29, 1990, and incorporated herein by this
reference.
(8) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended June 30, 1991, and incorporated herein by this reference.
(9) Filed as an exhibit to the Form S-3 Registration Statement of Merisel,
Inc., No. 33-45696, and incorporated herein by this reference.
(10) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended June 30, 1992, and incorporated herein by this reference.
(11) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1992 of Merisel, Inc., and incorporated herein by this
reference.
(12) Filed as an exhibit to the Current Report on Form 8-K dated February 14,
1994.
41
<PAGE>
Merisel, Inc.
Management Incentive Program
1993
Purpose
- -------
To incent and reward Associates to contribute to the Company achieving its
Short-Term Corporate Objectives (less than one year).
Eligible Participants
- ---------------------
Any Associate who can have a measurable impact on the Company's quarterly
earnings per share.
Interpretation:
---------------
Corporate: Chief Executive Officer, Senior Vice Presidents, Vice
Presidents and Directors
Domestic
Operation: President, Vice Presidents reporting to the President and
their direct reports
International
Companies: Any regional or Company Managing Director/President
whose net sales exceed 10% of the Company's
Consolidated Net Sales
Form
- ----
Cash bonus, paid quarterly based on achievement as follows:
<TABLE>
<CAPTION>
Approximate WEIGHTING
Percentage of Unit Cost Center Priority
Base Net Income Budget Task
------------- ---------- ----------- --------
Corporate
---------
<S> <C> <C> <C> <C>
Chief Executive Officer................... 60% 100% -0- -0-
SVP, MIS.................................. 35% 50% 25% 25%
SVP, OPS; MD Pac. Region and Latin
America................................. 35% 70% 15% 15%
SVP, Finance.............................. 35% 70% -0- 30%
VP, Treasurer............................. 35% 50% 25% 25%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Approximate WEIGHTING
Percentage of Unit Cost Center Priority
Domestic Operation Base Net Income Budget Task
------------------ ------------- ---------- ----------- --------
<S> <C> <C> <C> <C>
President...................... 35% 100% -0- -0-
Vice Presidents reporting
to President............ 25% 50% 25% 25%
Directors...................... 25% 50% 25% 25%
International Operations:
- ------------------------
MD Europe...................... 35% 70% -0- 30%
President Canada............... 50% 70% -0- 30%
</TABLE>
For the Net Income portion, the following Formula will be applied:
<TABLE>
<CAPTION>
Net Income Payment as a %
% of Operating Plan of Target
------------------- --------------
<S> <C>
equal to or greater 150%
than 120%
equal to or greater 125%
than 110% less than 120%
equal to or greater
than 100% less than 110% 100%
greater than 80% less
than 100% 50%
equal to or greater
than 80% -0-
</TABLE>
For the Cost Center Budget Portion, the following Pro Rata will be applied:
<TABLE>
<CAPTION>
Expense as % Payout as %
of Budget of Target
-------------- -----------
<S> <C>
equal to or greater
than 100% 100%
equal to or greater
than 105% less than 100% 50%
greater than 105% -0-
</TABLE>
Merisel Associates who qualify for this MIP are to have Priority Tasks with
quarter-end milestones. Generally, such Management Associate has 5 - 10
Priority Tasks. For the Priority Tasks portion, the percentage of milestones
achieved will be applied to the portion of the quarterly bonus related to
Priority Tasks.
Finally, Associates must be employed at date of payment to be eligible to
receive this bonus.
<PAGE>
MERISEL, INC.
401(k) RETIREMENT SAVINGS PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I................................................... 1
ARTICLE II - DEFINITIONS.................................... 2
2.1 Account............................................... 2
2.2 Affiliated Company.................................... 2
2.3 Aggregation Group..................................... 2
2.4 Alternate Payee....................................... 2
2.5 Annual Additions...................................... 3
2.6 Average Deferral Percentage........................... 3
2.7 Beneficiary........................................... 4
2.8 Board of Directors.................................... 4
2.9 Break in Service...................................... 4
2.10 Code.................................................. 4
2.11 Committee............................................. 4
2.12 Company............................................... 5
2.13 Company Contributions................................. 5
2.14 Compensation.......................................... 5
2.15 Computation Period.................................... 5
2.16 Covered Employees..................................... 5
2.17 Determination Date.................................... 6
2.18 Disability............................................ 6
2.19 Effective Date........................................ 6
2.20 Employee.............................................. 6
2.21 Employment Commencement Date.......................... 6
2.22 ERISA................................................. 7
2.23 Excess Aggregate Contributions........................ 7
2.24 Excess Contributions.................................. 7
2.25 Excess Deferrals...................................... 7
2.26 Fail-Safe Contributions............................... 7
2.27 Family Member......................................... 7
2.28 Five Percent Owner.................................... 8
2.29 Forfeiture............................................ 8
2.30 Highly Compensated Employee........................... 8
2.31 Hour of Service....................................... 10
2.32 Investment Manager.................................... 11
2.33 Key Employee.......................................... 11
2.34 Leave of Absence...................................... 12
2.35 Limitation Year....................................... 13
2.36 Matching Contributions................................ 13
2.37 Matching Contributions Account........................ 13
2.38 Maternity or Paternity Leave of Absence............... 13
2.39 Non-Key Employee...................................... 14
2.40 Normal Retirement Age................................. 14
2.41 Officer............................................... 14
2.42 One Percent Owner..................................... 15
2.43 Participant........................................... 15
2.44 Plan.................................................. 15
2.45 Plan Administrator.................................... 15
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
2.46 Plan Year.............................................. 15
2.47 Reemployment Commencement Date......................... 16
2.48 Rollover Contribution.................................. 16
2.49 Rollover Contribution Account.......................... 16
2.50 Salary Reduction Contributions......................... 16
2.51 Salary Reduction Contributions Account................. 16
2.52 Severance.............................................. 16
2.53 Spouse................................................. 16
2.54 Testing Period......................................... 16
2.55 Top-Heavy Group........................................ 16
2.56 Top-Heavy Plan......................................... 17
2.57 Trust and Trust Fund................................... 18
2.58 Trustee................................................ 18
2.59 Valuation Date......................................... 18
2.60 Vested Interest........................................ 18
2.61 Year of Service........................................ 18
ARTICLE III - ELIGIBILITY AND PARTICIPATION................. 19
3.1 Eligibility to Participate............................. 19
3.2 Special Participation Rules............................ 19
3.3 Participation Beyond Normal Retirement Age............. 19
ARTICLE IV - TRUST FUND AND CONTRIBUTIONS................... 20
4.1 Trust Fund............................................. 20
4.2 Company Contribution................................... 20
4.3 Irrevocability......................................... 21
4.4 Investments in Employer Securities and
Employer Real Property............................... 21
4.5 Investment Direction by Participants................... 21
ARTICLE V - SALARY REDUCTION CONTRIBUTIONS.................. 22
5.1 Special Rules.......................................... 22
5.2 Maximum Amount of Salary
Reduction Contributions............................. 22
5.3 Average Deferral Percentage Tests...................... 22
5.4 Prospective Reductions of Salary Reduction
Contributions........................................ 23
5.5 Distributions of Excess Deferrals...................... 24
5.6 Distributions of Excess Contributions.................. 24
5.7 Special Rules Applicable to Matching Contributions..... 25
5.8 Fail-Safe Contributions................................ 27
5.9 Rollover Contributions................................. 27
ARTICLE VI - ALLOCATIONS TO PARTICIPANTS' ACCOUNTS.......... 29
6.1 Participants' Accounts................................. 29
6.2 Allocation of Contributions............................ 29
6.3 Revaluation of Accounts................................ 30
6.4 Forfeitures............................................ 31
6.5 Miscellaneous Allocation Rules......................... 31
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE VII - VESTING...................................... 32
7.1 General Rule......................................... 32
7.2 Special Vesting Rules................................ 32
7.3 Fully Vested Accounts................................ 32
ARTICLE VIII - PAYMENT OF BENEFITS......................... 33
8.1 Payment of Benefits.................................. 33
8.2 Latest Payment Date.................................. 33
8.3 Required Beginning Date.............................. 34
8.4 Distributions to Partially Vested Participants....... 34
8.5 Distributions of Salary Reduction Contributions...... 35
8.6 Payees under Legal Disability........................ 36
8.7 Notice Regarding Tax Treatment of Distributions...... 36
8.8 Hardship Distributions............................... 36
8.9 Mailing of Payments.................................. 39
8.10 Withholding For Taxes................................ 39
8.11 Rollover Rules....................................... 39
ARTICLE IX - SURVIVOR ANNUITY REQUIREMENTS................. 41
9.1 Application of Article............................... 41
9.2 Definitions.......................................... 41
9.3 Form of Benefits Provided............................ 42
9.4 Elections With Respect to Survivor Annuities......... 43
9.5 Disclosure Requirements.............................. 44
9.6 Consent to Receive Early Distribution................ 45
ARTICLE X - TOP-HEAVY PLAN RULES........................... 46
10.1 Applicability........................................ 46
10.2 Special Valuation Rules.............................. 46
10.3 Minimum Contributions................................ 47
10.4 Maximum Annual Addition.............................. 48
10.5 Non-Eligible Employees............................... 49
ARTICLE XI - OPERATION AND ADMINISTRATION OF THE PLAN...... 50
11.1 Named Fiduciaries.................................... 50
11.2 Composition of Committee............................. 50
11.3 Committee Powers..................................... 51
11.4 Reporting and Disclosure............................. 52
11.5 Multiple Fiduciary Capacities........................ 52
11.6 Funding Policy....................................... 52
11.7 Prohibition Against Certain Actions.................. 52
11.8 Committee Procedure.................................. 53
11.9 Indemnification...................................... 53
11.10 Compensation of Committee Members and Plan Expenses.. 54
11.11 Bonding.............................................. 54
11.12 Notices and Communications........................... 54
11.13 Standard of Care..................................... 54
ARTICLE XII - MERGER OF COMPANY, MERGER OF PLAN............ 56
12.1 Effect of Reorganization or Transfer of Assets....... 56
12.2 Plan Merger Restriction.............................. 56
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE XIII - TERMINATION AND - DISCONTINUANCE OF
CONTRIBUTIONS............................................ 57
13.1 Plan Termination..................................... 57
13.2 Discontinuance of Contributions...................... 57
13.3 Replacement Plan..................................... 57
13.4 Partial Termination.................................. 57
ARTICLE XIV - APPLICATION FOR BENEFITS..................... 58
14.1 Application for Benefits............................. 58
14.2 Content of Denial.................................... 58
14.3 Appeals.............................................. 59
14.4 Exhaustion of Remedies............................... 59
ARTICLE XV - LIMITATIONS ON CONTRIBUTIONS.................. 60
15.1 General Rule......................................... 60
15.2 Other Defined Contribution Plans..................... 60
15.3 Defined Benefit Plans................................ 60
15.4 Adjustments for Excess Annual Additions.............. 62
ARTICLE XVI - RESTRICTION ON ALIENATION.................... 64
16.1 General Restrictions Against Alienation.............. 64
16.2 QDRO Definition...................................... 64
16.3 Impermissible Terms.................................. 64
16.4 Special Rules........................................ 65
16.5 Procedures........................................... 65
16.6 Segregation of Funds................................. 66
16.7 Authorized Participant Loans......................... 67
ARTICLE XVII - AMENDMENTS.................................. 70
17.1 Amendments........................................... 70
17.2 Effect of Amendments................................. 70
17.3 Securities Restrictions.............................. 71
17.4 Changes to Vesting Schedule.......................... 71
ARTICLE XVIII - MISCELLANEOUS MATTERS...................... 72
18.1 No Enlargement of Employee Rights.................... 72
18.2 Interpretation....................................... 72
</TABLE>
iv
<PAGE>
ARTICLE I
OVERVIEW
The following is intended to be a brief overview of some of the significant
provisions of the Merisel, Inc. 401(k) Retirement Savings Plan ("Plan").
Employees become eligible to participate in the Plan after satisfying the
eligibility conditions set forth in Article III.
Participants can contribute up to 15% of compensation, in accordance with the
rules of Article V.
The Company contributes an amount to the Plan on behalf of each Participant
who has made contributions to the Plan, in an amount equal to the Participant's
contributions, ignoring any contributions made by the Participant in excess of
2% of compensation. However, in order to be entitled to receive an allocation
of Company contributions, Participants generally must be employed by the Company
on the last day of the year. The rules regarding allocations of Company
contributions are located in Article VI.
The rules regarding vesting are contained in Article VII. Pursuant to these
rules, Participants are always be vested in their contributions to the Plan.
Participants become fully vested in the Company contributions on their behalf
upon death, disability, or attainment of age 65 while employed by the Company.
In all other cases, Participants become vested in the Company contributions on
their behalf according to the following schedule:
YEARS OF SERVICE VESTED PERCENTAGE
---------------- -----------------
Less than 1 0%
1 25%
2 50%
3 75%
4 or more 100%
Provided certain restrictions are satisfied, Participants may borrow funds
from their accounts. The rules regarding loans are contained in Article XVI.
Participants may withdraw some of their contributions after reaching age 59-
1/2 or upon incurring a financial hardship. The rules regarding withdrawals are
located in Article VIII.
Benefit will generally be paid in the form of an annuity, unless the
Participant elects otherwise. The rules regarding annuities are located in
Article IX.
-1-
<PAGE>
ARTICLE II
DEFINITIONS
Whenever capitalized in the text, the following terms shall have the meaning
set forth below.
2.1 ACCOUNT. "Account" or "Accounts" shall mean the Matching Contributions
-------
Account, the Salary Reduction Contributions Account (if applicable), and the
Rollover Contribution Account (if applicable) maintained for each Participant.
2.2 AFFILIATED COMPANY.
------------------
(a) "Affiliated Company" shall mean any entity that is aggregated with
the Company under Code Section 414(b), (c), (m), or (o).
(b) For purposes of applying the limitations of Article XV below,
whether or not an entity is an Affiliated Company shall be determined by
applying the percentage modifications contained in Code Section 415(h).
2.3 AGGREGATION GROUP.
-----------------
(a) "Aggregation Group" means--
(i) Each plan of the Company or an Affiliated Company in which a
Key Employee is or was a Participant during the Testing Period
(regardless of whether the plan has been terminated), and
(ii) Each other plan of the Company or an Affiliated Company
(regardless of whether the plan has been terminated) which enables any
plan described in Subparagraph (i) above to meet the requirements of
Code Sections 401(a)(4) or 410.
(b) Any plan not required to be included in an Aggregation Group under
the rules of Paragraph (a) above may be treated as being part of the group
if the group would continue to meet the requirements of Code Sections
401(a)(4) and 410 with the plan being taken into account.
(c) Each plan maintained by the Company or an Affiliated Company
required to be included in an Aggregation Group shall be treated as a Top-
Heavy Plan if the Aggregation Group is a Top-Heavy Group.
2.4 ALTERNATE PAYEE. "Alternate Payee" means any Spouse, former Spouse,
---------------
child, or other dependent of a Participant who is recognized by a domestic
relations order as having a right to receive all, or a portion of the benefits
payable with respect to the Participant.
-2-
<PAGE>
2.5 ANNUAL ADDITIONS.
----------------
(a) "Annual Additions" shall include, for any Limitation Year--
(i) The amount credited to a Participant's Accounts under this
Plan or to a Simplified Employee Pension from Company Contributions
(including Salary Reduction Contributions and Fail-Safe
Contributions),
(ii) The Participant's after-tax contributions,
(iii) Forfeitures, and
(iv) In the case of a Key Employee, any amounts allocated to an
account established under a funded welfare benefit plan or a defined
benefit plan to provide medical benefits with respect to the
Participant after retirement.
(b) The following amounts shall not be considered part of the
Participant's Annual Additions:
(i) Rollover Contributions;
(ii) Repayments of loans; and
(iii) Any recontributions (of prior distributions) made pursuant to
Section 8.4 below.
(c) The following amounts shall be considered part of the Participant's
Annual Additions:
(i) Excess Deferrals that are distributed later than April 15 of
the calendar year following the calendar year to which the amounts
relate;
(ii) Excess Contributions (even if timely distributed); and
(iii) Excess Aggregate Contribution (even if timely distributed or
forfeited).
2.6 AVERAGE DEFERRAL PERCENTAGE.
---------------------------
(a) The "Average Deferral Percentage" for the Highly Compensated
Employees and for all other Covered Employees is the average of the ratios,
calculated separately for each Employee in the group, of the amount of his
Salary Reduction Contributions (including any Fail-Safe Contributions made
on his behalf) to the amount of his Compensation.
-3-
<PAGE>
(i) In the case of an Employee who does not defer anything under
the Plan, his deferral percentage shall be zero percent (0%).
(ii) The Average Deferral Percentage for each group shall be
calculated to the nearest one-hundredth percent of Compensation.
(iii) The computation of the Average Deferral Percentage in the case
of Family Members shall be done in accordance with the regulations
under Code Section 401(k).
(b) If the Plan is treated as a single plan for purposes of satisfying
the requirements of Code Sections 401(a)(4) and 410 along with another plan
that contains a cash or deferred arrangement, all of the cash or deferred
arrangements shall be treated as a single arrangement.
(c) If a Highly Compensated Employee is also a participant in one or
more other cash or deferred arrangements maintained by the Company, all
such arrangements shall be treated as a single arrangement.
(d) For purposes of this Section 2.6, a Participant's Compensation shall
be determined in accordance with the rules of Code Sections 414(s) and
401(k).
2.7 BENEFICIARY. "Beneficiary" shall mean the person designated in Article VIII
-----------
to receive the Vested Interest of a deceased Participant.
2.8 BOARD OF DIRECTORS. "Board of Directors" or "Board" shall mean the
------------------
Board of Directors (or its delegate) of the Company.
2.9 BREAK IN SERVICE. "Break in Service" shall mean a Computation Period in
----------------
which the Employee does not complete more than five hundred (500) Hours of
Service, including Hours of Service completed while on a Maternity or Paternity
Leave of Absence.
2.10 CODE. "Code" shall mean the Internal Revenue Code of 1986.
----
2.11 COMMITTEE. "Committee" shall mean the Merisel, Inc. 401(k)
---------
Retirement Savings Plan Committee described in Article XI below.
-4-
<PAGE>
2.12 COMPANY. "Company" shall mean Merisel, Inc. and any Affiliated
-------
Companies (or similar entities) which may be included within the coverage of the
Plan with the consent of the Board of Directors.
2.13 COMPANY CONTRIBUTIONS.
---------------------
(a) "Company Contributions" shall mean all amounts paid by the Company
into the Trust Fund.
(b) Except where the context indicates to the contrary, Company
Contributions shall not include Salary Reduction Contributions and Fail-
Safe Contributions.
2.14 COMPENSATION.
------------
(a) A Participant's "Compensation" shall mean the amount indicated on
the Form W-2 issued to him.
(b) Except as otherwise expressly provided in this Plan to the contrary,
the term "Compensation" shall include those amounts which represent the
Participant's Salary Reduction Contributions and pre-tax contributions to a
cafeteria plan under Section 125 of the Code.
(c) For Plan Years beginning after December 31, 1988, in no event will
the amount of Compensation taken into account on behalf of any Participant
exceed two hundred thousand dollars ($200,000). This dollar amount shall
be adjusted at the same time and in the same manner as under Code Section
415(d).
(d) Notwithstanding anything in this Plan to the contrary, for purposes
of the applying the nondiscrimination rules of Article V, only amounts
earned while a Participant in the Plan will be taken into account.
2.15 COMPUTATION PERIOD.
------------------
(a) "Computation Period" is the relevant twelve (12) consecutive month
period for determining whether the Employee is to be credited with a Year
of Service or a Break in Service.
(b) For purposes of determining vesting, in all cases the Computation
Period shall be the Plan Year.
2.16 COVERED EMPLOYEES. "Covered Employees" means those Employees who have
-----------------
satisfied all of the requirements for eligibility to participate in the Plan and
are not otherwise precluded from participating in the Plan.
-5-
<PAGE>
2.17 DETERMINATION DATE.
------------------
(a) "Determination Date" means, with respect to any plan year, the last
day of the preceding plan year.
(b) In the case of the first plan year, "Determination Date" shall mean
the last day of that plan year.
2.18 DISABILITY.
----------
(a) An individual is disabled if he is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or
that has lasted or can be expected to last for a continuous period of not
less than twelve (12) months.
(b) No Participant shall be deemed to have incurred a Disability as a
result of an injury or illness incurred as a result of:
(i) The commission of a felony;
(ii) Intentionally self-inflicted injury (while sane or insane); or
(iii) Alcoholism or substance abuse.
2.19 EFFECTIVE DATE.
--------------
(a) The original "Effective Date" of the Plan was January 1, 1988.
(b) The Effective Date of this amendment and restatement of the Plan is
January 1, 1989, except as required to be earlier to comply with the law.
(c) In the case of an Employee who Severance occurred prior to the
Effective Date of this restatement, his benefit under the Plan will be
determined under the provisions of the Plan as it existed prior to this
restatement.
2.20 EMPLOYEE. "Employee" shall mean each person qualifying as a common law
--------
employee of the Company or an Affiliated Company.
2.21 EMPLOYMENT COMMENCEMENT DATE.
----------------------------
(a) The term "Employment Commencement Date" shall mean the date on which
an Employee first performs an Hour of Service.
-6-
<PAGE>
(b) For purposes of determining his Employment Commencement Date, an
Employee shall not be deemed to have commenced employment with an
Affiliated Company prior to the effective date on which the entity became
an Affiliated Company, except as is expressly provided otherwise in this
Plan or in resolutions of the Board of Directors.
2.22 ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974.
2.23 EXCESS AGGREGATE CONTRIBUTIONS. "Excess Aggregate Contributions" shall
------------------------------
mean those contributions in excess of the limitations of Section 5.7 below.
2.24 EXCESS CONTRIBUTIONS. "Excess Contributions" shall mean those Salary
--------------------
Reduction Contributions in excess of the limitations of Section 5.3 below.
2.25 EXCESS DEFERRALS. "Excess Deferrals" shall mean those Salary Reduction
----------------
Contributions in excess of the dollar limitation of Section 5.2(b) below.
2.26 FAIL-SAFE CONTRIBUTIONS. "Fail-Safe Contributions" shall mean those
-----------------------
Contributions made pursuant to Section 5.8 below that are designed to insure
compliance with the Average Deferral Percentage Tests of Section 5.3 below.
2.27 FAMILY MEMBER.
-------------
(a) If any individual is a member of the Family of a Five Percent Owner
or of a Highly Compensated Employee in the group consisting of the ten (10)
Highly Compensated Employees paid the greatest Compensation during the
year, then for purposes of applying the various nondiscrimination rules
applicable to this Plan--
(i) The individual ("Family Member") shall not be considered a
separate Employee, and
(ii) Any Compensation paid to the Family Member (and any applicable
contribution or benefit on behalf of the Family Member) shall be
treated as if it were paid to (or on behalf of) the Five Percent Owner
or Highly Compensated Employee.
(b) For purposes of this Section 2.27, "Family" means the Employee's
Spouse, lineal ascendants and descendants, and the spouses of lineal
ascendants and descendants.
-7-
<PAGE>
(c) For purposes of the Compensation limitation of Section 2.14 above,
the term "Family" shall include only-
(i) The Spouse of the Employee, and
(ii) Any lineal descendants who have not attained age nineteen (19)
before the close of the year.
That dollar limitation shall be divided among the various members of the
Family in the proportion that the Compensation of each member bears to the
total Compensation of all members of the Family.
2.28 FIVE PERCENT OWNER.
------------------
(a) "Five Percent Owner" means any person who owns (or is considered as
owning within the meaning of Section 318 of the Code) more than five
percent (5%) of the--
(i) Outstanding stock of the Company or an Affiliated Company, or
(ii) The total combined voting power of all stock of the Company or
an Affiliated Company.
(b) The rules of Subsections (b), (c), and (m) of Code Section 414 shall
not apply for purposes these ownership rules. Thus, this of ownership test
shall be applied separately with respect to the Company and every
Affiliated Company.
(c) The constructive ownership rules of Code Section 318(a)(2)(C) shall
be applied by substituting "five percent (5%)" for "fifty percent (50%)"
where it appears therein.
(d) For purposes of this Section 2.28, if an Employee's ownership
interest varies during a Plan Year, his ownership interest shall be the
largest interest he owned at any time during the year.
2.29 FORFEITURE. "Forfeiture" means the nonvested portion of a Participant's
----------
Matching Contributions Account that is forfeited in accordance with the rules of
Article VII below.
2.30 HIGHLY COMPENSATED EMPLOYEE.
---------------------------
(a) "Highly Compensated Employee" means any Employee who, during the
relevant Plan Year ("Determination Year") or the preceding Plan Year
("Lookback Year")--
-8-
<PAGE>
(i) Was at any time a Five Percent Owner,
(ii) Received Compensation from the Company and all Affiliated
Companies in excess of seventy-five thousand dollars ($75,000), as
indexed for inflation,
(iii) Received Compensation in excess of fifty thousand dollars
($50,000), as indexed for inflation, and was in the top twenty percent
(20%) of all Employees when ranked on the basis of Compensation paid
during the year ("Top-Paid Group"), or
(iv) Was at any time an Officer of the Company or any Affiliated
Company.
(b) An Employee described in Subparagraphs (ii), (iii), or (iv) of
Paragraph (a) above shall not be treated as described therein for the
Determination Year unless the Employee is a member of the group consisting
of the one hundred (100) Employees paid the greatest Compensation during
the Determination Year.
(c) For purposes of this Section 2.30, the amount of an Employee's
Compensation shall be determined--
(i) In accordance with Code Section 414(q)(7), and
(ii) Without regard to the dollar limitation of Section 2.14(c)
above.
(d) For purposes of determining the number of Employees in the Top-Paid
Group (described in Paragraph (a)(iii) above), the following Employees
shall be excluded--
(i) Employees who have not completed six (6) months of service,
(ii) Employees who normally work less than seventeen and one-half
(17-1/2) hours per week,
(iii) Employees who normally work during not more than six (6) months
during any year, and
(iv) Employees who have not attained age twenty-one (21) by the end
of the relevant Plan Year.
-9-
<PAGE>
Except to the extent provided in the regulations under Code Section 414(q),
Employees who are included in a unit of Employees covered by an agreement
which the Secretary of Labor finds to be a collective bargaining agreement
between Employee representatives and the Company must be taken into
account.
(e) A former Employee shall be treated as a Highly Compensated Employee
if--
(i) He was a Highly Compensated Employee when he separated from
service, or
(ii) He was a Highly Compensated Employee at any time after attaining
age fifty-five (55).
(f) Notwithstanding the foregoing, non-resident aliens without U.S.
source income from the Company or an Affiliated Company shall be
disregarded for all purposes in determining who are the Highly Compensated
Employees.
2.31 HOUR OF SERVICE.
---------------
(a) "Hour of Service" of an Employee shall mean each hour for which he
is paid or is entitled to payment by the Company or an Affiliated Company:
(i) For the performance of services as an Employee;
(ii) Which is attributable to a period of time during which he
performs no duties (irrespective of whether or not his employment has
been terminated) due to a vacation, holiday, illness, incapacity
(including pregnancy or disability), layoff, jury duty, military duty,
or a leave of absence.
(A) However, no such hours shall be credited to an Employee if
he is directly or indirectly paid or entitled to payment for the
hours and the payment or entitlement--
(I) Is made or due under a plan maintained solely for the
purpose of complying with applicable worker's compensation,
unemployment compensation, or disability insurance laws, or
(II) Is a payment which solely reimburses the Employee for
his medical or medically-related expenses; or
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<PAGE>
(iii) For which he is entitled to back pay, irrespective of
mitigation of damages, whether awarded or agreed to by the Company or
an Affiliated Company, provided that he has not previously been
credited with an Hour of Service with respect to that hour under
Subparagraph (i) or (ii) above.
(b) Notwithstanding the provisions of Paragraph (a) above, no Employee
shall be entitled to credit for more than five hundred and one (501) Hours
of Service for any single continuous period during which he performs no
duties, whether or not the period occurs in a single Computation Period.
(c) All Hours of Service determined under the rules of Paragraph (a)
above shall be credited to the Computation Period in which the payment is
actually made, determined in accordance with rules prescribed by the
Committee. The provisions of this Paragraph (c) shall be applied in a
manner consistent with the provisions of Department of Labor Regulation
Section 2530.200b-2.
(d) Unless the Board of Directors shall expressly determine otherwise,
and except as may be expressly provided otherwise in this Plan, an Employee
shall not receive credit for his Hours of Service completed with an
Affiliated Company prior to the effective date on which the entity became
an Affiliated Company.
2.32 INVESTMENT MANAGER. "Investment Manager" shall have the meaning set
------------------
forth in Section 3(38) of ERISA.
2.33 KEY EMPLOYEE.
------------
(a) "Key Employee" shall mean any Employee or former Employee who, at
any time during the Testing Period, is or was:
(i) An Officer;
(ii) One of the ten (10) Employees--
(A) Having annual Compensation from the Company or an
Affiliated Company of more than the limitation in effect under
Section 15.1(a)(1) below, and
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<PAGE>
(B) Owning (or considered as owning within the meaning of Code
Section 318) during the Testing Period both more than one-half
percent (1/2%) interest and the largest interests in the Company
or an Affiliated Company.
For purposes of this Subparagraph (ii), if two (2) Employees have
the same interest in the Company or an Affiliated Company, the
Employee having the greater annual Compensation shall be treated as
having the larger interest;
(iii) A Five Percent Owner of the Company or an Affiliated
Company; or
(iv) A One Percent Owner of the Company or an Affiliated Company
having an annual Compensation of more than one hundred fifty
thousand dollars ($150,000).
(b) The term "Key Employee" shall include his Beneficiaries.
(c) For purposes of this Section 2.33, an Employee's Compensation
shall be the amount indicated on the Form W-2 issued to him for the
calendar year ending with or within the Plan Year. Notwithstanding
the preceding sentence, for purposes of determining whether an
individual is a Key Employee, his compensation shall be increased by
Deferrals and his pre-tax contributions to a cafeteria plan under
Section 125 of the Code.
2.34 LEAVE OF ABSENCE.
----------------
(a) "Leave of Absence" shall mean any unpaid personal leave from
active employment duly authorized by the Company under the Company's
standard personnel practices. All persons under similar circumstances
shall be treated in a uniform and nondiscriminatory manner in the
granting of Leaves of Absence.
(b) An Employee shall not be deemed to have incurred a Break in
Service while on a Leave of Absence, provided he returns to employment
on or before the date on which the leave expires.
(c) In the event an Employee does not return to employment on or
before the end of the leave, he shall be deemed to have incurred a
Severance as of the first day of the leave, unless--
-12-
<PAGE>
(i) The failure was due to his death or disability, or
(ii) The provisions of Section 2.38 below apply.
2.35 LIMITATION YEAR. In connection with the adoption of this Plan, the
---------------
Company hereby elects a "Limitation Year" corresponding to the Plan Year for
purposes of the limitations on contributions contained in Article XV below.
2.36 MATCHING CONTRIBUTIONS. "Matching Contributions" shall mean
----------------------
the Company Contributions that are allocated to Participants pursuant
to the provisions of Section 6.2(a) below.
2.37 MATCHING CONTRIBUTIONS ACCOUNT. The "Matching Contributions
------------------------------
Account" of a Participant shall mean his individual account in the
Trust Fund in which are held his allocated share of the Matching
Contributions, and the earnings thereon.
2.38 MATERNITY OR PATERNITY LEAVE OF ABSENCE.
---------------------------------------
(a) The provisions of this Section 2.38 shall apply with respect to an
Employee who is absent from work without pay for any period--
(i) By reason of the pregnancy of the Employee,
(ii) By reason of the birth of a child of the Employee,
(iii) By reason of the placement of a child with the Employee in
connection with the adoption of the child by the Employee, or
(iv) For purposes of caring for the child for a period beginning
immediately following the birth or placement.
(b) The number of Hours of Service to which an Employee described in
Paragraph (a) above shall be credited with shall be--
(i) The number which otherwise would normally have been credited to
the Employee but for the absence, or
(ii) If the number described in Subparagraph (i) above is not
capable of being determined, eight (8) Hours of Service per day of the
absence.
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<PAGE>
(c) However, the total number of hours treated as Hours of Service under
Paragraph (b) above shall not exceed five hundred one (501). Furthermore,
these Hours of Service shall be taken into account solely for the purpose
of determining whether or not the Employee has incurred a Break in Service.
(d) The Hours described in Paragraph (b) above shall be credited to the
Computation Period--
(i) In which the absence from work begins, if the Employee would be
prevented from incurring a Break in Service in that Computation Period
solely because the period of absence is treated as Hours of Service
under this Section 2.38, or
(ii) In any other case, in the immediately following Computation
Period.
(e) The above provisions of this Section 2.38 shall not apply unless the
Employee provides such timely information as the Committee may reasonably
require to establish that--
(i) The absence is for reasons described in Paragraph (a) above, and
(ii) The number of days for which there was an absence.
2.39 NON-KEY EMPLOYEE.
----------------
(a) "Non-Key Employee" shall mean any Employee who is not a Key Employee.
(b) The term "Non-Key Employee" shall include his Beneficiaries.
2.40 NORMAL RETIREMENT AGE. "Normal Retirement Age" shall mean the
---------------------
Participant's sixty-fifth (65th) birthday.
2.41 OFFICER.
-------
(a) "Officer" shall mean any Employee who was at any time an officer of
the Company or an Affiliated Company and received Compensation from the
Company and all Affiliated Companies greater than fifty percent (50%) of
the amount in effect under Code Section 415(b)(1)(A) for the year.
(b) However, no more than the lesser of--
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<PAGE>
(i) Fifty (50) Employees, or
(ii) The greater of three (3) Employees or ten percent (10%) of the
Employees,
shall be treated as Officers.
(c) If no officer is described in Paragraph (a) above, then the highest
paid officer of the Company shall be treated as being described therein.
(d) For purposes of Paragraph (b) above--
(i) All Leased Employees (within the meaning of Section 414(n) of
the Code) and all part-time Employees shall be taken into account, and
(ii) The number of Employees shall be the greatest number at any
time during the relevant period.
2.42 ONE PERCENT OWNER. "One Percent Owner" means any person who would be a
-----------------
Five Percent Owner if the minimum ownership threshold were one percent (1%)
instead of five percent (5%).
2.43 PARTICIPANT.
-----------
(a) "Participant" shall mean any Employee who has satisfied the
participation eligibility requirements and has been enrolled in this Plan
in accordance with the provisions of Article III below.
(b) "Participant" does not include an Employee who has incurred a
Severance and either--
(i) Does not have a Vested Interest, or
(ii) Has been paid the full amount of his Vested Interest.
2.44 PLAN. "Plan" shall mean the Merisel, Inc. 401(k) Retirement Savings Plan.
----
2.45 PLAN ADMINISTRATOR. "Plan Administrator" shall mean the
------------------
administrator of the Plan within the meaning of ERISA Section 3(16)(A), which
shall be the Company.
2.46 PLAN YEAR. "Plan Year" shall mean the twelve (12) month period
---------
ending on December 31.
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<PAGE>
2.47 REEMPLOYMENT COMMENCEMENT DATE. In the case of an Employee
------------------------------
who incurs a Severance and who is subsequently reemployed by the Company or an
Affiliated Company, the term "Reemployment Commencement Date" shall mean the
first day following the Severance on which the Employee performs an Hour of
Service.
2.48 ROLLOVER CONTRIBUTION. "Rollover Contribution" shall mean a
---------------------
contribution made by a Participant pursuant to Section 5.9 below.
2.49 ROLLOVER CONTRIBUTION ACCOUNT. "Rollover Contribution
-----------------------------
Account" of a Participant shall mean his individual Account in the Trust Fund
in which are held his Rollover Contributions and the earnings thereon.
2.50 SALARY REDUCTION CONTRIBUTIONS. "Salary Reduction
------------------------------
Contributions" shall mean the pre-tax contributions made by Participants
pursuant to Article V below.
2.51 SALARY REDUCTION CONTRIBUTIONS ACCOUNT. "Salary Reduction
--------------------------------------
Contributions Account" of a Participant shall mean his individual account in
the Trust Fund in which are held his Salary Reduction Contributions, any
Fail-Safe Contributions made on his behalf, and the earnings thereon.
2.52 SEVERANCE. "Severance" shall mean the termination of an
---------
Employee's employment with the Company or an Affiliated Company, by reason of
his retirement, death, resignation, dismissal, or otherwise.
2.53 SPOUSE. "Spouse" shall mean the person to whom a Participant
------
is married as of the relevant date.
2.54 TESTING PERIOD. "Testing Period" means the Plan Year
--------------
containing the Determination Date and the preceding four (4) Plan Years.
2.55 TOP-HEAVY GROUP. "Top-Heavy Group" means any Aggregation
---------------
Group if the sum (as of the Determination Date) of--
(a) The present value of the cumulative accrued benefits for Key
Employees under all defined benefit plans included in the group, and
(b) The aggregate of the account balances of Key Employees under all
defined contribution plans included in the group,
exceeds sixty percent (60%) of a similar sum determined for all Employees.
-16-
<PAGE>
2.56 TOP-HEAVY PLAN.
--------------
(a) Any defined benefit plan is a Top Heavy Plan if, as of the
Determination Date, the present value of the cumulative accrued benefits
under the plan for Key Employees exceeds sixty percent (60%) of the present
value of the cumulative accrued benefits under the plan for all Employees.
(i) For purposes of this Paragraph (a), the present value of an
Employee's accrued benefit shall be determined by using the interest
rate and the mortality assumptions specified in that plan. The same
actuarial assumptions shall be used in measuring accrued benefits
under all defined benefit plans.
(ii) The accrued benefit of any Employee (other than a Key Employee)
shall be determined--
(A) Under the method that is used for benefit accrual purposes
for all plans of the Company and all Affiliated Companies, or
(B) If there is no such method, as if the benefit accrued no
more rapidly than the slowest accrual rate permitted under
Section 411(b)(1)(C) of the Code.
(iii) The date on which the accrued benefit of each Employee is
measured (with respect to each Determination Date) shall be the date
used for computing costs under the minimum funding standards of Code
Section 412, determined as if he had terminated service as of that
date.
(b) Any defined contribution plan shall be a Top Heavy Plan if, as of
the Determination Date, the aggregate account balances of Key Employees
under the plan exceeds sixty percent (60%) of the present value of the
aggregate of the account balances of all Employees under the plan.
(i) The date on which the account balance of each Employee is
measured (with respect to each Determination Date) shall be the last
day of the relevant plan year.
(c) For purposes of this Section 2.56, the accrued benefit and account
balances of a Participant shall include amounts attributable to Participant
contributions (whether or not the contributions are includible in income).
Furthermore, the same date shall be used for valuing benefits under all
plans.
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<PAGE>
2.57 TRUST AND TRUST FUND. "Trust" or "Trust Fund" shall mean the Trust
--------------------
created by this Agreement.
2.58 TRUSTEE. "Trustee" shall mean the person(s) or entity acting as the
-------
Trustee of the Trust created under this Plan.
2.59 VALUATION DATE. "Valuation Date" shall mean the last day of each Plan
--------------
Year, or such other date or dates as may be selected by the Committee for
valuing the assets of the Plan.
2.60 VESTED INTEREST. "Vested Interest" shall mean the interest of a
---------------
Participant in the Trust Fund which has become vested pursuant to the provisions
of Article VII below.
2.61 YEAR OF SERVICE.
---------------
(a) "Year of Service" shall mean a Computation Period during which the
Employee completes at least one thousand (1,000) Hours of Service.
(b) In no event will an Employee be credited with more than one (1) Year
of Service with respect to service performed in a single Computation
Period.
(c) A Participant's Years of Service completed prior to commencing
participation in the Plan shall be taken into account.
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<PAGE>
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY TO PARTICIPATE.
--------------------------
(a) Every Employee of the Company who has completed eighty (80) Hours of
Service during a thirty (30) day period shall become eligible to
participate in the Plan as of the first day of the month following the date
on which the service requirement is satisfied.
(b) Notwithstanding the above, the following classes of Employees shall
not be eligible to participate in the Plan:
(i) Employees who are included in a unit of Employees covered by a
collective bargaining agreement, if there is evidence that retirement
benefits were the subject of good faith bargaining between the
Employee representatives and the Company, unless the collective
bargaining agreement expressly provides for coverage under this Plan;
and
(ii) Leased Employees (within the meaning of Section 414(n) of the
Code).
3.2 SPECIAL PARTICIPATION RULES.
---------------------------
(a) In the case of an Employee whose Entry Date occurs after the
Employee incurred a Severance, the Employee shall commence participation in
this Plan as of the later of--
(i) His Entry Date, or
(ii) His Reemployment Commencement Date following the Severance.
(b) A Participant who incurs a Severance and is thereafter reemployed by
the Company shall be entitled to recommence participation in the Plan as of
his Reemployment Commencement Date following the Severance.
3.3 PARTICIPATION BEYOND NORMAL RETIREMENT AGE. Participants who
------------------------------------------
have attained their Normal Retirement Age will continue to participate in the
Plan to the same extent as those Participants who have not yet attained their
Normal Retirement Age.
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<PAGE>
ARTICLE IV
TRUST FUND AND CONTRIBUTIONS
4.1 TRUST FUND.
----------
(a) Pursuant to the terms of the Plan, the Company established a trust,
with the Trustee as the trustee thereunder.
(b) The Trustee has agreed to hold and administer in trust all amounts
accumulated under the Plan under the terms of this Plan.
4.2 COMPANY CONTRIBUTION.
--------------------
(a) For each Plan Year the Company shall contribute to the Trust Fund--
(i) The Salary Reduction Contributions by Participants, and
(ii) The amount determined under Section 6.2(a) below.
(b) In no event shall the amount of the contribution by the Company
under this Plan (including Salary Reduction Contributions) exceed the
maximum allowable deduction available to the Company for its taxable year
under Code Section 404.
(c) No contribution shall be made by the Company at any time when its
allocation would be precluded by the limitations of Article XV below.
(d) All contributions by the Company under this Plan may be made in kind
or in cash, or in both, and shall be made directly to the Trustee on any
date or dates selected by the Company. Any stock of the Company that is
contributed to the Plan by the Company shall be valued at its fair market
value. The purchase price of any stock of the Company that is acquired by
the Plan with its assets shall be its fair market value.
(e) All contributions by the Company for a Plan Year shall be made
within the time prescribed by law for filing the Company's federal income
tax return (including extensions) for the Company's taxable year
corresponding to the Plan Year.
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<PAGE>
4.3 IRREVOCABILITY. In no event shall any of the assets of the Plan revert to
--------------
the Company except as provided in this Section 4.3.
(a) In the case of a Company Contribution which is made by reason of a
mistake of fact, at the Company's election, the contribution shall be
returned to the Company within one (1) year after it is made.
(b) All Company Contributions to the Plan are hereby conditioned on
their deductibility under Code Section 404. To the extent a deduction is
disallowed, at the Company's election, the contribution shall be returned
to the Company within one (1) year after the disallowance.
(c) In the case where amounts are held in a Suspense Account under
Section 15.4 below that may not be allocated to the Accounts of
Participants when the Plan is terminated, the excess amounts may revert to
the Company in accordance with the regulations under Code Section 415.
4.4 INVESTMENTS IN EMPLOYER SECURITIES AND EMPLOYER REAL PROPERTY.
-------------------------------------------------------------
(a) The Plan is authorized to invest in employer securities and employer
real property (as those terms are defined in Section 407 of ERISA), to the
extent permitted in ERISA.
(b) The assets of the Plan may be invested, primarily or exclusively, in
employer securities (as defined in Section 407 of ERISA).
4.5 INVESTMENT DIRECTION BY PARTICIPANTS. Pursuant to such rules and
------------------------------------
procedures as may be prescribed by the Committee, Participants may direct the
investment of the assets in some or all of their Accounts.
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ARTICLE V
SALARY REDUCTION CONTRIBUTIONS
5.1 SPECIAL RULES.
-------------
(a) Pursuant to such rules and procedures as the Committee may
prescribe, each Participant may elect to make contributions to the Plan
("Salary Reduction Contributions".)
(b) Participants may increase or decrease the amount of their Salary
Reduction Contributions twice a year, on January 1 and July 1.
Participants may suspend their Salary Reduction Contributions at any time,
although they cannot recommence making them until the next January 1 or
July 1. All changes or suspensions of Salary Reduction Contributions
require at least fourteen (14) days prior notice.
(c) Salary Reduction Contributions shall be treated as Company
Contributions for purposes of Code Sections 401(k) and 414(h).
(d) Salary Reduction Contributions shall be collected by the Company
only through payroll deductions. The Company shall remit the Salary
Reduction Contributions to the Trustee as soon as practicable.
5.2 MAXIMUM AMOUNT OF SALARY REDUCTION CONTRIBUTIONS.
------------------------------------------------
(a) The amount of a Participant's Compensation that may be contributed
to the Plan subject to the election provided in Section 5.1 above shall be
a whole percentage of the Participant's Compensation, not to exceed fifteen
(15).
(b) Notwithstanding anything in this Plan to the contrary, the maximum
amount that a Participant may contribute in a single calendar year is
limited to eight thousand four hundred seventy-five dollars ($8,475). This
amount shall be adjusted for increases in the cost-of-living, as determined
under Section 402(g) of the Code.
(c) In no event will a Participant be permitted to make Salary Reduction
Contributions in excess of the maximum amount permitted under Sections 5.3
or 5.7 below.
5.3 AVERAGE DEFERRAL PERCENTAGE TESTS.
---------------------------------
(a) The Committee shall monitor the Salary Reduction Contributions by
Participants to insure that the requirements of either Paragraph (b) or (c)
are satisfied.
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(b) The requirements of this Paragraph (b) are satisfied if the Average
Deferral Percentage for Highly Compensated Employees for the Plan Year is
not more than the Average Deferral Percentage for all other Covered
Employees multiplied by 1.25.
(c) The requirements of this Paragraph (c) are satisfied if--
(i) The excess of the Average Deferral Percentage of the group of
Highly Compensated Employees over that of all other Covered Employees
is not more than two (2) percentage points, and
(ii) The Average Deferral Percentage for the group of Highly
Compensated Employees is not more than twice the Average Deferral
Percentage for all other Covered Employees.
(d) The Company shall maintain records sufficient to demonstrate
satisfaction of the requirements of this Section 5.3, including the extent
to which Fail-Safe Contributions are taken into account (if applicable).
5.4 PROSPECTIVE REDUCTIONS OF SALARY REDUCTION CONTRIBUTIONS.
--------------------------------------------------------
(a) The Committee may determine prior to the end of the Plan Year
whether or not the Average Deferral Percentage tests of Section 5.3 are
satisfied. If it appears that the tests will not be satisfied, the
Committee may elect to reduce the Salary Reduction Contributions by the
Highly Compensated Employees on a prospective basis.
(b) In the event that Salary Reduction Contributions by Highly
Compensated Employees are reduced by Committee action, these reductions
will be accomplished reducing the rate of contributions for the Highly
Compensated Employee whose Deferral Percentage is the highest to the extent
required to--
(i) Enable the Plan to satisfy one of the Average Deferral
Percentage Tests of Section 5.3 above, or
(ii) Cause his Deferral Percentage to equal that of the Highly
Compensated Employee with the next highest Deferral Percentage. If
this action does not cause the Plan to satisfy one of the Average
Deferral Percentage Tests, this process will be repeated until one of
those tests is satisfied.
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<PAGE>
5.5 DISTRIBUTIONS OF EXCESS DEFERRALS. In the event a Participant deferred
---------------------------------
more than the maximum permitted under Section 5.2(b) above ("Excess Deferrals"),
whether under only this Plan, or under this Plan and another plan, the
Participant may notify the Plan of the portion of his Excess Deferrals allocable
to the Plan no later than March 1 following the calendar year in which the
Excess Deferrals were made.
(a) Notwithstanding anything in this Plan to the contrary, the Committee
shall attempt to distribute the amount of the Participant's Excess
Deferrals (and the earnings thereon) to the Participant no later than April
15th of the calendar year following the calendar year in which the Excess
Deferrals were made.
(i) However, any income earned after the end of the calendar year
but before the date of the distribution need not be distributed.
(b) Distributions may be made under this Section 5.5 without regard to
the consent requirement of Section 9.6 below.
(c) Amounts that are distributed under this Section 5.5 shall be treated
as part of a Participant's Annual Addition.
(d) Amounts that are distributed under this Section 5.5 will not be
taken into account for purposes of the minimum distribution rules of
Section 8.3 below.
5.6 DISTRIBUTIONS OF EXCESS CONTRIBUTIONS. In the event that the Plan fails
-------------------------------------
to satisfy the Average Deferral Percentage Tests of Section 5.3 above as of the
last day of the Plan Year, the contributions in excess of those limits and the
earnings thereon ("Excess Contributions") shall be distributed from the Plan.
(a) The Committee shall attempt to distribute these amounts within two
and one-half (2-1/2) months after the end of the Plan Year for which the
contributions were made, but in no event later than the last day of the
Plan Year following the Plan Year in which the Excess Contributions were
made.
(i) However, any income earned after the end of the Plan Year but
before the date of the distribution need not be distributed.
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(b) In the event that the Excess Contributions are distributed, the
distributions will be accomplished by distributing amounts to the Highly
Compensated Employee whose Deferral Percentage is the highest to the extent
required to--
(i) Enable the Plan to satisfy one of the Average Percentage Tests
of Section 5.3 above, or
(ii) Cause his Deferral Percentage to equal that of the Highly
Compensated Employee with the next highest Deferral Percentage. If
this action does not cause the Plan to satisfy one of the Average
Deferral Percentage Tests, this process will be repeated until one of
those tests is satisfied.
(c) The amount to be distributed to a Highly Compensated Employee under
Paragraph (b) above shall be determined on the basis of the portion of the
Excess Contributions attributable to him.
(d) The amount of the distributions of Excess Contributions of Family
Members shall be determined in accordance with the regulations under Code
Section 401(k).
(e) Distributions may be made under this Section 5.6 above without
regard to the consent requirement of Section 9.6 below.
(f) Amounts that are distributed under this Section 5.6 shall be treated
as part of a Participant's Annual Addition.
(g) Amounts that are distributed under this Section 5.6 will not be
taken into account for purposes of the minimum distribution rules of
Section 8.3 below.
5.7 SPECIAL RULES APPLICABLE TO MATCHING CONTRIBUTIONS.
--------------------------------------------------
(a) Any Matching Contributions made under this Plan shall satisfy one or
both of the numerical tests set forth in Section 5.3(b) and (c) above,
treating the Matching Contributions as if they were Salary Reduction
Contributions.
(i) In addition, the Plan shall comply with the rules of Treasury
Regulation Section 1.401(m)-2, which precludes multiple use of the
limitation contained in Section 5.3(c) above.
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<PAGE>
(ii) Pursuant to regulations under Code Section 401(m), a
Participant's Salary Reduction Contributions and any Fail-Safe
Contributions on his behalf may be taken into account for purposes of
this Section 5.7.
(b) In the event that the Company maintains two or more plans that must
be treated as a single plan for purposes of Code Sections 401(a)(4) and
410--
(i) All such plans shall be treated as a single plan for purposes
of this Section 5.7, and
(ii) All of the Matching Contributions shall be aggregated if a
Highly Compensated Employee participates in more than one plan that
provides for Matching Contributions.
(c) In the event that the Plan fails to satisfy the above tests of this
Section 5.7, the contributions in excess of those limits and the earnings
thereon ("Excess Aggregate Contributions") shall be distributed from the
Plan.
(i) The Committee will attempt to distribute these amounts within
two and one-half (2-1/2) months after the end of the Plan Year, but in
no event later than the last day of the following Plan Year.
Alternatively, any amounts that are forfeitable may be forfeited,
provided that no such forfeitures may be allocated to Highly
Compensated Employees whose contributions are reduced under this
Section 5.7.
(A) However, any income earned after the end of the Plan Year
but before the date of the distribution need not be distributed.
(ii) The distributions shall be made by reducing the contributions
made on behalf of Highly Compensated Employees, beginning with
individual with the highest contribution percentages. The amount to
be distributed to a Highly Compensated Employee shall be determined on
the basis of the portion of the Excess Aggregate Contributions
attributable to him.
(d) The amount of the Excess Aggregate Contributions shall be determined
after--
(i) First determining the amount of Excess Deferrals under Section
5.5 above; and
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(ii) Then determining the amount of Excess Contributions under
Section 5.6 above.
(e) The Company shall not be obligated to make any Matching
Contributions in excess of the maximum amount permitted under the above
rules of this Section 5.7.
(f) Distributions may be made under this Section 5.7 without regard to
the consent requirement of Section 9.6 below.
(g) The amount of the distributions of Excess Aggregate Contributions of
Family Members shall be determined in accordance with the regulations under
Code Section 401(m).
(h) Amounts that are distributed or forfeited under this Section 5.7
shall be treated as part of a Participant's Annual Addition.
(i) Amounts that are distributed under this Section 5.7 will not be
taken into account for purposes of the minimum distribution rules of
Section 8.3 below.
(j) The Company shall maintain records sufficient to demonstrate
satisfaction of the requirements of this Section 5.7, including the extent
to which Salary Reduction Contributions and Fail-Safe Contributions are
taken into account (if applicable).
5.8 FAIL-SAFE CONTRIBUTIONS.
-----------------------
(a) In addition to those amounts which may be contributed to the Trust
Fund by the Company under Sections 4.2 above, the Company may, in the sole
discretion of the Board of Directors, contribute such additional amounts to
the Salary Reduction Contributions Accounts of various Participants as it
deems necessary or appropriate for any Plan Year to insure satisfaction of
at least one of the Average Deferral Percentage tests set forth in Section
5.3.
(b) Such Fail-Safe Contributions shall be treated as Deferrals for
purposes of Articles VII and VIII.
5.9 ROLLOVER CONTRIBUTIONS.
----------------------
(a) Any Participant may make a Rollover Contribution to the Plan.
However, a Rollover Contribution will not be permitted unless it satisfies
the applicable requirements of:
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(i) Section 402(c) of the Code, or
(ii) Section 12.2 below.
(b) A Rollover Contribution shall not be considered a Salary Reduction
Contribution for purposes of the rules of Articles V, VIII, or XV.
5.10 UNION EMPLOYEES.
---------------
(a) The provisions of Section 5.7 (relating to Matching Contributions)
shall not apply to Participants subject to the terms of a collective
bargaining agreement.
(b) The provisions of Section 5.3 (relating to Average Deferral
Percentage Test)--
(i) Shall be applied separately to each group of Participants
subject to the terms of a different collective bargaining agreement,
and
(ii) Shall not apply to Participants described in Paragraph (a)
above for Plan Years beginning before January 1, 1993.
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ARTICLE VI
ALLOCATIONS TO PARTICIPANTS' ACCOUNTS
6.1 PARTICIPANTS' ACCOUNTS. The Committee shall open and maintain a separate
----------------------
Matching Contributions Account, Rollover Contribution Account (if applicable),
and a Salary Reduction Contributions Account for each Participant.
6.2 ALLOCATION OF CONTRIBUTIONS.
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(a) The Matching Contribution for each Plan Year shall be allocated to
the Accounts of each Participant according to the following rules:
(i) Each Participant who made Salary Reduction Contributions
during the Plan Year is entitled to receive an allocation of
Matching Contribution in an amount equal to his Salary Reduction
Contributions, ignoring any Salary Reduction Contributions he made
in excess of two percent (2%) of Compensation.
(A) However, no Matching Contributions will be made with
respect to Fail-Safe Contributions.
(ii) A Participant will not be entitled to receive an allocation
of Matching Contributions on behalf of a particular Plan Year,
though, unless he is employed on the last day of the Plan Year.
However, the rule specified in the previous sentence shall not apply
in the event the Participant's employment was terminated during the
year by reason of his death, Disability, or after attaining Normal
Retirement Age.
(b) A Participant's Salary Reduction Contributions shall be allocated
to his Salary Reduction Contributions Account.
(c) Fail-Safe Contributions shall be made only on behalf of those
Participants who do not qualify as Highly Compensated Employees.
(i) These contributions shall be allocated to those Participants
whose Compensation for the relevant Plan Year is the least, starting
with the Participant whose Compensation is the lowest.
(ii) The amount to be allocated to each such Participant's Salary
Reduction Contributions Account shall be the lesser of the amount
necessary to--
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(A) Subject to the limitations of Article XV below, to raise his
Deferral Percentage to twenty-five percent (25%), or
(B) Satisfy one of the Average Deferral Percentage tests of
Section 5.3 above.
(d) For purposes of making the allocations of Company contributions
under this Article VI, any Company contributions made with respect to a
particular Plan Year that are made after the end of the year but on or
before the due date for the Company's federal income tax return (including
extensions) for its fiscal year relating to the Plan Year shall be
considered as having been made on the last day of the Plan Year.
(e) Allocations made pursuant to this Section 6.2 shall not be made
until after the allocations required by Sections 6.3, 6.4, and 15.4 below
have been made.
6.3 REVALUATION OF ACCOUNTS.
-----------------------
(a) Within sixty (60) days after each Valuation Date, the Trustee shall
value the assets of the Trust on the basis of fair market values.
(b) Upon receipt of the valuations from the Trustee, the Committee shall
revalue the Accounts of each Participant as of the applicable Valuation
Date so as to reflect a proportionate share in any increase or decrease in
the fair market value of the assets in the Trust Fund, determined as of
that date as compared with the value of the assets in the Trust Fund
determined as of the immediately preceding Valuation Date.
(c) The increase or decrease shall be allocated to each Account in the
proportion that the cumulative amount previously allocated to the Account
bears to the total of the amounts previously allocated to all Accounts,
adjusted for any contributions to or distributions from the Account since
the immediately preceding Valuation Date.
(d) Notwithstanding the above, the following rules shall apply in the
event some or all of the Accounts of Participants are invested on a
segregated basis.
(i) The investment gain or loss attributable to the segregated
investments shall be allocated to the corresponding Accounts.
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(ii) Any expenses incurred solely by reason of a segregated Account
shall be borne by that Account.
(e) The allocation of profits or losses and appreciation or depreciation
under this Section 6.3 shall be made prior to the allocations under
Sections 6.2, 6.4, and 15.4.
6.4 FORFEITURES. Any amount of a Participant's Matching Contributions Account
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that is forfeited shall be used in the following manner:
(a) First, to restore the Accounts of former Participants under Section
8.4 below; and
(b) Second, any remaining amounts will used to reduce future Company
Contributions to the Plan.
6.5 MISCELLANEOUS ALLOCATION RULES.
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(a) Upon a Participant's Severance, pending distribution of the
Participant's Vested Interest, the Participant's Accounts shall continue to
be maintained and accounted for in accordance with all applicable
provisions of this Plan.
(b) The Committee and the Trustee may establish accounting procedures
for the purpose of making the allocations, valuations, and adjustments to
Participants' Accounts provided for in this Article VI.
(c) The Company, the Committee, and the Trustee do not guarantee that
the value of a Participant's Accounts shall at any time equal or exceed the
amount previously contributed thereto.
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ARTICLE VII
VESTING
7.1 GENERAL RULE. The Vested Interest of each Participant in his Matching
------------
Contributions Account shall be determined on the basis of his Years of Service,
in accordance with the following schedule:
YEARS OF SERVICE VESTED PERCENTAGE
---------------- -----------------
Less than 1 0%
1 25%
2 50%
3 75%
4 or more 100%
7.2 SPECIAL VESTING RULES. Notwithstanding the rules of Section 7.1 above,
---------------------
the determination of a Participant's Vested Interest in his Matching
Contributions Account shall be subject to the following rules:
(a) A Participant's Years of Service completed prior to the Effective
Date of the Plan shall not be taken into account in applying the provisions
of Section 7.1 above; and
(b) During a Participant's period of employment with the Company or an
Affiliated Company, in the event of his death, Disability, or attainment of
Normal Retirement Age, he shall become one hundred percent (100%) vested in
his Matching Contributions Account.
7.3 FULLY VESTED ACCOUNTS. A Participant shall always be one hundred percent
---------------------
(100%) vested in his Salary Reduction Contributions Account and in his Rollover
Contributions Account.
7.4 FORFEITURES. The nonvested portion of a Participant's Matching
-----------
Contributions Account shall be forfeited as of the date of the distribution
of his benefit.
(a) In the event the Participant elects to defer the distribution of his
Vested Interest, the forfeiture shall occur on the date on which the
Participant incurs five (5) consecutive Breaks in Service, if that occurs
prior to the date on which his benefit is distributed.
(b) If the Participant does not have any Vested Interest in the Plan,
the distribution shall be deemed to have occurred on the date of his
Severance.
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ARTICLE VIII
PAYMENT OF BENEFITS
8.1 PAYMENT OF BENEFITS.
-------------------
(a) Subject to the following rules of this Article VIII, a Participant's
Vested Interest shall not be distributed prior to his Severance.
(b) All distributions to Participants or their Beneficiaries shall be
based on the amount of the Participant's Accounts as of the Valuation Date
immediately preceding the date on which the Participant's Vested Interest
is distributed.
(c) In the event that a Participant elects that his benefit be paid in a
form other than as provided in the form of a type of annuity described in
Article IX, any Employer Securities held in the Participant's Accounts
shall be distributed in kind.
8.2 LATEST PAYMENT DATE.
-------------------
(a) Subject to the following rules of this Article VIII, payment of the
Participant's entire Vested Interest under the Plan shall begin in no event
later than his "Latest Payment Date," which is the sixtieth (60th) day
after the close of the Plan Year in which the latest of the following
events occurs:
(i) The Participant's Normal Retirement Age;
(ii) The tenth (10th) anniversary of the date on which he
commenced participation in the Plan; or
(iii) The termination of his employment with the Company or an
Affiliated Company.
(b) If it is not possible to make payment to a Participant by his Latest
Payment Date because the amount of his benefit cannot be ascertained by
that date, or because the Committee has been unable to locate the
Participant after making reasonable efforts to do so, the payment shall be
made no later than sixty (60) days after the earliest date on which the
amount of the payment can be ascertained or the date on which the
Participant is located (whichever is applicable).
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8.3 REQUIRED BEGINNING DATE.
-----------------------
(a) The interest of each Participant shall be distributed not later than
his Required Beginning Date.
(b) "Required Beginning Date" shall mean April 1 of the calendar year
following the calendar year in which the Participant attains age seventy
and one-half (70-1/2), whether or not he has yet incurred a Severance.
(c) If a Participant dies before distribution of his Vested Interest has
begun, his entire Vested Interest shall be distributed within five (5)
years of his death.
(d) If a Participant dies after distribution of his Vested Interest has
begun, the remaining Vested Interest shall be distributed at least as
rapidly as the method being used as of the date of his death.
(e) Notwithstanding anything herein to the contrary, all distributions
under this Plan shall be made in accordance with the requirements of this
Section 8.3, Code Section 401(a)(9), and Sections 1.401(a)(9)-1 and -2 of
the Treasury Regulations.
8.4 DISTRIBUTIONS TO PARTIALLY VESTED PARTICIPANTS. The following rules shall
----------------------------------------------
apply if a Participant incurs a Severance prior to becoming fully vested.
(a) In the event that a distribution of Matching Contributions is made
to a Participant at a time when he is not fully vested in such amounts, the
nonvested portion of the Participant's Account shall be forfeited in
accordance with the rules of Article VII above.
(b) A Participant who received a distribution described in Paragraph (a)
above may recontribute the amount of the distribution he received. The
repayment must be made (if at all), however, not later than the date
specified below:
(i) In the case of a distribution upon Severance, the earlier of--
(A) The fifth (5th) anniversary of his Reemployment
Commencement Date, or
(B) The date on which he incurs five (5) consecutive Breaks in
Service.
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(ii) In any other case, the fifth (5th) anniversary of the date of the
withdrawal.
(c) If the Participant repays the amount of the distribution within the
prescribed time period, the amount of his Matching Contributions Account
balance shall be completely restored. Neither the amount recontributed nor
the Account balance (previously forfeited) shall be adjusted for gains,
losses, or interest in the interim period.
(d) If the Participant does not repay the amount of the distribution and
he incurs a second Severance prior to becoming fully vested, the amount to
be distributed to him shall be equal to the sum of--
(i) The amount in his Account as of the date of the second
distribution, and
(ii) The amount previously distributed to him,
multiplied by his vested percentage, but reduced by the amount previously
distributed to him.
(e) Forfeitures shall be used as provided in Section 6.4 above.
8.5 DISTRIBUTIONS OF SALARY REDUCTION CONTRIBUTIONS. Any distributions
-----------------------------------------------
authorized pursuant to this Section 8.5 shall be subject to the survivor annuity
rules of Article IX below.
(a) Notwithstanding anything in this Plan to the contrary, the amount of
a Participant's Salary Reduction Contributions may not be distributed prior
to the occurrence of the earliest of any of the events described below:
(i) Separation from service, death, or disability;
(ii) Termination of the Plan without establishment of a successor
plan (as defined in the regulations under Section 401(k) of the Code);
(iii) Sale of substantially all of the assets used by the Company
in a trade or business (applicable only to the Employees who continue
employment with the corporation acquiring such assets); or
(iv) Sale of the Company's interest in a subsidiary corporation
(applicable only to the transferred Employees).
Distributions made pursuant to Subparagraphs (ii), (iii), or (iv) above
must be made in the form of a lump sum distribution.
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(b) The Committee may prescribe rules and procedures which permit a
Participant to make withdrawals of his Salary Reduction Contributions prior
to termination of employment if the Participant--
(i) Has attained age fifty-nine and one-half (59-1/2), or
(ii) Incurs a Hardship under the rules of Section 8.8 below. In
the case of a hardship distribution, only the amount of the
Participant's Salary Reduction Contributions and the interest accrued
before January 1, 1989 may be distributed.
(c) The Committee shall prescribe such rules as it deems necessary
regarding the timing of payments under this Section 8.5.
8.6 PAYEES UNDER LEGAL DISABILITY.
-----------------------------
(a) If the Committee believes that any payee is--
(i) A minor, or
(ii) Legally incapable of giving a valid receipt and discharge for
any payment due him,
the Committee may have the payment, or any part of it, made to the
person(s) or institution that it believes is caring for or supporting the
payee.
(b) Any such payment shall be a payment for the account of the payee and
shall, to the extent thereof, be a complete discharge of any liability
under the Plan to the payee.
8.7 NOTICE REGARDING TAX TREATMENT OF DISTRIBUTIONS. The Plan Administrator
-----------------------------------------------
shall provide a written explanation regarding the Code provisions relating to
the tax treatment of distributions to each distributee receiving a distribution
any portion of which may be rolled over tax-free to another tax-qualified
retirement plan or to an individual retirement account.
8.8 HARDSHIP DISTRIBUTIONS. A Participant will be entitled to receive a
----------------------
distribution of his Salary Reduction Contributions because of a Hardship
only in accordance with the provisions of this Section 8.8. The
distribution must both made on account of an immediate and heavy financial
need (as determined under Paragraph (a) below) and be necessary to satisfy
that need (as determined under Paragraph (b) below).
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(a) The determination of whether a Participant has an immediate and heavy
financial need will be made on the basis of all relevant facts and
circumstances. However, the need may still qualify even if it was
reasonably foreseeable or was voluntarily incurred by the Participant. A
distribution on account of any of the following reasons will automatically
qualify:
(i) Medical expenses necessary to obtain medical care described in
Section 213(d) of the Code incurred by the Participant, his Spouse, or
Dependent (as defined in Section 152 of the Code);
(ii) Costs directly related to the purchase of the principal
residence for the Participant (excluding mortgage payments);
(iii) Payment of tuition and related educational fees for the next
twelve (12) months of post-secondary education for the Participant, or
for his Spouse, children, or dependents (as defined in Section 152 of
the Code); or
(iv) Need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage on his principal
residence.
Furthermore, the amount of the distribution may include any amounts
necessary to pay the taxes reasonably anticipated to result from the
distribution.
(b) Except as is provided below, the determination as to whether a
distribution is necessary to satisfy an immediate and heavy financial need
is determined on the basis of the facts and circumstances. A distribution
will not satisfy this requirement if--
(i) The amount of the distribution is in excess of the amount
required to relieve the financial need, or
(ii) The need may be satisfied from other resources that are
reasonably available to the Participant.
(c) A distribution will qualify under Paragraph (b) above if the
Committee reasonably relies upon the Participant's representation that the
need cannot be relieved--
(i) Through reimbursement or compensation by
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insurance or otherwise;
(ii) By reasonable liquidation of the Participant's assets, to
the extent the liquidation itself would not cause an immediate and
heavy financial need. For this purpose, the Participant's resources
shall include those of his Spouse and minor children that are
reasonably available to him;
(iii) By cessation of his Salary Reduction Contributions or after-
tax contributions to the Plan;
(iv) By other distributions or nontaxable loans from plans
maintained by the Company or any other employer; or
(v) By borrowing from commercial sources on reasonable
commercial terms.
However, it will not be necessary for the Participant to obtain a loan if
the purpose of the funds is for the downpayment on the principal residence
of the Participant.
(d) A distribution will automatically be deemed to meet the requirements
of Paragraphs (a) and (b) above if all of the following conditions are
satisfied:
(i) The distribution is not in excess of the immediate and heavy
financial need of the Participant;
(ii) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans currently available
under all tax-qualified retirement plans maintained by the Company;
(iii) The Plan and all other plans of deferred compensation
(whether or not tax-qualified) maintained by the Company, provide that
the Participant's Salary Reduction Contributions and after-tax
contributions will be suspended for at least twelve (12) months after
receipt of the hardship distribution.
(A) Furthermore, the Participant will be precluded from making
any contributions to any stock option, stock purchase, or similar
plans for the twelve (12) month period by means of a legally
enforceable agreement.
(B) However, the Participant will still be treated as being
eligible to participate in this Plan for purposes of the Average
Deferral Percentage Tests of Section 5.3 above; and
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(iv) The Plan, and all other tax-qualified retirement plans maintained
by the Company, preclude the Participant from making Salary Reduction
Contributions and after-tax contributions for the calendar year
following the calendar year in which the hardship distribution was
made in excess of the amount determined under the following sentence.
(A) The Participant's maximum Salary Reduction Contributions
for the next calendar year will be the maximum Salary Reduction
Contributions allowed for that calendar year, reduced by the
amount of the Participant's Salary Reduction Contributions for
the prior calendar year.
8.9 MAILING OF PAYMENTS.
-------------------
(a) All payments under the Plan shall be delivered in person or mailed
to the last address of the Participant (or, in the case of the death of the
Participant, to the last address of his Beneficiary).
(b) Each Participant shall be responsible for furnishing the Committee
with his current address and the name and current address of his
Beneficiary.
8.10 WITHHOLDING FOR TAXES. Any payments from the Plan may be subject to
---------------------
withholding for taxes as may be required by any applicable federal or state law.
8.11 ROLLOVER RULES.
--------------
(a) This Section applies to distributions made on or after January 1,
1993.
(b) Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this Section 8.11, a
Distributee may elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an Eligible Rollover Distribution
paid directly to an Eligible Retirement Plan specified by the Distributee
in a Direct Rollover.
(c) An "Eligible Rollover Distribution" is any distribution of all or
any portion of the balance to the credit of the Distributee, except that an
Eligible Rollover Distribution does not include:
(i) Any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually) made for
the life (or life
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expectancy) of the Distributee or the joint lives (or joint life
expectancies) of the Distributee and the Distributee's designated
beneficiary, or for a specified period of ten (10) years or more;
(ii) Any distribution to the extent such distribution is required
under Section 401(a)(9) of the Code; and
(iii) The portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(d) An "Eligible Retirement Plan" is--
(i) An individual retirement account described in Section 408(a)
of the Code,
(ii) An individual retirement annuity described in Section 408(b)
of the Code,
(iii) An annuity plan described in Section 403(a) of the Code, or
(iv) A qualified trust described in Section 401(a) of the Code,
that accepts the Distributee's Eligible Rollover Distribution. However, in
the case of an Eligible Rollover Distribution to the surviving spouse, an
Eligible Retirement Plan is limited to an individual retirement account or
individual retirement annuity.
(e) A "Distributee" includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the
Alternate Payee under a qualified domestic relations order, as defined in
Section 414(p) of the Code, are Distributees with regard to the interest of
the spouse or former spouse.
(f) A "Direct Rollover" is a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
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ARTICLE IX
SURVIVOR ANNUITY REQUIREMENTS
9.1 APPLICATION OF ARTICLE.
----------------------
(a) The provisions of this Article IX shall apply with respect to the
payment of all benefits under the Plan in which the Participant was vested
immediately prior to death.
(b) This Article IX will not apply to distributions subject to Article
XVI below, except to the extent provided in the Qualified Domestic
Relations Order.
9.2 DEFINITIONS.
-----------
(a) "Annuity Starting Date" means--
(i) The first day of the first period for which an amount is
received as an annuity, or
(ii) In the case of a benefit not payable in the form of an
annuity, the first day on which all events have occurred which entitle
the Participant to the benefit.
(b) "Applicable Election Period" means--
(i) In the case of an election to waive the Qualified Joint and
Survivor Annuity, the ninety (90) day period ending on the Annuity
Starting Date, and
(ii) In the case of an election to waive the Qualified
Preretirement Survivor Annuity, the period--
(A) Which begins on the first day of the Plan Year in which
the Participant attains age thirty-five (35), and
(B) Which ends on the date of the Participant's death.
In the case of a Participant who has separated from service, the
Applicable Election Period shall begin not later than the date of
separation.
(c) "Qualified Joint and Survivor Annuity" means an annuity--
(i) The payment of which commences immediately,
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(ii) For the life of the Participant with a survivor annuity for the
life of the Spouse which is not less than fifty percent (50%) of, and
is not greater than one hundred percent (100%) of, the amount of the
annuity which is payable during the joint lives of the Participant and
the Spouse, and
(iii) Which is the actuarial equivalent of a single life annuity for
the life of the Participant.
Qualified Joint and Survivor Annuity shall also refer to any annuity in a
form having the effect of an annuity described above. In any event, for
purposes of calculating the amount of the annuity, the amount of the
Participant's Vested Interest shall be reduced by the outstanding balance
of any loans.
(d) "Qualified Preretirement Survivor Annuity" means an annuity for the
life of the surviving Spouse, the actuarial equivalent of which is not less
than fifty percent (50%) of the Participant's Vested Interest, reduced by
the outstanding balance of any loans. The payment of this benefit must
commence within a reasonable time after the date of the Participant's
death.
9.3 FORM OF BENEFITS PROVIDED. Except as otherwise provided in Section 9.4
-------------------------
below--
(a) In the case of a Participant with a Vested Interest in the Plan who
does not die before his Annuity Starting Date and who has a Surviving
Spouse, his benefit shall be paid in the form of a fifty percent (50%)
Qualified Joint and Survivor Annuity.
(b) In the case of a Participant with a Vested Interest who dies before
his Annuity Starting Date and who has a Surviving Spouse, a Qualified
Preretirement Survivor Annuity shall be paid to his Surviving Spouse, in
the form of the survivor portion of a fifty percent (50%) Qualified Joint
and Survivor Annuity.
(c) In the case of a Participant with a Vested Interest in the Plan who
is not married, his benefit shall be paid in the form of a single life
annuity.
(d) Any benefits payable under Paragraph (a) or (b) shall be the
Actuarial Equivalent of the retirement benefits of the Participant payable
in the form of the annuity described in Paragraph (c) and commencing on his
Normal Retirement Age.
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9.4 ELECTIONS WITH RESPECT TO SURVIVOR ANNUITIES.
--------------------------------------------
(a) At any time during the Applicable Election Period, each Participant
may--
(i) Elect to waive the Qualified Joint and Survivor Annuity or the
Qualified Pre-retirement Survivor Annuity (or both), and
(ii) Revoke any such election.
(b) An election under Paragraph (a)(i) above shall not take effect
unless the requirements of Subparagraphs (i) or (ii) below are satisfied.
(i) The requirements of this Subparagraph (i) are satisfied if the
requirements of Clauses (A), (B) and (C) below are met.
(A) The Spouse of the Participant consents in writing to the
designation of Beneficiary,
(B) The election designates a Beneficiary (or a form of
benefits) which may not be changed without spousal consent (or
the spousal consent expressly permits designations without any
requirement of further consent by the Spouse), and
(C) The Spouse's consent acknowledges the effect of the
designation and is witnessed by a Plan Representative or a notary
public.
(ii) The requirements of this Subparagraph (ii) are satisfied if it
is established to the satisfaction of a Plan Representative that the
consent required by Clause (i) above may not be obtained because--
(A) There is no Spouse,
(B) The Spouse cannot be located, or
(C) Of such other circumstances as may be set forth in
regulations under Section 417(a)(2) of the Code.
(c) For purposes of Paragraph (b) above, "Plan Representative" shall
mean the person or persons designated by the Committee to perform the
duties specified herein.
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(d) Notwithstanding the above, a Participant may elect that his benefit
be paid in a form other than as provided in Section 9.3 above. Any such
form of benefit, however, must comply with the rules of Section 401(a)(9)
of the Code.
(e) Any consent by a Spouse (or establishment that the consent of the
Spouse may not be obtained) will be effectively only with respect to that
Spouse.
9.5 DISCLOSURE REQUIREMENTS.
-----------------------
(a) Within a reasonable period of time before the Participant's
Annuity Starting Date (and consistent with regulations under Section
417(a)(3)(A) of the Code) each Participant shall receive a written
explanation of--
(i) The terms and conditions of the Qualified Joint and Survivor
Annuity,
(ii) The Participant's right to make, and the effect of, an
election under Section 9.4(a) above to waive the Qualified Joint
and Survivor Annuity form of benefit,
(iii) The rights of the Participant's Spouse under Section 9.4(b)
above, and
(iv) The right to make, and the effect of, a revocation of an
election under Section 9.4(a) above.
(b) Each Participant shall receive a written explanation with respect to
the Qualified Preretirement Survivor Annuity comparable to that required
pursuant to Paragraph (a) above within whichever of the following periods
ends last:
(i) The period beginning with the first day of the Plan Year in
which the Participant attains age thirty-two (32) and ending with
the close of the Plan Year preceding the Plan Year in which the
Participant attains age thirty-five (35);
(ii) A reasonable period after the individual becomes a
Participant;
(iii) A reasonable period after the provisions of this Article IX
first to apply to the Participant, or
(iv) A reasonable period after separation from service, in the
case of a Participant who separates before attaining age thirty-
five (35).
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9.6 CONSENT TO RECEIVE EARLY DISTRIBUTION.
-------------------------------------
(a) If the present value of the Participant's Vested Interest exceeds
thirty-five hundred dollars ($3,500), a distribution shall not occur prior
to the later of--
(i) The Participant's Normal Retirement Age, or
(ii) The Participant's attainment of age sixty-five (65),
unless the Participant and the Spouse (or Surviving Spouse) of the
Participant elect to receive the distribution (in a manner consistent with
the regulations under Section 417 of the Code) within ninety (90) days
prior to the distribution.
(b) Failure to consent to such a distribution shall be deemed an
election to defer the distribution until the earlier of (i) attainment of
age sixty-two (62) or (ii) death.
(c) No distribution may be made under Paragraph (a) above after the
Annuity Starting Date, unless the Participant and Spouse (or where the
Participant has died, the surviving Spouse) consent in writing to the
distribution. This consent requirement shall not apply in the case of
the--
(i) Death of the Participant, or
(ii) Termination of the Plan, provided neither the Company
nor any Affiliated Company maintains any other defined contribution
plan, other than an employee stock ownership plan. If the Participant
does not consent to an immediate distribution from this Plan, the
benefit shall be transferred to the other defined contribution plan.
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ARTICLE X
---------
TOP-HEAVY PLAN RULES
10.1 APPLICABILITY. Notwithstanding any provision in this Plan to the
-------------
contrary, the provisions of this Article X shall apply in the case of any Plan
Year in which the Plan is determined to be a Top-Heavy Plan.
10.2 SPECIAL VALUATION RULES.
-----------------------
(a) For purposes of determining--
(i) The present value of the cumulative accrued benefit of any
Employee, or
(ii) The account balance of any Employee,
the present value or account balance shall be increased by the
aggregate distributions made with respect to the Employee under
the plan during the five (5) year period ending on the
Determination Date. The preceding rule shall also apply to
distributions under a terminated plan that, if it had not been
terminated, would have been required to be included in the
Aggregation Group that includes the transferee Plan.
(b) Any Rollover Contribution or similar transfer initiated by the
Employee and made after December 31, 1983 to a plan shall not be taken
into account with respect to the transferee plan for purposes of
determining whether the transferee plan is a Top-Heavy Plan (or whether
any Aggregation Group which includes the transferee plan is a Top-Heavy
Group).
(c) If any individual--
(i) Is a Non-Key Employee with respect to any plan for any plan
year, but the individual was a Key Employee with respect to the
plan for any prior plan year, or
(ii) Has not performed any services for the Company or an
Affiliated Company at any time during the five (5) year period
ending on the Determination Date,
his accrued benefit and account balance shall not be taken into
account for purposes of determining whether or not the plan is a
Top-Heavy Plan.
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10.3 MINIMUM CONTRIBUTIONS. For each Plan Year in which the Plan is Top-
---------------------
Heavy, the minimum contributions for that year shall be determined in accordance
with the rules of this Section 10.3.
(a) Except as provided below, the minimum contribution for each
Participant who is a Non-Key Employee who is employed on the last day of
the Plan Year shall be not less than three percent (3%) of his
Compensation, regardless of the number of Hours of Service he completes
that Plan Year or his level of Compensation.
(b) The minimum required contribution under Paragraph (a) above shall be
reduced by--
(i) The Company contributions and forfeitures allocated to the
Participant in any other defined contribution plan included in the
Aggregation Group that includes the Plan, and
(ii) Any Fail-Safe Contributions on behalf of the Participant.
However, Matching Contributions may not be taken into account for this
purpose.
(c) Subject to the following rules of this Paragraph (c), the percentage
set forth in Paragraph (a) above shall not be required to exceed the
percentage at which contributions (including any Salary Reduction
Contributions) are made (or are required to be made) under the Plan for the
year for the Key Employee for whom the percentage is the highest for the
year.
(i) For purposes of this Paragraph (c), all defined contribution
plans required to be included in an Aggregation Group shall be treated
as one plan.
(ii) The rules of this Paragraph (c) shall not apply to any plan
required to be included in an Aggregation Group if the plan enables a
defined benefit plan to meet the requirements of Sections 401(a)(4) or
410 of the Code.
(d) The requirements of this Section 10.3 must be satisfied without
taking into account contributions under chapters 2 or 21 of the Code, title
II of the Social Security Act, or any other Federal or State law.
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(e) In the event a Participant is covered by both a defined contribution
and a defined benefit plan maintained by the Company or an Affiliated
Company, both of which are determined to be Top-Heavy, the minimum benefit
shall be provided under this Plan, which shall be a contribution of at
least five percent (5%) of Compensation.
10.4 MAXIMUM ANNUAL ADDITION.
-----------------------
(a) Except as set forth below, in the case of any Top-Heavy Plan, the
rules of Sections 15.3(b)(ii) and 15.3(c)(ii) below shall be applied by
substituting "1.0" for "1.25".
(b) The rule set forth in Paragraph (a) above shall not apply if the
requirements of both Subparagraphs (i) and (ii) are satisfied.
(i) The requirements of this Subparagraph (i) are satisfied if the
Plan would not be a Top-Heavy Plan if "ninety percent (90%)" were
substituted for "sixty percent (60%)" each place it appears in Section
2.56 above.
(ii) The requirements of this Subparagraph (ii) are satisfied if
the required minimum contribution under Section 10.3(a) above would be
satisfied if it were applied by substituting "four percent (4%)" for
"three percent (3%)" each place it appears therein.
(A) Notwithstanding the provisions of the preceding sentence,
in the case of an Employee covered by both this Plan and a
defined benefit plan maintained by the Company or an Affiliated
Company, both of which are Top-Heavy, the minimum
contribution/benefit shall be provided solely under this Plan,
which shall be applied by substituting "seven and one-half
percent (7-1/2%)" for "three percent" each place it appears in
Section 10.3 above.
(c) The rules of Paragraph (a) shall not apply with respect to any
Employee for any Plan Year as long as there are no--
(i) Annual Additions allocated to the Employee under a defined
contribution plan maintained by the Company or an Affiliated Company,
or
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(ii) Accruals by the Employee under a defined benefit plan
maintained by the Company or an Affiliated Company.
10.5 NON-ELIGIBLE EMPLOYEES. The rules of Sections 10.3 and 10.4 above shall
----------------------
not apply to any Employee--
(a) Included in a unit of Employees covered by an agreement which the
Secretary of Labor finds to be a collective bargaining agreement between
Employee representatives and one or more employers, if there is evidence
that retirement benefits were the subject of good faith bargaining between
the Employee representatives and the Company, or
(b) Whose employment was terminated before the Plan became Top-Heavy.
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ARTICLE XI
OPERATION AND ADMINISTRATION OF THE PLAN
11.1 NAMED FIDUCIARIES. The provisions of this Section 11.1 shall determine
-----------------
the various parties who are the "Named Fiduciaries" (within the meaning of
Section 402(a) of ERISA) of the Plan and their respective responsibilities.
(a) The Board of Directors shall be the Named Fiduciary with respect to
appointing and/or removing the Trustee, an Investment Manager, and the
members of the Committee.
(b) The Trustee shall be the Named Fiduciary with respect to the
management and investment of the assets of the Plan, except to the extent
that the Trustee is subject to the directions of an Investment Manager, the
Committee, or Participants.
(c) The Committee shall be the Named Fiduciary with respect to all of
the administrative matters relating to the Plan, except to the extent the
management and investment of the assets of the Plan is the responsibility
of the Trustee, an Investment Manager, or the Participants.
11.2 COMPOSITION OF COMMITTEE.
------------------------
(a) The members of the Committee (who need not be Participants or even
Employees) shall be appointed by the Board of Directors of the Company and
shall hold office until termination of such status in accordance with the
provisions of this Article XI.
(b) Any member of the Committee may resign at any time by giving written
notice to the other members and to the Board of Directors of the Company,
effective as of the date stated in the notice. Any member of the Committee
may be removed by the Board of Directors of the Company at any time. In
the case of a Committee member who is also an Employee of the Company, his
status as a Committee member shall terminate as of the effective date of
his Severance, except as otherwise provided in resolutions of the Board of
Directors.
(c) Upon the death, resignation, or removal of any Committee member, the
Board of Directors may appoint a successor. Notice of appointment of a
successor member shall be given by the Company in writing to the Trustee
and to the other members of the Committee.
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11.3 COMMITTEE POWERS. The Committee shall have all powers necessary to
----------------
supervise the administration of the Plan and control its operations. In
addition to any powers and authority conferred on the Committee elsewhere in the
Plan or by law, the Committee shall have the following powers and authority:
(a) To allocate fiduciary responsibilities among the Named Fiduciaries
and to designate one or more other persons, including Investment Managers,
to carry out fiduciary responsibilities.
(i) However, no allocation or delegation under this Paragraph (a)
shall be effective--
(A) Until the person or persons to whom the responsibilities
have been allocated or delegated agree to assume the
responsibilities, or
(B) With respect to Trustee Responsibilities (within the
meaning of Section 405(c) of ERISA);
(b) To designate agents to carry out responsibilities relating to the
Plan, other than fiduciary responsibilities;
(c) To employ such legal, actuarial, medical, accounting, clerical and
other assistance as it may deem appropriate in carrying out the provisions
of this Plan, including one or more persons to render advice with regard to
any responsibility any Committee member or any other fiduciary may have
under the Plan;
(d) To establish rules and procedures for the conduct of the Committee's
business and the administration of this Plan;
(e) To administer this Plan for the exclusive benefit of Participants
and their Beneficiaries;
(f) To decide all questions which may arise or which may be raised under
this Plan. The decisions of the Committee shall be binding upon all
persons, to the maximum extent permitted under ERISA;
(g) To determine the manner in which the assets of this Plan, or any
part thereof, shall be disbursed;
(h) To direct the Trustee how to invest the assets of the Plan; and
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(i) To perform or cause to be performed such further acts as it may deem
to be necessary or appropriate to administer the Plan.
11.4 REPORTING AND DISCLOSURE. The Plan Administrator shall be responsible
------------------------
for the reporting and disclosure of information required to be reported or
disclosed pursuant to ERISA or any other applicable law.
11.5 MULTIPLE FIDUCIARY CAPACITIES. Any person or group of persons may serve
-----------------------------
in more than one fiduciary capacity with respect to the Plan.
11.6 FUNDING POLICY.
--------------
(a) At periodic intervals, not less frequently than annually, the
Committee shall review the financial needs of the Plan and shall determine
a funding policy for the Plan consistent with the objectives of the Plan.
(b) In establishing the funding policy, the Committee shall review and
take into account--
(i) The short-term and long-term financial objectives and liquidity
requirements of the Plan, determined by reference to the age and
tenure characteristics of the Participants,
(ii) The current and projected market conditions, and
(iii) Such other considerations as appear pertinent under the
circumstances,
all with a view toward the realization by the Plan of its maximum
investment potential consistent with prudent asset management and the need
to pay benefits in accordance with the terms of the Plan, taking into
account (if applicable) the ability of Participants to direct the
investment of the amounts in their Accounts.
11.7 PROHIBITION AGAINST CERTAIN ACTIONS.
-----------------------------------
(a) In administering this Plan, the Committee shall not discriminate in
favor of Highly Compensated Employees.
(b) The Committee shall not cause the Plan to engage in any transaction
that constitutes a nonexempt prohibited transaction under Section 4975(c)
of the Code or ERISA Section 406(a).
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(c) Any member of the Committee who is also a Participant shall not be
qualified to act or vote on any matter relating solely to himself.
11.8 COMMITTEE PROCEDURE.
-------------------
(a) A majority of the members of the Committee shall constitute a
quorum, and any action authorized by a majority of the members--
(i) Present at any meeting, or
(ii) In writing without a meeting,
shall constitute the actions of the Committee.
(b) The Committee may designate one or more of its members ("Designated
Members") as authorized to execute any document or documents on behalf of
the Committee. In such a case, the Committee shall notify the Trustee of
this action and the name or names of the Designated Members.
11.9 INDEMNIFICATION.
---------------
(a) To the maximum extent permitted by law, the Company shall indemnify
each member of the Board of Directors and of the Committee, and any other
Employee with duties under the Plan, against expenses (including any amount
paid in settlement) reasonably incurred by him in connection with any
claims against him by reason of the performance of his duties under the
Plan.
(b) This indemnity shall not apply if the individual acted fraudulently
or in bad faith in the performance of his duties.
(c) Notwithstanding the above, the Company shall have the right to
select counsel and to control the prosecution or defense of the suit.
Furthermore, the Company shall not be required to indemnify any person for
any amount incurred through any settlement or compromise of any action
unless the Company consents in writing to the settlement or compromise.
(d) Payment of the indemnity, fees, or other expenses shall be made
solely from the assets of the Company, and shall not be paid, directly or
indirectly, from the assets of the Plan.
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11.10 COMPENSATION OF COMMITTEE MEMBERS AND PLAN EXPENSES.
---------------------------------------------------
(a) Members of the Committee shall serve without compensation unless the
Board of Directors shall otherwise determine. However, in no event shall
any member of the Committee who receives full-time pay from the Company
receive compensation from the Plan for his services as a member of the
Committee, except for reimbursement of expenses properly and actually
incurred.
(b) The expenses incurred in the administration of the Plan, including
but not limited to the expenses incurred by the members of the Committee in
exercising their duties, shall be borne by the Plan However, the Company
may elect to pay these expenses.
11.11 BONDING. Members of the Committee and all other Employees handling the
-------
assets of the Plan shall be bonded to the extent required by Section 412 of
ERISA or any other applicable law.
11.12 NOTICES AND COMMUNICATIONS.
--------------------------
(a) All communications from Participants to the Committee shall be in
writing, on forms prescribed by the Committee.
(i) These documents shall be mailed or delivered to the office
designated by the Committee, and shall be deemed to have been given
when received by the office.
(b) Each communication directed to a Participant or Beneficiary shall be
in writing and may be delivered in person or by mail.
(i) An item shall be deemed to have been delivered and received by
the Participant three (3) days after the date when it is deposited in
the United States Mail with postage prepaid, addressed to the
Participant or Beneficiary at his last address of record with the
Committee.
11.13 STANDARD OF CARE. The Fiduciaries (as defined in ERISA) of the Plan,
----------------
including the Trustee, the Committee, and any Investment Manager, shall act in
accordance with the following standards of care and fiduciary responsibility
imposed under ERISA (to the extent they are applicable).
(a) Each Fiduciary shall discharge his duties with respect to the Plan
solely in the interest of the Participants and Beneficiaries, and--
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(i) For the exclusive purposes of--
(A) Providing benefits to Participants and their Beneficiaries,
and
(B) Defraying reasonable expenses of administering the Plan,
(ii) With the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims,
(iii) Subject to the exception for "eligible individual account
plans" under Section 404(a)(2) of ERISA, by diversifying the
investments of the Plan so as to minimize the risk of large losses,
unless under the circumstances it is clearly prudent not to do so, and
(iv) In accordance with the terms of the Plan and Trust Agreement,
insofar as those documents are consistent with the provisions of
ERISA.
(b) A Fiduciary shall be liable for a breach of fiduciary responsibility
by another Fiduciary if--
(i) He participates knowingly in, or knowingly undertakes to
conceal an act or omission of the other Fiduciary, knowing the act or
omission is a breach,
(ii) By his failure to fulfill his fiduciary responsibilities, he
has enabled the other Fiduciary to commit a breach, or
(iii) He has knowledge of a breach by the other Fiduciary, unless
he makes reasonable efforts under the circumstances to remedy the
breach.
(c) The inclusion of this Section 11.13 in this document is for the sole
purpose of informing the appropriate Fiduciaries of the standard of care
that is demanded of them under ERISA. It is not intended that this
provision impose any additional duties, responsibilities, or liabilities
upon such Fiduciaries than would otherwise apply under ERISA.
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ARTICLE XII
MERGER OF COMPANY, MERGER OF PLAN
12.1 EFFECT OF REORGANIZATION OR TRANSFER OF ASSETS.
----------------------------------------------
(a) In the event of a consolidation, merger, sale, liquidation, or other
transfer of substantially all of the operating assets of the Company to any
other company, the ultimate successor to the business of the Company shall
automatically be deemed to have elected to continue this Plan in full force
and effect, in the same manner as if the Plan had been adopted by
resolution of its board of directors.
(b) The presumption set forth in Paragraph (a) above shall not apply if
the successor, by resolution of its board of directors, elects not to so
continue this Plan in effect. In such a case, the Plan shall terminate as
of the effective date set forth in the board resolution.
12.2 PLAN MERGER RESTRICTION.
-----------------------
(a) This Plan shall not merge or consolidate with, or transfer its
assets and/or liabilities to any other plan unless each affected
Participant in this Plan would receive a benefit immediately after the
merger, consolidation, or transfer (if the Plan then terminated) which is
equal to or greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation, or transfer (if the Plan had
then terminated).
(b) Provided the requirements set forth in Paragraph (a) above
are satisfied, the Committee may direct that the Plan may merge,
consolidate with, or transfer its assets and/or liabilities to, or receive
such a transfer from another tax-qualified retirement plan.
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ARTICLE XIII
TERMINATION AND
DISCONTINUANCE OF CONTRIBUTIONS
13.1 PLAN TERMINATION.
----------------
(a) The Company may terminate the Plan at any time by an instrument in
writing executed in the name of the Company by an officer duly authorized
to execute the instrument.
(b) The rights of all Employees who are employed by the Company on the
date of the termination of the Plan to the amounts in their accounts shall
automatically become fully vested as of that date.
13.2 DISCONTINUANCE OF CONTRIBUTIONS. On and after the effective date of a
-------------------------------
discontinuance of Company Contributions, the rights of all Employees who are
employed by the Company on the date of the discontinuance to the amounts in
their Accounts shall automatically become fully vested as of that date.
13.3 REPLACEMENT PLAN. The provisions of Sections 13.1 and 13.2 above
----------------
shall not apply in the event that the Plan is replaced by a comparable
plan.
13.4 PARTIAL TERMINATION.
-------------------
(a) In the event of a partial termination of the Plan within the meaning
of Code Section 411(d)(3), all Employees who are employed by the Company on
the date of the partial termination and who are affected by the partial
termination to the amounts in their Accounts shall become fully vested as
of that date.
(b) This Section 13.4 is intended solely to meet the requirements of
Code Section 411 and is not intended to create, nor shall it be construed
as creating, any contractual rights whatsoever.
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ARTICLE XIV
APPLICATION FOR BENEFITS
14.1 APPLICATION FOR BENEFITS.
------------------------
(a) The Committee may require any person claiming benefits under the
Plan ("Claimant") to submit an application therefor, together with such
other documents and information as the Committee may require.
(b) Within ninety (90) days following receipt of the application and all
necessary documents and information, the Committee's authorized delegate
reviewing the claim shall furnish the Claimant with written notice of the
decision rendered with respect to the application.
(c) Should special circumstances require an extension of time for
processing the claim, written notice of the extension shall be furnished to
the Claimant prior to the expiration of the initial ninety (90) day period.
(i) The notice shall indicate the special circumstances requiring
an extension of time and the date by which a final decision is
expected to be rendered.
(ii) In no event shall the period of the extension exceed ninety
(90) days from the end of the initial ninety (90) day period.
14.2 CONTENT OF DENIAL. In the case of a denial of the Claimant's
-----------------
application, the written notice shall set forth:
(a) The specific reasons for the denial;
(b) References to the Plan provisions upon which the denial is based;
(c) A description of any additional information or material necessary
for perfection of the application (together with an explanation of why the
material or information is necessary); and
(d) An explanation of the Plan's claim review procedure.
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14.3 APPEALS.
-------
(a) In order to appeal the decision rendered with respect to his
application for benefits or with respect to the amount of his benefits, the
Claimant must follow the appeal procedures set forth in this Section 14.3.
(b) The appeal must be made, in writing--
(i) In the case where the claim is expressly rejected, within sixty-
five (65) days after the date of notice of the decision with respect
to the application, or
(ii) In the case where the claim has neither been approved nor
denied within the applicable period provided in Section 14.1 above,
within sixty-five (65) days after the expiration of the period.
(c) The Claimant may request that his application be given full and fair
review by the Committee. The Claimant may review all pertinent documents
and submit issues and comments in writing in connection with the appeal.
(d) The decision of the Committee shall be made promptly, and not later
than sixty (60) days after the Committee's receipt of a request for review,
unless special circumstances require an extension of time for processing.
In such a case, a decision shall be rendered as soon as possible, but not
later than one hundred twenty (l20) days after receipt of the request for
review.
(e) The decision on review shall be in writing and shall include
specific reasons for the decision, written in a manner designed to be
understood by the Claimant, with specific references to the pertinent Plan
provisions upon which the decision is based.
14.4 EXHAUSTION OF REMEDIES. No legal action for benefits under the Plan may
----------------------
be brought unless and until the Claimant has exhausted his remedies under this
Article XIV.
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ARTICLE XV
LIMITATIONS ON CONTRIBUTIONS
15.1 GENERAL RULE.
------------
(a) Notwithstanding anything to the contrary contained in this Plan, the
total Annual Additions under this Plan to a Participant's Accounts for any
Plan Year shall not exceed the lesser of:
(i) Thirty thousand dollars ($30,000) or such greater amount as
may be permitted pursuant to Code Section 415(d)(1) ("Dollar
Limitation"); or
(ii) Twenty-five percent (25%) of the Participant's Compensation
("Percentage Limitation").
(b) Because the Limitation Year is also the Plan Year, in the case of a
Plan Year of less than twelve (12) months duration, the Dollar Limitation
shall be prorated by multiplying it by a fraction, the numerator of which
is the number of months in the short Plan Year and the denominator of which
is twelve (12).
(c) The Dollar Limitation shall be adjusted annually by the Internal
Revenue Service for increases in the cost of living, effective January 1 of
the year for which the adjustment is made. This adjustment shall apply to
the Limitation Year ending with or within that calendar year.
15.2 OTHER DEFINED CONTRIBUTION PLANS.
--------------------------------
(a) If the Company or an Affiliated Company is or was contributing to
any other defined contribution plan, then the Participant's Annual
Additions in the other plan shall be aggregated with the Participant's
Annual Additions under this Plan for purposes of applying the limitations
of this Article XV.
(b) The rule of Paragraph (a) above shall apply whether or not the other
defined contribution plan has been terminated.
15.3 DEFINED BENEFIT PLANS. If the Company or an Affiliated Company is or
---------------------
was contributing to a defined benefit plan, then in addition to the limitations
contained in Section 15.1 of this Plan, the "Combined Plan Fraction" shall not
exceed 1.0. This rule shall apply whether or not the defined benefit plan has
been terminated.
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(a) "Combined Plan Fraction" means a fraction determined in accordance
with the provisions of Code Section 415(e) and the following rules. This
fraction shall be the sum of the Defined Contribution Plan Fraction and
the Defined Benefit Plan Fraction. In the event that the Combined Plan
Fraction would exceed 1.0:
(i) The amount in the numerator of the Defined Contribution Plan
Fraction shall be reduced in accordance with the applicable
regulations; then, if necessary,
(ii) The limit otherwise applicable to the Participant under any or
all defined benefit plans shall be accordingly reduced.
(b) "Defined Contribution Plan Fraction" means a fraction determined in
accordance with the provisions of Code Section 415(e) and the following
rules with respect to the combined participation by a Participant in all
defined contribution plans of the Company and all Affiliated Companies.
(i) The numerator of the fraction is the sum of all Annual
Additions to the Participant's accounts under all such plans as of
the close of the Plan Year.
(ii) The denominator of the fraction is the sum of the lesser of
the following amounts determined separately with respect to the
current Plan Year and each prior year of service:
(A) The product of 1.25 multiplied by the Dollar Limitation
under Section 15.1(a)(i) above in effect for that Plan Year; or
(B) The product of 1.4 multiplied by the Percentage Limitation
under Section 15.1(a)(ii) above with respect to the Participant
for the Plan Year.
(c) "Defined Benefit Plan Fraction" means a fraction determined in
accordance with the provisions of Code Section 415(e) and the following
rules with respect to the combined participation by a Participant in all
defined benefit plans of the Company and all Affiliated Companies.
(i) The numerator of the fraction is the projected annual benefit
of the Participant under all the plans (determined as of the close
of the Plan Year).
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(ii) The denominator of this fraction is the lesser of:
(A) The product of 1.25 multiplied by the dollar limitation
under Code Section 415(b)(1)(A) for the Plan Year; or
(B) The product of 1.4 multiplied by the percentage of
compensation limitation under Code Section 415(b)(1)(B) with
respect to the Participant for the Plan Year.
15.4 ADJUSTMENTS FOR EXCESS ANNUAL ADDITIONS. In the event the Annual
---------------------------------------
Additions to a Participant's Accounts under this Plan would exceed the
applicable limitations described in Sections 15.1 through 15.3 above, the excess
amount shall be subject to the following rules.
(a) If the Participant had made any after-tax contributions for the Plan
Year to the Plan or to any other defined contribution plan that is
maintained by the Company or an Affiliated Company, these contributions and
the earnings thereon shall be returned to the Participant to the extent of
any excess Annual Additions.
(b) If excess Annual Additions remain, amounts which give rise to the
excess Annual Additions under this Plan shall be transferred to a Suspense
Account.
(c) Any amounts held in the Suspense Account shall be used to reduce
future Company Contributions to the Plan as of the next allocation date on
a first-in, first-out basis.
(d) The Suspense Account shall be exhausted before any Company
Contributions or Salary Reduction Contributions shall be allocated to the
Accounts of Participants subsequent to the date on which the excess
described in Paragraph (b) is credited to the Suspense Account.
(e) The Trustee shall segregate any amounts held in the Suspense Account
from other assets of the Plan and may place the cash portions thereof in an
interest-bearing account in any bank or savings and loan institution,
including the Trustee's own banking department (if applicable).
(i) Any amounts held in the Suspense Account shall not participate
in any allocation of Forfeitures, or net income or loss of other
assets of the Trust Fund under Article VI above.
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(f) In the event the Plan shall terminate at a time when all amounts in
the Suspense Account have not been allocated to the Accounts of the
Participants, the amounts in the Suspense Account shall be applied as
follows:
(i) The amount in the Suspense Account shall first be allocated, as
of the date of the termination of the Plan, to Participants on the
same basis as specified in Paragraph (c) above, with the allocation to
be made to the maximum extent permissible under the limitations of
this Article XV; and
(ii) If after those allocations have been made, any further amounts
remain in the Suspense Account, the residue shall revert to the
Company in accordance with the applicable Treasury Regulations.
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ARTICLE XVI
RESTRICTION ON ALIENATION
16.1 GENERAL RESTRICTIONS AGAINST ALIENATION. Benefits under the Plan may not
---------------------------------------
be assigned or alienated. The preceding sentence shall not apply with respect
to a "Qualified Domestic Relations Order" described below.
16.2 QDRO DEFINITION. A "Qualified Domestic Relations Order" is a
---------------
judgment, decree, or order (including approval of a property settlement
agreement) that--
(a) Creates or recognizes the existence of an Alternate Payee's right
to, or assigns to an Alternate Payee the right to receive all or a
portion of the benefits payable with respect to a Participant,
(b) Relates to the provision of child support, alimony payments, or
marital property rights to a Spouse, child, or other dependent of a
Participant,
(c) Is made pursuant to a State domestic relations law (including a
community property law), and
(d) Clearly specifies:
(i) The name and last known mailing address (if any) of the
Participant and the name and mailing address of each Alternate
Payee covered by the order (if the Plan Administrator does not
have reason to know that address independently of the order);
(ii) The amount or percentage of the Participant's benefits to be
paid to each Alternate Payee, or the manner in which the amount or
percentage is to be determined;
(iii) The number of payments or period to which the order applies;
and
(iv) Each plan to which the order applies.
16.3 IMPERMISSIBLE TERMS. A domestic relations order is not a Qualified
-------------------
Domestic Relations Order if it requires--
(a) The Plan to provide any type or form of benefit, or any option not
otherwise provided under the Plan,
(b) The Plan to provide increased benefits (determined on the basis of
actuarial value), or
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(c) The payment of benefits to an Alternate Payee that are required to be
paid to another Alternate Payee under a previous Qualified Domestic
Relations Order.
16.4 SPECIAL RULES.
-------------
(a) A domestic relations order will not be considered to fail to satisfy
the requirements of Section 16.3 above with respect to any payment made
before a Participant has separated from service solely because the order
requires that payment of benefits be made to an Alternate Payee--
(i) In the case of any payment before a Participant has separated
from service, on or after the date on which the Participant
attains (or would have attained) Earliest Retirement Age.
"Earliest Retirement Age" means the earlier of--
(A) The date on which the Participant is entitled to a
distribution, or
(B) The later of--
(I) The date the Participant attains age fifty (50), or
(II) The earliest date on which the Participant could
begin receiving benefits if he separated from service,
(ii) As if the Participant had retired on the date on which such
payment is to begin under the order (based on the value of the
Participant's Account balances at that time), and
(iii) In any form in which the benefits may be paid under the Plan
to the Participant.
(b) However, if the Participant dies before his Earliest Retirement Age,
the Alternate Payee is entitled to benefits (as the Beneficiary of the
Participant) only if the Qualified Domestic Relations Order requires
survivor benefits to be paid to the Alternate Payee.
16.5 PROCEDURES.
----------
(a) In the case of any domestic relations order received by the Plan--
-65-
<PAGE>
(i) The Plan Administrator shall promptly notify the Participant and
any Alternate Payee of the receipt of the order and the Plan's
procedures for determining the qualified status of domestic relations
orders, and
(ii) Within a reasonable period after the receipt of the order, the
Plan Administrator shall determine whether the order is a Qualified
Domestic Relations Order and shall notify the Participant and each
Alternate Payee of the determination.
(b) The Plan Administrator shall establish reasonable procedures to
determine the qualified status of domestic relations orders and to
administer distributions under Qualified Domestic Relations Orders.
16.6 SEGREGATION OF FUNDS.
--------------------
(a) During any period in which the issue of whether a domestic relations
order is a Qualified Domestic Relations Order is being determined (by the
Plan Administrator, by a court of competent jurisdiction, or otherwise),
the Plan Administrator shall separately account for the amounts which would
have been payable to the Alternate Payee during the period if the order had
been determined to be a Qualified Domestic Relations Order.
(b) If within the eighteen (18) month period beginning with the date on
which the first payment would be required to be made under the domestic
relations order, the order (or a modification thereof) is determined to be
a Qualified Domestic Relations Order, the Plan Administrator shall pay the
segregated amounts (including any interest thereon) to the person or
persons entitled thereto.
(c) If within the eighteen (18) month period beginning with the date on
which the first payment would be required to be made under the domestic
relations order--
(i) It is determined that the order is not a Qualified Domestic
Relations Order, or
(ii) The issue as to whether or not the order is a Qualified
Domestic Relations Order is not resolved,
then the Plan Administrator shall pay the segregated amounts (including any
interest thereon) to the person or persons who would have been entitled to
the amounts if there had been no order, or restore the amount to the
Participant's Account, whichever is applicable.
-66-
<PAGE>
(d) Any determination that an order is a Qualified Domestic Relations
Order that is made after the close of the eighteen (18) month period shall
be applied prospectively only.
16.7 AUTHORIZED PARTICIPANT LOANS. Notwithstanding any other provision of
----------------------------
this Plan (including the provisions of Section 16.1 above), Participants may
borrow amounts from the Plan in accordance with the rules of this Section 16.7
for any reason whatsoever.
(a) Any Participant desiring to borrow funds from the Plan must submit
an application to the Committee, which shall be the person responsible for
administering the loan program.
(i) An application for a loan will be denied by the Committee only
if the loan would be less than the minimum required under Paragraph
(b) below or would be greater than the maximum permitted under
Paragraph (c) below. However, a Participant may not have more than
one (1) loan outstanding at any time.
(ii) A denial of an application for a loan shall be treated the
same as a claim for benefits under Article XIV, 14.1 above.
(b) The loans must be available to all Participants on a reasonably
equivalent basis and must not be made available to Highly Compensated
Employees in amounts greater than the amounts made available for other
Employees. However, the minimum amount of a loan is one thousand dollars
($1,000).
(c) The maximum amount of the loan may not exceed the lesser of:
(i) Fifty thousand dollars ($50,000.00), reduced by the highest
outstanding balance of loans from the Plan to the Participant during
the one year period ending on the day before the date on which the
loan is made; or
(ii) One-half (1/2) of the value of the Participant's Vested
Interest.
(d) The loan must state the date upon which the loan must be repaid,
which may not exceed five (5) years, except where the proceeds of the loan
are used to purchase the principal residence of the Participant.
-67-
<PAGE>
(i) In all cases, however, the loan shall require substantially
level amortization payment (accomplished through payroll withholding)
over the term of the loan.
(e) The loan will bear interest at the rate of two percent points more
than the prime rate published in the Wall Street Journal on the day the
loan is made. The rate of interest will be determined at the time the loan
is made, and will remain fixed throughout the duration of the original term
of the loan, unless the loan is extended or renegotiated.
(f) The loan will be secured by the Participant's Vested Interest. The
Participant may not use more than fifty percent (50%) of his Vested
Interest as security for the loan. No other forms of security may be given
for the loan.
(g) Upon the Participant's Severance, the entire amount of the loan
shall become immediately due and payable (including the interest accrued
thereon). In the event that the Participant has not completely repaid the
loan by the date on which his Vested Interest becomes payable, his Vested
Interest shall be reduced by the outstanding balance due on the loan on
that date.
(h) The Committee shall require the Spouse of the Participant to consent
to the loan within the ninety (90) day period before the making of the
loan. This consent shall be in writing, shall acknowledge the effect of
the loan, and shall be witnessed by a notary public or a Plan
representative.
(i) The consent of the spouse, once given, is irrevocable.
(ii) This consent shall be both to the use of the Participants'
Vested Interest--
(A) As security for the loan, and
(B) To satisfy the repayment obligation if the Participant
defaults.
(iii) The requirement of spousal consent shall be waived, in the
event a married Participant has been abandoned by his Spouse.
-68-
<PAGE>
(i) Notwithstanding anything to the contrary, in no event will there be a
reduction of a Participant's Salary Reduction Contributions Account because
of a default on a loan until the Participant is otherwise entitled to
receive a distribution of his Salary Reduction Contributions.
(j) The Committee will charge the Participant the administrative costs
incurred in making the loan.
(k) Pursuant to such rules and procedures as may be prescribed by the
Committee, the amount of interest that a Participant pays on the loan shall
be allocated to his Account.
-69-
<PAGE>
ARTICLE XVII
AMENDMENTS
17.1 AMENDMENTS. The Company may at any time amend the Plan by an instrument
----------
in writing executed in the name of the Company by an officer duly authorized to
execute the instrument. However, except as otherwise permitted by law, no
amendment shall be made, the effect of which would be:
(a) To cause any assets of the Plan, at any time prior to the
satisfaction of all liabilities with respect to Participants and their
Beneficiaries, to be used for or diverted to purposes other than--
(i) Providing benefits to the Participants and their
Beneficiaries, and
(ii) Defraying reasonable expenses of administering the Plan;
(b) To have any retroactive effect so as to decrease the accrued benefit
of any Participant (within the meaning of Section 411(d)(6) of the Code).
This requirement will not be considered to be violated, however, by
amendments to the rules regarding hardship distributions under Section 8.8
(including amendments eliminating such form of distributions); or
(c) To increase or alter the responsibilities or liabilities of a
Trustee or an Investment Manager without its written consent.
17.2 EFFECT OF AMENDMENTS.
--------------------
(a) All amendments to the Plan are effective only on the date on which
the amendments are adopted, unless--
(i) A different effective date is expressly provided by
resolution of the Board of Directors of the Company, or
(ii) The amendment by its own express terms becomes effective at
another date.
(b) Unless and to the extent expressly stated to the contrary in the
terms of any amendment, the amendment shall not be construed to enlarge the
rights of any Participant whose Severance occurred prior to the effective
date of the amendment.
-70-
<PAGE>
17.3 SECURITIES RESTRICTIONS. The Plan is intended to qualify as for the
-----------------------
exemption for "grant and award transactions" under Rule 16b-3 promulgated by the
Securities Exchange Commission. Accordingly, the provisions of the Plan
relating to the following topics may not be amended more frequently than once
every six (6), except as otherwise required to comply with ERISA and/or the
Code:
(a) The amount and price of Company stock to be acquired under the Plan;
(b) The eligibility conditions; and
(c) The timing of contributions to the Plan that may be invested in
Company stock.
17.4 CHANGES TO VESTING SCHEDULE. In the event that the vesting schedule of
---------------------------
the Plan is amended--
(a) In no event will the vested percentage (determined as of the later
of the date on which the amendment is adopted or becomes effective) of a
Participant be decreased, and
(b) Each Participant who has at least three (3) Years of Service with
the Company may elect to have his vested percentage determined without
regard to the amendment.
(c) An election described in Paragraph (b) above must be made during the
period beginning no later than the date on which the amendment is adopted,
and ending no later than sixty (60) days after the latest of the following
events:
(i) The amendment is adopted;
(ii) The amendment becomes effective; or
(iii) The Participant receives written notice of the amendment.
-71-
<PAGE>
ARTICLE XVIII
MISCELLANEOUS MATTERS
18.1 NO ENLARGEMENT OF EMPLOYEE RIGHTS.
---------------------------------
(a) This Plan is strictly a voluntary undertaking on the part of the
Company and shall not be deemed to constitute a contract between the
Company and any Employee, or to be consideration for, or an inducement to,
or a condition of the employment of any Employee.
(b) Nothing contained in the Plan shall be deemed to give any Employee
the right to be retained in the employ of the Company or to interfere with
the right of the Company to discharge any Employee at any time.
(c) No Employee shall have any right to, or interest in any assets of
the Plan, other than as specifically provided in this Plan.
18.2 INTERPRETATION.
--------------
(a) Article and Section headings are for convenient reference only and
shall not be deemed to be part of the substance of this instrument or in
any way to enlarge or limit the contents of any Article or Section.
(b) Unless the context clearly indicates otherwise, the masculine gender
shall include the feminine, the singular shall include the plural, and the
plural shall include the singular.
(c) The provisions of this Plan shall be interpreted in a manner that is
consistent with this Plan satisfying the applicable requirements of the
Code and ERISA.
IN WITNESS WHEREOF, Merisel, Inc. has caused this instrument to be executed by
its duly authorized officer.
MERISEL, INC.,
BY: /s/ JIM BRILL
------------------------------
ITS: Senior Vice President, CFO
-----------------------------
DATE: October 15, 1993
----------------------------
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<PAGE>
ASSET TRANSFER, ASSIGNMENT AND ASSUMPTION AGREEMENT
This Asset Transfer, Assignment and Assumption Agreement (the
"Assignment") is made and entered into as of this 23rd day of December, 1993, by
and between MERISEL, INC., a Delaware corporation ("Assignor"), and MERISEL
AMERICAS, INC., a Delaware corporation ("Assignee"), with reference to the
following recitals of fact:
R E C I T A L S
---------------
Assignor desires by this Assignment to transfer and assign all of its
right, title and interest in and to those certain assets set forth on Exhibit A
---------
attached hereto (the "Assets"), and Assignee desires to accept the assignment of
the Assets and hereby assumes and agrees to pay, perform, comply with and
discharge all debts, liabilities and obligations of the Assignor of whatever
nature (whether fixed or contingent, arising by law or by contract or
otherwise), set forth on Exhibit A attached hereto (the "Liabilities") arising
---------
on or prior to the date hereof or hereafter, subject to the terms of this
Assignment.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties agree as follows:
A G R E E M E N T:
-----------------
1. Effective Date. As used in this Assignment the term "Effective
--------------
Date" shall mean December 31, 1993.
2. Assignment. As of the Effective Date, Assignor hereby grants,
----------
assigns, transfers and conveys to Assignee all of Assignor's right, title and
interest in and to the Assets.
3. Assignee's Assumption. As of the Effective Date, Assignee
---------------------
hereby accepts the grant, assignment, transfer and conveyance of the Assets as
provided in Section 2 hereof and assumes and agrees to pay, perform, comply with
and discharge all of the Liabilities.
4. Further Assurances. Each party to this Assignment shall use
------------------
all reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable under applicable laws to
consummate the assignment of the Assets and the assumption of the Liabilities
set forth herein. Assignor and Assignee shall execute and deliver such other
documents, certificates, agreements and other writings and take such other
actions as may be necessary or desirable in order
<PAGE>
to consummate or implement expeditiously the transactions contemplated hereby.
5. Binding Effect. This Assignment shall be binding upon and
--------------
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors, or assigns.
6. Governing Law. This Assignment shall be governed by the laws
-------------
of the State of California.
IN WITNESS WHEREOF, Assignor and Assignee have executed and delivered
this Assignment as of the day and year first written above.
ASSIGNOR: ASSIGNEE:
MERISEL, INC. MERISEL AMERICAS, INC.,
a Delaware corporation a Delaware corporation
By: /s/ Timothy N. Jenson By: /s/ James L. Brill
------------------------- --------------------------
Name: Timothy N. Jenson Name: James L. Brill
-------------------- -------------------
Its: Vice President & Treasurer Its: Senior Vice President, Finance
---------------------------- -------------------------------
Chief Financial Officer
-----------------------
2
<PAGE>
EXHIBIT A - ASSETS AND LIABILITIES TRANSFERRED
FROM MERISEL, INC. TO MERISEL AMERICAS, INC.
--------------------------------------------
All assets and liabilities of Merisel, Inc. except the
following:
1. Assets specifically transferred to Merisel Europe, Inc., a
Delaware corporation and subsidiary of Merisel, Inc. ("Merisel Europe")
pursuant to the Assignment and Assumption Agreement of even date herewith by and
between Merisel, Inc. and Merisel Europe (the "European Assignment Agreement")
and a copy of which is attached hereto as Schedule I.
2. Capital stock of and investment in the following subsidiaries
of Merisel, Inc.: Merisel Europe, Merisel Americas, Inc. and Merisel FAB, Inc.
3. Life insurance policies on employees.
4. Cash and cash equivalents for the corporate operations of
Merisel, Inc. in an amount not to exceed $250,000.00 (As used herein, the term
"corporate operations" means the executive and other headquarters functions of
Merisel, Inc., including executive, finance and management information systems.)
5. Property and equipment (in an amount not to exceed $10,000,000
in net book value), net of accumulated depreciation, and contracts and
agreements related to corporate operations.
6. The following intangible assets:
a. Agreements with corporate operations employees
b. Employee benefit plans
c. All trademarks, trade names, service marks,
and related goodwill, and other similar
proprietary rights; provided, however, that
Merisel Americas, Inc. shall have the right
to use such trademarks, trade names, service
marks and other similar proprietary rights.
7. The following liabilities and reserves, to the extent related
to corporate operations: Accounts payable, reserves, accrued expenses and
liabilities, income tax liability.
3
<PAGE>
ASSET TRANSFER, ASSIGNMENT AND ASSUMPTION AGREEMENT
This Asset Transfer, Assignment and Assumption Agreement (the
"Assignment") is made and entered into as of this 23rd day of December, 1993, by
and between MERISEL, INC., a Delaware corporation ("Assignor"), and MERISEL
EUROPE, INC., a Delaware corporation ("Assignee"), with reference to the
following recitals of fact:
R E C I T A L S
---------------
Assignor desires by this Assignment to transfer and assign all of its
right, title and interest in and to those certain assets set forth on Exhibit A
---------
attached hereto (the "Assets"), and Assignee desires to accept the assignment of
the Assets and hereby assumes and agrees to pay, perform, comply with and
discharge the debts, liabilities and obligations of the Assignor set forth on
Exhibit A attached hereto (the "Liabilities") arising on or prior to the date
- ---------
hereof or hereafter, subject to the terms of this Assignment.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties agree as follows:
A G R E E M E N T:
-----------------
1. Effective Date. As used in this Assignment the term "Effective
--------------
Date" shall mean December 31, 1993.
2. Assignment. As of the Effective Date, Assignor hereby grants,
----------
assigns, transfers and conveys to Assignee all of Assignor's right, title and
interest in and to the Assets.
3. Assignee's Assumption. As of the Effective Date, Assignee hereby
---------------------
accepts the grant, assignment, transfer and conveyance of the Assets as provided
in Section 2 hereof and assumes and agrees to pay, perform, comply with and
discharge all of the Liabilities.
4. Further Assurances. Each party to this Assignment shall use all
------------------
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable under applicable laws to
consummate the assignment of the Assets and the assumption of the Liabilities
set forth herein. Assignor and Assignee shall execute and deliver such other
documents, certificates, agreements and other writings and take such other
actions as may be necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated hereby.
<PAGE>
5. Binding Effect. This Assignment shall be binding upon and inure
--------------
to the benefit of the parties hereto and their respective heirs, executors,
administrators, successors, or assigns.
6. Governing Law. This Assignment shall be governed by the laws of
-------------
the State of California.
IN WITNESS WHEREOF, Assignor and Assignee have executed and delivered
this Assignment as of the day and year first written above.
ASSIGNOR: ASSIGNEE:
MERISEL, INC. MERISEL EUROPE, INC.
a Delaware corporation a Delaware corporation
By: /s/ Timothy N. Jenson By: /s/ James L. Brill
----------------------- ----------------------
Name: Timothy N. Jenson Name: James L. Brill
----------------- ------------------
Its: Vice President & Treasurer Its: Senior Vice President, Finance
-------------------------- ------------------------------
Chief Financial Officer
-----------------------
2
<PAGE>
EXHIBIT A - ASSETS AND LIABILITIES TRANSFERRED
FROM MERISEL, INC. TO MERISEL EUROPE, INC.
------------------------------------------
1. Capital stock of and investment in the following subsidiaries:
Merisel (UK) Limited United Kingdom
Merisel E.U.R.L. France
Merisel GmbH Germany
Merisel Ges.m.b.H. Austria
Merisel C.A.T. Switzerland
MIFINCO, INC. Delaware
2. Goodwill associated with Merisel GmbH.
3. Advances and other inter-company borrowings due from the
subsidiaries listed in paragraph 1 above.
4. Accrued expenses related to European operations. (As used
herein, "European operations" means the operations associated with the
European subsidiaries listed in paragraph 1, including operations conducted by
Thomas Reeves and Kevin Evans related thereto).
5. The right to use the trademarks, trade names, service marks,
and related goodwill, and other similar proprietary rights of Merisel, Inc.
3
<PAGE>
_________________________________________________________________________
_________________________________________________________________________
MERISEL AMERICAS, INC.
AMENDED AND RESTATED SENIOR
NOTE PURCHASE AGREEMENT
Dated as of December 23, 1993
Re: $100,000,000 of Amended
and Restated 8.58% Senior Notes
Due June 30, 1997
_________________________________________________________________________
_________________________________________________________________________
<PAGE>
AMENDED AND RESTATED SENIOR
NOTE PURCHASE AGREEMENT
Re: $100,000,000 of Amended and Restated 8.58% Senior Notes
Due June 30, 1997
THIS AMENDED AND RESTATED SENIOR NOTE PURCHASE AGREEMENT (this
"Agreement"), dated as of December 23, 1993, is entered into by and among the
Noteholders identified on the signature pages hereof and Merisel Americas, Inc.,
a Delaware corporation (the "Company").
R E C I T A L S
- - - - - - - -
WHEREAS, Merisel, Inc. and the Purchasers entered into that certain Note
Purchase Agreement, dated as of June 30, 1992 (the "Original Agreement"),
whereby the Purchasers purchased the $100,000,000 of 8.58% Senior Notes, Due
June 30, 1997 (the "Original Notes");
WHEREAS, pursuant to that certain Amendment Number One to Note Purchase
Agreement, dated as of September 30, 1993 (the "Amendment"), Merisel, Inc. and
the Noteholders made certain amendments to the Original Agreement in connection
with Merisel, Inc.'s securitization of its accounts receivable (the Original
Agreement, as amended by the Amendment, is hereafter referred to as the
"Existing Agreement");
WHEREAS, Merisel, Inc. concurrently herewith has completed a corporate
reorganization (the "Reorganization") whereby, among other things, Merisel, Inc.
transferred to the Company all of Merisel, Inc.'s right, title and interest in
and to the properties, assets, contracts, business, and liabilities identified
on Schedule A attached hereto (including, without limitation capital stock and
----------
equity interests in Merisel Canada Inc., Softsel Foreign Sales Corporation,
Merisel Latin America, Merisel Mexico S.A. de C.V., Merisel Asia, Inc.,
Intersell, Inc., and Merisel Pty. Ltd.) (collectively, the "Merisel Transfers")
in exchange for all of the Company's issued and outstanding stock, such that the
Company becomes a direct, wholly owned Subsidiary of Merisel, Inc., and whereby
the Company agreed to assume all of the obligations of Merisel, Inc. with
respect to, among other things, the Existing Agreement and the Original Notes;
WHEREAS, the Restructuring Transactions requires the consent of the
Noteholders under the terms and conditions of the Existing Agreement and the
Noteholders are willing to give such consent subject to the terms and conditions
set forth herein; and
1
<PAGE>
WHEREAS, the Company and the Noteholders desire to amend and restate the
Existing Agreement and the Original Notes as set forth herein.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing and subject to the terms
and conditions herein contained, the parties hereto do hereby amend and restate
the Existing Agreement and covenant and agree as follows:
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.
1.1 DESCRIPTION OF NOTES. The Company has authorized the issuance for
exchange of $100,000,000 aggregate principal amount of its Amended and Restated
8.58% Senior Notes (the "Notes") to be dated the date of issue, to bear interest
on the unpaid principal amount from such date to maturity at the rate of 8.58%
per annum (the "Coupon Rate"), and on overdue principal, any overdue Make-Whole
Premium, and (to the extent legally enforceable) any overdue installment of
interest at the Overdue Rate, to mature on June 30, 1997, and to be
substantially in the form attached hereto as Exhibit A. The Company will pay
---------
interest semiannually in arrears on January 1 and July 1 of each year (beginning
July 1, 1994). Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Notes are not subject to prepayment or redemption at
the option of the Company prior to their expressed maturity dates except as set
forth in Section 3 of this Agreement. The term "Notes" as used herein shall
---------
include each Note delivered pursuant to this Agreement.
1.2 COMMITMENT, CLOSING DATE. Subject to the terms and conditions hereof
and on the basis of the representations and warranties hereinafter set forth,
the Company agrees to issue and sell to each Purchaser, and each Purchaser
agrees to acquire from the Company, a Note in the principal amount set forth
opposite such Purchaser's name on Schedule 1 hereto in exchange for the
----------
corresponding Original Note theretofore held by that Purchaser as a "Noteholder"
thereof on the Closing Date hereafter mentioned.
Delivery of the Notes will be made by the Company at the offices of Riordan
& McKinzie in Los Angeles, California, against payment therefor by concurrent
delivery by the respective Purchasers of the corresponding Original Notes at
10:00 a.m., Los Angeles, California time, on December 23, 1993 or such later
date as shall mutually be agreed upon by the Company and the Purchasers (the
"Closing Date"). The Notes delivered to each Purchaser on the Closing Date will
be delivered in the form of a single registered Note for the full amount of such
Purchaser's corresponding Original Note, registered in such Purchaser's name or
in the name of such nominee as may be specified by such Purchaser and in
substantially the form
2
<PAGE>
attached hereto as Exhibit A, all as each Purchaser may specify at any time
prior to the date fixed for delivery.
SECTION 2. INTERPRETATION OF AGREEMENT; DEFINITIONS.
2.1 DEFINITIONS. Unless the context otherwise requires, the terms
hereinafter set forth when used in this Agreement shall have the following
meanings:
"Act" means the Securities Act of 1933, as amended.
"Affiliate" shall mean any Person (i) which directly or indirectly through
one or more intermediaries controls, or is controlled by, or is under common
control with, the Company, (ii) which beneficially owns or holds 5% or more of
any class of the Voting Stock of the Company or (iii) 5% or more of the Voting
Stock (or in the case of a Person which is not a corporation, 5% or more of the
equity interest) of which is beneficially owned or held by the Company or a
Subsidiary of the Company. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of Voting Stock, by contract
or otherwise.
"Agreement" shall mean this Amended and Restated Senior Note Purchase
Agreement and all exhibits and schedules hereto.
"Amendment" shall have the meaning set forth in the Recitals.
"Approved Securitization Transaction" shall mean any transaction or series
of transactions in which the Company or any of its Subsidiaries sells interests
in a pool of the Company's or such Subsidiary's accounts receivable pursuant to
documentation which (i) provides that such sale is on a non-recourse basis as to
the Company and its Subsidiaries with respect to uncollectible receivables
(subject, however, to standard indemnification provisions), and (ii) shall have
been approved in writing as to form and substance by the Required Noteholders.
Anything to the contrary herein notwithstanding, the transactions evidenced by
the Ciesco Securitization Agreements constitute an "Approved Securitization
Transaction".
"Annual Report" shall mean the annual report on "Form 10-K" as required to
be filed with the Securities and Exchange Commission pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended.
"Asset" shall mean any interest in any kind of property or asset, whether
real, personal, or mixed, and whether tangible or intangible.
3
<PAGE>
"Business Day" shall mean any day on which commercial banks are generally
open for business in the State of California, exclusive of Saturdays and
Sundays.
"Canada Guarantee" shall mean that certain Limited Amount Continuing
Guarantee dated as of December 23, 1993, issued by Merisel Canada in favor of
the Purchasers, substantially in the form of Exhibit C attached hereto.
---------
"Capitalized Lease" shall mean any lease the obligation for Rentals with
respect to which is required to be capitalized on a consolidated balance sheet
of the lessee and its Subsidiaries in accordance with GAAP.
"Ciesco Securitization Agreements" shall mean (i) that certain Trade
Receivables Purchase and Sale Agreement, dated as of September 24, 1993, among
Merisel, Inc., Ciesco L.P., and Citicorp North America, Inc., as "Agent", and
(ii) that certain Trade Receivables Purchase and Sale Agreement, dated as of
September 24, 1993, among Merisel, Inc., Citibank, N.A., the "Banks" identified
therein, and Citicorp North America, Inc., individually and as "Agent", which
agreements have been assigned to, and assumed by, the Company, as either of the
same may be modified, amended, restated, or extended from time to time in a
manner that does not violate the terms of Section 6.23.
"Closing Date" shall have the meaning ascribed thereto in Section 1.2.
-----------
"Company" shall mean Merisel Americas, Inc., a Delaware corporation.
"Consolidated Debt" shall mean Debt of the Company and its Subsidiaries, on
a consolidated basis.
"Consolidated Net Income" for any period shall mean the gross revenues of
the Company and its Subsidiaries for such period less all expenses and other
proper charges (including taxes on income), determined on a consolidated basis
after eliminating earnings or losses attributable to outstanding Minority
Interests in the Company or any Subsidiary of the Company, but excluding in any
event: (a) any gains or losses on the sale or other disposition of Permitted
Investments or fixed or capital Assets, and any taxes on such excluded gains and
any tax deductions or credits on account of any such excluded losses; (b) the
proceeds of any life insurance policy; (c) net earnings and losses of any
Subsidiary of the Company accrued prior to the date it became a Subsidiary; (d)
net earnings and losses of any corporation (other than a Subsidiary of the
Company), substantially all the assets of which have been acquired in any manner
by the Company or any Subsidiary of the Company, realized by such corporation
prior to the date of such acquisition; (e) net earnings and losses of any
corporation (other than a Subsidiary of the Company) with which the Company or a
Subsidiary of the Company shall have consolidated or which shall have merged
into or
4
<PAGE>
with the Company or a Subsidiary of the Company prior to the date of such
consolidation or merger; (f) earnings resulting from any reappraisal,
revaluation or write-up of assets; (g) any deferred or other credit representing
any excess of the equity in any Subsidiary of the Company at the date of
acquisition thereof over the amount invested in such Subsidiary; (h) any gain
arising from the acquisition of any Securities of the Company or any Subsidiary
of the Company; and (i) any reversal of any contingency reserve, except to the
extent that provision for such contingency reserve shall have been made from
income arising during the most recently audited fiscal year. As used in this
Agreement, "Consolidated Net Income" shall not include any proceeds received by
the Company or any of its Subsidiaries from a sale of an interest in its
accounts receivable pursuant to any Approved Securitization Transaction.
"Consolidated Tangible Net Worth" shall mean the sum of the consolidated
shareholders' equity, less all Intangible Assets, and deferred taxes to the
extent a credit exists, (excluding any write-up of the book value of any Assets
of the Company and its Subsidiaries resulting from revaluation thereof
subsequent to December 31, 1992) determined in accordance with GAAP.
"Consolidated Total Assets" shall mean the total amount of assets which
under GAAP would appear on the consolidated balance sheet of the Company as
determined in accordance with GAAP.
"Contractual Obligation" shall mean, as applied to any Person, any term,
condition or provision of any security issued by that Person or of any material
indenture, mortgage, deed of trust, contract, undertaking, agreement, note or
other instrument to which that Person is a party or by which it or any of its
owned properties or assets is bound or to which it or any of its owned
properties or assets is subject.
"Coupon Rate" shall have meaning ascribed thereto in Section 1.1.
-----------
"Credit Integrity Make-Whole Premium", as at any date a payment thereof is
due, shall mean the difference (but not less than zero) between (a) the present
value as at such payment date of the amount of each remaining scheduled payment
of interest on and principal of such Notes that will not be required to be made
as a result of such payment, discounted at an annual rate that is equal to the
Treasury Rate plus 1.75%, minus (b) the aggregate principal amount of such Notes
---- -----
then to be paid.
"Debt" shall mean (i) indebtedness for borrowed money, or for the deferred
purchase price of property or services (it being understood that Debt shall not
include obligations both (a) classified as accounts payable or accrued
liabilities under GAAP and (b) incurred in the ordinary course of business);
(ii) obligations evidenced by bonds, debentures, notes, or other similar
instruments (excluding accrued interest); (iii) principal obligations under
Capitalized Leases; (iv) obligations under Guaranties; and (v) reimbursement
obligations under letters of credit; provided that no obligation
--------
5
<PAGE>
included in Debt shall be included in more than one of clauses (i) through (v).
As used in this Agreement, "Debt" of the Company or its Subsidiaries shall not
include any of the obligations incurred by the Company or any of its
Subsidiaries in connection with the sale of interests in its accounts receivable
pursuant to any Approved Securitization Transaction unless a particular Approved
Securitization Transaction is structured as a financing secured by accounts
receivable rather than a purchase and sale or unless a purported sale of
interests in accounts receivable pursuant to an Approved Securitization
Transaction is treated as debt under GAAP.
"Default" shall mean any event or condition, the occurrence of which would,
with the lapse of time or the giving of notice, or both, constitute an Event of
Default.
"Domestic Subsidiary" shall mean any wholly-owned Subsidiary of the Company
organized and existing under the laws of the United States, any state thereof,
or the District of Columbia.
"Earnings before Interest and Taxes" shall mean Consolidated Net Income
plus (to the extent deducted in determining Consolidated Net Income) Interest
- ----
Expense and provisions for income taxes of the Company and its Subsidiaries as
determined in accordance with GAAP.
"Environmental Laws" shall mean all federal, state or local laws, statutes,
rules, regulations, or ordinances relating to public health, safety, or the
environment including those relating (a) to releases, discharges, emissions, or
disposals into air, water, land, or groundwater, (b) to the withdrawal or use of
groundwater, (c) to the use, handling, or disposal of polychlorinated biphenyls
or asbestos, (d) to the disposal, treatment, storage, or management of hazardous
or solid waste, or Hazardous Substances or crude oil, fractious petroleum
derivatives, or by-products thereof, (e) to exposure to toxic or hazardous
materials, (f) to the handling, transportation, discharge, or release of gaseous
or liquid Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" shall mean any corporation, trade, or business that is,
along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in section 414(b) and
414(c), respectively, of the Internal Revenue Code of 1986, as amended, or
Section 4001 of ERISA.
"Event of Default" shall have the meaning set forth in Section 7.1.
-----------
6
<PAGE>
"Europe Guaranty" shall mean that certain General Continuing Guarantee
dated as of December 23, 1993, issued by Merisel Europe in favor of the
Purchasers, substantially in the form of Exhibit E attached hereto.
---------
"Existing Agreement" shall have the meaning set forth in the Recitals.
"GAAP" shall mean generally accepted accounting principles, as they exist
on the date of determination thereof.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Debt (other than Guaranties), dividend or other obligation (other than
obligations both (a) classified as accounts payable or accrued liabilities under
GAAP and (b) incurred in the ordinary course of business) of any other Person
(the "primary obligor") in any manner, whether directly or indirectly, including
all obligations incurred through an agreement, contingent or otherwise, by such
Person: (i) to purchase such Debt or obligation or any property or assets
constituting security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of such Debt or obligation, or (y) to maintain working
capital or other balance sheet condition or otherwise to advance or make
available funds for the purchase or payment of such Debt or obligation, (iii) to
lease property or to purchase Securities, supplies, materials, or other property
or services primarily for the purpose of assuring the owner of such Debt or
obligation of the ability of the primary obligor to make payment of the Debt or
obligation, or (iv) otherwise to assure the owner of the Debt or obligation of
the primary obligor against loss in respect thereof. For the purposes of all
computations made under this Agreement, a Guaranty in respect of any Debt for
borrowed money shall be deemed to be Debt equal to the outstanding principal
amount of such Debt for borrowed money which has been guaranteed, and a Guaranty
in respect of any other obligation or liability or any dividend shall be deemed
to be Debt equal to the maximum aggregate amount of such obligation, liability
or dividend.
"Hazardous Substance" shall mean any hazardous or toxic material,
substance, or waste pollutant or contaminant which is regulated as such under
any statute, law, ordinance, rule, or regulation of any federal, state, local,
or regional authority having jurisdiction over Assets of the Company or any of
its Subsidiaries or its use, including any material, substance, or waste which
is: (a) defined as a hazardous substance under Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. Section 1317), as amended; (b) regulated as a
hazardous waste under Section 1004 of the Federal Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.), as amended; (c) defined as a
-- ---
hazardous substance under Section 101 of the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), as
-- ---
amended; or (d) defined or regulated as a hazardous substance or hazardous waste
under any rules or regulations promulgated under any of the foregoing statutes.
7
<PAGE>
"Imputed Securitization Interest" shall mean any amount, paid to a
purchaser of assets of the Company or any of its Subsidiaries, as applicable,
under an Approved Securitization Transaction, that would have been treated as
interest if such Approved Securitization Transaction had been structured as a
loan transaction secured by the applicable accounts receivable rather than as a
sale of such accounts receivable.
"Institutional Holder" shall mean any Person that qualifies as an
accredited investor pursuant to Rule 501(a) promulgated under the Act.
"Intangible Assets" shall mean, as of the date of any determination
thereof, the amount recorded on the Company's balance sheet of all unamortized
debt discount and expense, unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, copyrights, organization, or
developmental expenses and other like intangible items of the Company and its
Subsidiaries.
"Interest Expense" shall mean amounts paid in respect of (a) interest paid
on Consolidated Debt plus (b) Imputed Securitization Interest, in each case
----
during the applicable period.
"Lien" shall mean any interest in Assets securing an obligation owed to, or
a claim by, a Person other than the owner of the Assets, whether such interest
is based on the common law, statute, or contract, and including the security
interest or lien arising from a mortgage, security agreement, encumbrance,
pledge, conditional sale, or trust receipt or a lease, consignment, or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases, and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting Assets. For the purposes of this Agreement,
the Company or a Subsidiary of the Company shall be deemed to be the owner of
any Assets which it has acquired or holds subject to a conditional sale
agreement, Capitalized Lease, or other arrangement pursuant to which title to
the Assets has been retained by or vested in some other Person for security
purposes and such retention or vesting shall constitute a Lien.
"Make-Whole Premium" shall mean a Credit Integrity Make-Whole Premium or a
Market Make-Whole Premium.
"Market Make-Whole Premium" as at any date a payment thereof is due,
including a Voluntary Prepayment Date, shall mean the difference (but not less
than zero) between (a) the present value as at such payment date of the amount
of each remaining scheduled payment of interest on and principal of such Notes
that will not be required to be made as a result of such payment, discounted at
an annual rate that is equal to the Treasury Rate plus 0.50%, minus (b) the
---- -----
aggregate principal amount of such Notes then to be paid.
8
<PAGE>
"Merisel Canada" shall mean Merisel Canada, Inc., a corporation organized
under the laws of Ontario, Canada and a direct, wholly owned Subsidiary of the
Company, and its successors and assigns.
"Merisel Europe" shall mean Merisel Europe, Inc., a Delaware corporation,
and its successors and assigns.
"Merisel, Inc." shall mean Merisel, Inc., a Delaware corporation, and its
successors and assigns.
"Merisel Transfers" shall have the meaning set forth in the Recitals.
"Minority Interests" shall mean any shares of stock of any class of a
Subsidiary of the Company (other than directors' qualifying shares as required
by law) that are not owned by the Company or one of or more of its Subsidiaries.
Minority Interests shall be valued by valuing Minority Interests constituting
preferred stock at the voluntary or involuntary liquidating value of such
preferred stock, whichever is greater, and by valuing Minority Interests
constituting common stock at the book value of capital and surplus applicable
thereto adjusted, if necessary, to reflect any changes from the book value of
such common stock required by the foregoing method of valuing Minority Interests
in preferred stock.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"NationsBank Credit Agreement" shall mean that certain Credit Agreement,
dated as of December 23, 1993, between Merisel, Inc. and NationsBank of Texas,
N.A., as the same may be amended, supplemented, extended, refinanced (so long as
such refinancing is through Debt, other than Debt in connection with a
"distribution" as such term is used in the Securities Act of 1933) or otherwise
modified from time to time.
"New Revolving Credit Agreement" shall mean that certain Revolving Credit
Agreement, dated as of December 23, 1993, among the Company and Merisel Europe,
as borrowers, Merisel, Inc., as guarantor, Citicorp USA, Inc., as agent, and the
financial institutions which may now or hereafter be parties thereto, as the
same may be amended, supplemented, or otherwise modified from time to time.
"Note Register" shall mean a register kept by the Company for the
registration and transfer of the Notes.
"Noteholder" shall mean (a) before the Closing Date, each holder from time
to time of a then outstanding Original Note, and (b) from and after the Closing
Date, each holder from time to time of an outstanding Note.
"Notes" shall have the meaning ascribed thereto in Section 1.1.
-----------
9
<PAGE>
"Operating Lease" shall mean, as applied to any Person, any lease of any
Asset which is not a Capitalized Lease, other than any such lease under which
such Person is the lessor.
"Original Agreement" shall have the meaning set forth in the Recitals.
"Original Notes" shall have the meaning set forth in the Recitals.
"Overdue Rate" shall mean a rate of interest equal to the greater of (a)
the Coupon Rate plus two (2) percentage points per annum, and (b) the Prime Rate
plus two (2) percentage points per annum.
"Parent Guaranty" shall mean that certain General Continuing Guarantee by
Merisel, Inc. dated as of December 23, 1993, issued by Merisel, Inc. in favor of
the Purchasers, substantially in the form of Exhibit P attached hereto.
---------
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Permitted Investments" shall mean:
(a) obligations, stock, or securities of a Subsidiary or of a corporation
which immediately after such purchase or acquisition will be a
Subsidiary;
(b) the acquisition of at least 20% of the outstanding stock of another
Person or Persons (other than Merisel, Inc., or any of its
Subsidiaries), so long as (i) such Person is in a Permitted Line of
Business, (ii) the aggregate purchase price of all such acquisitions
does not exceed 10% of Consolidated Total Assets in any calendar year
and the cash portion of the aggregate purchase price does not exceed 5
% of Consolidated Total Assets in any calendar year, and (iii) if
any such acquisition is of less than 50% of the outstanding stock of
such Person, the Company shall have the right to acquire not less than
50% of such stock;
(c) obligations, stock, or securities received in connection with a
settlement of debts owing to the Company or any Subsidiary, including
accounts receivable arising from the sale of goods or services in the
ordinary course of business of the Company and its Subsidiaries;
(d) commercial paper, bankers acceptances, time deposits, and certificates
of deposit with final maturities of one year or less
10
<PAGE>
issued by banks, trust companies, and saving and loan institutions
organized under the laws of a jurisdiction within the United States
of America or with respect to the Subsidiary, under the laws of the
country in which the Subsidiary operates having (x) capital and
surplus at the end of the most recently ended fiscal year in excess
of $100,000,000 and (y) in the case of United States entities, a
commercial paper rating of "A-1" or better by Standard and Poor's
Corporation or "P-1" or better by Moody's Investors Service, Inc.;
(e) direct obligations of the United States of America or obligations of
any instrumentality or agency thereof the payment of the principal of
and interest on which is unconditionally guaranteed by the
United States of America; provided, however, that any such obligation
-------- -------
shall be payable in dollars and shall have a final maturity date no
more than one year after the acquisition thereof;
(f) repurchase agreements of banks or brokerage institutions organized
under the laws of a jurisdiction within the United States of America
or with respect to a Subsidiary, under the laws of the country in
which the Subsidiary operates having capital and surplus at the end
of its most recently ended fiscal year in excess of $100,000,000;
provided, however, that any such agreement shall be payable in
-------- -------
dollars or, with respect to a Subsidiary, the applicable local
currency, shall have a final maturity date no more than one year after
the acquisition thereof, and shall be fully collateralized;
(g) time deposits, eurodollar certificates of deposit of foreign branches
of the institutions described in clause (c) above and obligations of
---------
money market funds which invest in any such time deposits and
eurodollar certificates of deposit; provided however, that any such
-------- -------
deposit or obligation shall be payable in dollars or, with respect to
a Subsidiary, the applicable local currency, and shall have a final
maturity date no more than one year after the acquisition thereof;
(h) travel or like advances to officers and employees in the ordinary
course of business; and
(i) investments permitted under Sections 6.9 and 6.15.
---------------------
"Permitted Liens" shall mean:
(a) Liens for taxes and assessments or governmental charges or levies and
Liens securing claims or demands of mechanics and materialmen;
11
<PAGE>
(b) Liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall not have expired, or
in respect of which the Company or a Subsidiary shall at any time in
good faith be prosecuting an appeal or proceeding for a review and
in respect of which a stay of execution pending such appeal or
proceeding for review shall have been secured;
(c) Liens incidental to the conduct of business or the ownership of
properties and assets (including Liens in connection with worker's
compensation, unemployment insurance and other like laws,
warehousemen's and attorneys' Liens, customs Liens, and statutory
landlords' Liens) and Liens to secure the performance of bids,
tenders, or trade contracts, or to secure statutory obligations,
surety, or appeal bonds or other Liens of like general nature
incurred in the ordinary course of business and not in connection
with the borrowing of money, provided that in each case, the
obligation secured is not overdue or, if overdue, is being contested
in good faith by appropriate actions or proceedings;
(d) minor survey exceptions or minor encumbrances, easements, or
reservations, or rights of others for right-of-way, utilities, and
other similar purposes, or zoning or other restrictions as to the use
of real properties, which are necessary for the conduct of the
activities of the Company and its Subsidiaries or which
customarily exist on properties of corporations engaged in
similar activities and similarly situated and which do not in any
event materially impair their use in the operation of the business
of the Company and its Subsidiaries;
(e) Liens securing indebtedness of a Subsidiary of the Company to the
Company or to a wholly-owned Subsidiary of the Company;
(f) Liens existing as of June 30, 1992 and described on Schedule P-1;
------------
(g) Liens incurred after June 30, 1992 given to secure the payment of the
purchase price incurred in connection with the acquisition of fixed
assets (or to refinance the cost of such purchase) useful and
intended to be used in carrying on the business of the Company or
any of its Subsidiaries, including Liens existing on such fixed
assets at the time of acquisition thereof or at the time of
acquisition by the Company or a Subsidiary of any business entity
then owning such fixed assets, irrespective of whether such
existing Liens were given to secure the payment of the purchase
price of the fixed assets to which they attach so long as they were
not incurred, extended, or
12
<PAGE>
renewed in contemplation of such acquisition; provided that the Lien
--------
shall attach solely to the fixed assets acquired or purchased and
shall not extend to any other assets of the Company or its
Subsidiaries;
(h) Liens in the form of cash collateral pledged by Subsidiaries of the
Company (other than Domestic Subsidiaries) to support their
obligations under letters of credit and Liens on goods shipped or
documents presented under commercial letters of credit of the
Company and its Subsidiaries;
(i) purchase money Liens of Selected Suppliers in and to inventory
supplied by such Selected Suppliers to the extent that such Liens
do not exceed 5% of Consolidated Total Assets;
(j) additional Liens of the Company and its Subsidiaries not provided for
in clauses (a) through (h) inclusive, so long as such additional
-----------------------
Liens secure Debt that does not exceed 2.5% of Total
Capitalization; and
(k) Liens consisting of security interests in accounts receivable (and in
property securing or otherwise supporting accounts receivable)
granted pursuant to an Approved Securitization Transaction.
The foregoing notwithstanding, "Permitted Liens" shall not include any of
the foregoing Liens in favor, or for the benefit, of Merisel, Inc. or any
creditor thereof.
"Permitted Lines of Business" shall mean businesses directly related to the
distribution or marketing of computer products.
"Person" shall mean an individual, partnership, corporation, trust, or
unincorporated organization, and a government, or agency, or political
subdivision thereof.
"Plan" shall mean a "pension plan," as such term is defined in Section 3(2)
of ERISA, established or maintained by the Company or any ERISA Affiliate or as
to which the Company or any ERISA Affiliate contributed or is a member or
otherwise may have any liability.
"Prime Rate" shall mean the variable rate of interest per annum most
recently announced by Citibank, N.A., New York, New York, or any successor
thereto, as its "base rate", whether or not such announced rate is the best rate
available from such financial institution. Any change in the Overdue Rate
resulting from a
13
<PAGE>
change in the Prime Rate shall become effective as of 12:01 a.m. on the day on
which such change in the Prime Rate is announced by such financial institution.
"Purchaser" shall mean (a) before the Closing Date, each purchaser of an
Original Note pursuant to the Original Agreement, and (b) from and after the
Closing Date, each purchaser of a Note pursuant to this Agreement. The
Purchasers of the Notes are more fully identified in Schedule 1.
----------
"Quarterly Report" shall mean the quarterly report on "Form 10-Q" as
required to be filed with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended.
"Remaining Dollar-years" of the Notes means the amount obtained by
multiplying the amount of each then remaining required repayment at final
maturity, by the number of years (calculated to the nearest one-twelfth) which
will elapse between the time in question and the date of such repayment.
"Reorganization" shall have the meaning set forth in the Recitals.
"Rentals" shall mean and include as of the date of any determination
thereof, all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of the
property) payable by the Company or a Subsidiary of the Company, as lessee or
sublessee under a lease of real or personal property, but shall be exclusive of
any amounts required to be paid by the Company or a Subsidiary of the Company
(whether designated as rents or additional rents) on account of maintenance,
repairs, insurance, taxes, and similar charges. Fixed payments under any so-
called "percentage leases" shall be computed solely on the basis of the minimum
rents, if any, required to be paid by the lessee regardless of sales volume or
gross revenues.
"Reportable Event" shall have the same meaning as in Section 4043(b) of
ERISA (other than a Reportable Event to which notice to the PBGC is waived under
applicable regulations).
"Required Noteholders" shall mean the holders of at least 66-2/3% in
aggregate principal amount of outstanding Notes.
"Responsible Officer" shall mean the President, the Chief Financial
Officer, the Treasurer, or the Controller of the Company.
"Restricted Payments" shall mean (a) any dividend or other distribution on
any shares of the Company's stock (except a dividend payable solely in shares of
capital stock, and dividends or other distributions payable to the Company or
any of its Subsidiaries) and any redemption, retirement, purchase of any shares
of capital stock of
14
<PAGE>
the Company or any of its Subsidiaries, and (b) any loans or advances to, and
investments in the stock or securities of entities other than Subsidiaries of
the Company, except for Permitted Investments.
"Restructuring Transactions" shall mean, collectively, the Reorganization,
the issuance of the Notes and the Subordinated Notes, the execution and delivery
of the NationsBank Credit Agreement, and the execution and delivery of the New
Revolving Credit Agreement and the related guaranty by Merisel Canada.
"Sale and Leaseback Transaction" shall mean, with respect to any Person,
any transaction consisting of a sale of Assets by such Person and a lease back
by such Person of such Assets.
"Securitization Proceeds" shall mean, at any time of determination, the
amount of any proceeds paid to the Company or its Subsidiaries by a purchaser of
accounts receivable and to be recovered from such accounts receivable under an
Approved Securitization Transaction, minus the amount, if any, by which such
-----
purchaser's interest in such accounts receivable has been liquidated or has been
repurchased by the Company or its Subsidiaries.
"Security" shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
"Selected Suppliers" shall mean those Persons designated in writing by the
Company to the Noteholders on the date hereof.
"Single Employer Plan" shall mean a Plan maintained by the Company or any
ERISA Affiliate for employees of the Company or any ERISA Affiliate.
"Subordinated Debt" shall mean the Subordinated Notes and all other Debt of
the Company subordinated in right of payment to the Notes pursuant to documents
containing maturities, amortizations, schedules, covenants, defaults, remedies,
subordination provisions, and other material terms in form and substance
satisfactory to the Required Noteholders.
"Subordinated Note Purchase Agreement" means that certain Amended and
Restated Subordinated Note Purchase Agreement, dated as of December 23, 1993,
among the Company and the purchasers listed on the signature pages thereof, as
the same may hereafter be amended, supplemented, or otherwise modified from time
to time to the extent permitted under this Agreement.
"Subordinated Notes" shall mean the Amended and Restated 11.28%
Subordinated Notes Due March 11, 2000 in the aggregate principal amount of
$22,000,000 issued by the Company pursuant to the Subordinated Note Purchase
15
<PAGE>
Agreement, as such Subordinated Notes may be amended, supplemented, or otherwise
modified from time to time to the extent permitted under this Agreement.
"Subsidiary" shall mean any corporation, association, partnership, or other
business entity of which 50% or more of the total voting power of shares of
Voting Stock is at the time owned or controlled by any Person or one or more of
the other Subsidiaries of that Person or a combination thereof.
"Tangible Assets" shall mean, as of the date of any determination thereof,
the total book value of all Assets of the Company and its Subsidiaries (less
depreciation, depletion, and other properly deductible valuation reserves) after
deducting Intangible Assets.
"Termination Event" shall mean (a) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder, (b) the withdrawal
of the Company or any of its ERISA Affiliates from a Plan during a plan year in
which it was a "substantial employer" as defined in Section 4001 (a)(2) of
ERISA, (c) the filing of a notice of intent to terminate a Plan or the treatment
of a Plan amendment as a termination under Section 4041 of ERISA, (d) the
institution of proceedings to terminate a Plan by the PBGC, or (e) any other
event or condition that might constitute grounds under ERISA for the termination
of, or the appointment of a trustee to administer, any Plan.
"Total Capitalization" shall mean Consolidated Debt plus Consolidated
----
Tangible Net Worth plus Minority Interests, as set forth in the Company's
----
consolidated balance sheet (but specifically including any Guaranties and
letters of credit in the calculation of Consolidated Debt even if not shown on
such balance sheet, unless the obligation guarantied by any such Guaranties is
already included in the calculation of Consolidated Debt) as determined in
accordance with GAAP.
"Treasury Rate" shall mean, as of the date of any determination thereof,
the rate per annum equal to the arithmetic average of the two most recent weekly
average bid-side yields on issues of United States Treasury Securities adjusted
to a constant maturity equal to the Weighted Average of Life to Maturity of the
Notes (determined, if necessary, by interpolating on a straight line basis such
yields on United States Treasury Securities adjusted to the particular constant
maturities greater than (but nearest to) and less than (but nearest to) the
Weighted Average Life to Maturity of the Notes), as published by the Federal
Reserve Board for release on the first business day of the week in which such
determination is made in its Statistical Release H.15 (519) under the heading
"Treasury Constant Maturities" for the two calendar weeks ending on the two
Wednesdays immediately preceding the date of such release or, if such average is
not published for such periods, of such reasonably comparable index as may be
designated for such period by Noteholders holding at least 51% in aggregate
unpaid principal amount of the Notes then outstanding.
16
<PAGE>
"Unfunded Liabilities" shall mean, (i) in the case of Single Employer
Plans, the amount (if any) by which the present value of all vested
nonforfeitable benefits under such Plan exceeds the fair market value of all
Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, and (ii) in the case of Multiemployer
Plans, the withdrawal liability of the Company and its Subsidiaries.
"Value" shall mean the greater of market or book value.
"Voluntary Prepayment Date" shall have the meaning ascribed thereto in
Section 3.2.
- -----------
"Voting Stock" shall mean Securities of any class or classes, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
"Weighted Average Life to Maturity" of the Notes, as of the date of the
determination thereof, means the number of years obtained by dividing the then
Remaining Dollar-years of the Notes by the then outstanding principal amount
thereof.
2.2 ACCOUNTING PRINCIPLES; CHANGES. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement. If any changes in accounting principles from
those in effect at the time of preparation of the financial statements referred
to in Section 4.1(d) are hereafter occasioned by the promulgation of rules,
--------------
regulations, pronouncements, and opinions by or required by the Financial
Accounting Standards Board or the American Institute of Certified Public
Accountants (or successors thereto or organizations with similar functions)
result in a change in the method of calculation of financial covenants,
standards or terms found in this Agreement or there is any change in the
Company's fiscal quarters or fiscal year, the parties hereto agree to enter into
negotiations to amend this Agreement so as to equitably reflect such changes
with the desired result that the criteria for evaluating the financial condition
of the Company shall be the same after such changes as if such changes had not
been made.
2.3 CONSTRUCTION. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular and to the singular
include the plural, the part includes the whole, the terms "include" and
"including" are not limiting, and the term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase "and/or". The words
"hereof," "herein," "hereby," "hereunder" and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Section, subsection, clause, exhibit
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and schedule references are to this Agreement unless otherwise specified. Any
reference herein to this Agreement, the Notes, the Canada Guaranty, the Europe
Guaranty, and the Parent Guaranty includes any and all alterations, amendments,
changes, extensions, modifications, renewals, or supplements thereto or thereof,
as applicable.
SECTION 3. PREPAYMENT OF NOTES.
3.1 VOLUNTARY PREPAYMENT WITH PREMIUM. The Company shall have the
option, at any time and from time to time, of prepaying the outstanding Notes,
either in whole or in part (but if in part then in a minimum principal amount of
$10,000,000) by payment of the principal amount of the Notes, or portion
thereof to be prepaid, and accrued interest thereon to the date of such
prepayment, together with the Market Make-Whole Premium.
3.2 NOTICE OF PREPAYMENTS. The Company will give notice of any
prepayment of the Notes pursuant to Section 3.1 to each Noteholder not less than
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20 days nor more than 60 days before the date fixed for such prepayment (the
"Voluntary Prepayment Date") specifying (i) the Voluntary Prepayment Date, (ii)
the principal amount of the Noteholder's Notes to be prepaid on such Voluntary
Prepayment Date, (iii) that a Market Make-Whole Premium may be payable, (iv) the
date when the final calculation of such Market Make-Whole Premium will be made
and provided to the Noteholders, (v) a reasonably detailed calculation of the
estimated Market Make-Whole Premium, and (vi) the accrued interest applicable to
the prepayment. Notice of prepayment having been so given, the aggregate
principal amount of the Notes specified in such notice, together with accrued
interest thereon to the Voluntary Prepayment Date and the Market Make-Whole
Premium, if any, payable with respect thereto shall become due and payable on
the Voluntary Prepayment Date. Not later than two business days prior to the
Voluntary Prepayment Date, the Company shall provide each Noteholder written
notice of the Market Make-Whole Premium payable in connection with such
prepayment, together with a reasonably detailed computation thereof.
3.3 ALLOCATION OF PREPAYMENTS. All partial prepayments pursuant to
Section 3.1 shall be applied to all outstanding Notes ratably in accordance
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with the unpaid principal amounts thereof.
SECTION 4. REPRESENTATIONS.
4.1 REPRESENTATIONS OF THE COMPANY. The Company represents and warrants
to each Purchaser as of the date hereof and as of the Closing Date as follows:
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(a) CAPITALIZATION. The authorized capital stock of the Company
consists of 1,000 shares of common stock, $.01 par value, of which 100 shares
are issued and outstanding on the Closing Date. All such outstanding shares
have been validly issued and are fully paid, nonassessable shares free of
preemptive rights and are held of record by Merisel, Inc. The issuance and sale
of all such shares have been in full compliance with all applicable federal and
state securities laws, except as would not have a material adverse effect on the
Company or any of its Subsidiaries or on the Company's ability to perform
hereunder or under the Notes. Other than as set forth in the financial
statements referred to in Section 4.1(d) or Schedule 4.1(a) attached hereto,
-------------- ---------------
there are no subscriptions, options, warrants, or calls relating to any shares
of the Company's capital stock, including any right of conversion or exchange
under any outstanding. security or other instrument. The Company is not
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or any security convertible
into or exchangeable for any of its capital stock.
(b) SUBSIDIARIES. Schedule 4.1(b) attached hereto states the name
---------------
of each of the Company's Subsidiaries, its jurisdiction of incorporation, and
the percentage of its Voting Stock owned by the Company and/or its Subsidiaries.
Such Voting Stock has been duly issued, is fully paid and nonassessable, and,
except as set forth on Schedule 4.1(b) is owned by the Company or its
---------------
Subsidiaries as set forth on Schedule 4.1(b) free and clear of all Liens.
---------------
(c) CORPORATE ORGANIZATION AND AUTHORITY. The Company and each
Subsidiary of the Company:
(i) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation;
(ii) has all requisite power and authority and all necessary
licenses and permits to own and operate its Assets and to carry on its business
as now conducted and as presently proposed to be conducted; and
(iii) is duly licensed or qualified and is in good standing as a
foreign corporation in each jurisdiction wherein the nature of the business
transacted by it or the nature of the Assets owned or leased by it makes such
licensing or qualification necessary except where the failure to be so licensed
or qualified or in good standing would not have a material adverse effect on
the Company or any of its Subsidiaries, or the ability of the Company to
perform its obligations hereunder or under the Notes.
(d) FINANCIAL STATEMENTS.
(i) The Purchasers have been furnished with (A) an audited
consolidated balance sheet of Merisel, Inc. as of December 31, 1992, and
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related audited consolidated statements of income, cash flow and changes in
stockholders' equity for the fiscal year ended on said date accompanied by a
report thereon by Deloitte & Touche, Merisel, Inc.'s independent and certified
public accountants, (B) the unaudited consolidated balance sheet of Merisel,
Inc. as of September 30, 1993, and related consolidated statements of income,
cash flow and changes in stockholders' equity for the fiscal quarter ended on
said date, and (C) the pro forma balance sheet of the Company based upon
--- -----
Merisel, Inc.'s September 30, 1993 balance sheet and giving effect to the
Restructuring Transactions (a copy of which is attached as Exhibit F hereto).
---------
Except as may be stated in any notes thereto and except, in the case of such
unaudited financial statements, for the absence of footnotes and subject to year
end adjustments, such financial statements have been prepared in accordance with
GAAP consistently applied, present fairly the consolidated financial position of
the Company as of such dates, and the consolidated results of operations and
changes in cash flows and stockholders' equity for such periods.
(ii) Since September 30, 1993, there has been no material
adverse change in the Assets, business, profits, or condition (financial or
otherwise) of the Company or its Subsidiaries as shown on the financial
statements referenced above after giving effect to the Restructuring
Transactions.
(e) INDEBTEDNESS. Schedule 4.1(e) attached hereto lists all Debt
---------------
of the Company outstanding as of the Closing Date, and all Debt of the Company's
Subsidiaries outstanding as of September 30, 1993. Since September 30, 1993,
the Company's Subsidiaries have incurred no additional Debt other than in the
ordinary course of business.
(f) FULL DISCLOSURE. The representations, warranties, and other
information disclosed to the Purchasers in this Agreement do not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements contained therein or herein not misleading. Any
projections and pro forma financial information delivered to the Purchasers by
the Company are based upon good faith estimates and assumptions believed by the
Company to be reasonable at the time made, it being acknowledged by the
Purchasers that such projections as to future events are not to be viewed as
facts and that actual results during the period or periods covered by any such
projections may differ from the projected results. There is no fact peculiar
to the Company or its Subsidiaries which the Company has not disclosed to the
Purchasers in writing which would have a material adverse effect on the Assets,
business, profits or condition (financial or otherwise) of the Company or any
of its Subsidiaries.
(g) PENDING LITIGATION. Except as disclosed in Schedule 4.1(g)
---------------
attached hereto, there are no proceedings pending or, to the knowledge of the
Company, threatened, against or affecting the Company or any Subsidiary of the
Company in any court or before any governmental authority or arbitration board
or
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tribunal which, if determined adversely, (i) could have a material adverse
effect on the Assets, business, profits, or condition (financial or otherwise)
of the Company or any of its Subsidiaries, or (ii) questions the legality,
validity or enforceability of (A) this Agreement or the Notes or (B) the
Restructuring Transactions.
(h) TITLE TO ASSETS; LEASES. The Company and each Subsidiary of the
Company has good title in fee simple (or its equivalent under applicable law) to
all material parcels of real property and has good title to all the other Assets
it purports to own, including those reflected in the pro forma balance sheet
---------
referred to in Section 4.1(d), except for Permitted Liens and Assets that have
--------------
been disposed of in the ordinary course of the Company's and its Subsidiaries'
business since September 30, 1993. The Company and each Subsidiary of the
Company has the right to, and does, enjoy peaceful and undisturbed possession
under all material leases under which it is leasing Assets. All such material
leases are valid, subsisting, and in full force and effect, and the Company is
not in default under any such leases.
(i) PATENTS AND TRADEMARKS. The Company and each Subsidiary of the
Company (i) owns or possesses all the patents, trademarks, trade names, service
marks, copyrights, licenses, and rights with respect to the foregoing necessary
for the present conduct of its business without any known conflict with the
rights of others, and (ii) owns or possesses or has applied for all the patents,
trademarks, trade names, service marks, copyrights, licenses, and rights with
respect to the foregoing necessary for the planned conduct of its business,
without any known conflict with the rights of others, except where the failure
to own or possess any patents, trademarks, trade names, service marks,
copyrights, licenses, or rights would not have a material adverse effect on the
Company or any of its Subsidiaries.
(j) SALE IS LEGAL AND AUTHORIZED. The sale of the Notes and compliance
by the Company with all of the provisions of this Agreement and the Notes:
(i) are within the corporate powers of the Company;
(ii) not violate any provisions of any law, will not violate any
order of any court or governmental authority or agency, will not conflict with
or result in any breach of any of the terms, conditions, or provisions of, or
constitute a default under the Articles of Incorporation or By-laws of the
Company or any indenture or other agreement or instrument pursuant to which any
Consolidated Debt is outstanding and to which the Company is a party or by which
it may be bound, or result in the imposition of any Liens or encumbrances on any
Assets of the Company, and will not conflict with or result in any breach of
any Contractual Obligations of the Company; and
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<PAGE>
(iii) have been duly authorized by proper corporate action on the
part of the Company (no action by the stockholders of the Company being required
by law, by the Articles of Incorporation or By-laws of the Company, or
otherwise).
(k) BINDING OBLIGATION. This Agreement and the Notes have been
executed and delivered by the Company and constitute the legal, valid, and
binding obligations of the Company, enforceable in accordance with their
respective terms except for (a) the effect upon this Agreement and the Notes of
bankruptcy, insolvency, reorganization, moratorium, and other similar laws
relating to or affecting the rights of creditors generally, and (b) equitable
principles (whether considered in an action at law or in equity) which provide,
among other things, that the remedies of specific performance and injunction and
other forms of equitable relief are subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought.
(l) NO DEFAULTS UNDER OTHER AGREEMENTS. The Company and its
Subsidiaries are not in default in the payment of principal or interest on any
Consolidated Debt and are not in default under any instrument or agreement under
and subject to which any Consolidated Debt has been issued, and no event has
occurred and is continuing under the provisions of any such instrument or
agreement which with the lapse of time or the giving of notice, or both, would
constitute an event of default thereunder.
(m) GOVERNMENTAL CONSENT. No approval, consent, or withholding of
objection on the part of any regulatory body, state, federal, or local, is
necessary in connection with (i) the consummation of the Restructuring
Transactions, or (ii) the execution and delivery by the Company of this
Agreement or the Notes or compliance by the Company with any of the provisions
of this Agreement or the Notes other than routine corporate filings required
under state securities laws.
(n) TAXES. All federal or state tax returns required to be filed by
the Company or any Subsidiary of the Company have been filed, and all federal or
state taxes, assessments, fees, and other governmental charges upon the Company
or any Subsidiary of the Company or upon any of their respective Assets, income,
or franchises, which are shown to be due and payable in such returns have been
paid other than those being contested in good faith for which a reserve or other
appropriate provision, as shall be required by GAAP, has been made. The Company
does not know of any proposed additional tax assessment against it for which
adequate provision has not been made on its books. The provisions for taxes on
the books of the Company and each Subsidiary of the Company are adequate for all
open years, and for its current fiscal period.
(o) NO MATERIALLY ADVERSE CONTRACTS. Neither the Company nor any
Subsidiary of the Company is a party to or bound by (nor are any of its Assets
22
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affected by) any contract or agreement, or subject to any order, writ,
injunction, or decree or other action of any court or any governmental
department, commission, bureau, board, or other administrative agency or
official, or any charter or other corporate or contractual restriction, which
materially and adversely affects, or in the future may (so far as the Company
can reasonably foresee) materially and adversely affect, the Assets, business,
profits, or condition (financial or otherwise) of the Company or any Subsidiary
of the Company.
(p) NO CONFLICTS. The consummation of the Restructuring Transactions,
the execution, delivery and performance by the Company of this Agreement and the
Notes, and the compliance by the Company with any of the provisions of this
Agreement and the Notes do not and will not: (a) violate any provision of
federal, state or local law or regulation applicable to Merisel, Inc., the
Company and any Subsidiary of the Company, the articles of incorporation or
bylaws (or other charter documents) of Merisel, Inc., the Company and any
Subsidiary of the Company, or any order, judgment, or decree of any court or
other agency of government binding on Merisel, Inc., the Company or any
Subsidiary of the Company; (b) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation or material lease of the Company and or any Subsidiary of
the Company; (c) result in or require the creation or imposition of any Lien of
any nature whatsoever upon any properties or assets of the Company or any
Subsidiary of the Company, other than Permitted Liens; or (d) require any
approval of stockholders or any approval or consent of any Person under any
Contractual Obligation of the Company or any Subsidiary of the Company (other
than those already obtained).
(q) ERISA. Assuming the accuracy of the Purchasers' representations in
Section 4.2 acquisition of the Notes by the Purchasers does not constitute a
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"prohibited transaction" within the meaning of Section 4975 of the Code or
Section 406 of ERISA. Each Plan is in substantial compliance with ERISA. The
Company and its ERISA Affiliates have never had and do not currently have
Unfunded Liabilities under any Plans.
(r) HOLDING COMPANY ACT; INVESTMENT COMPANY ACT.
(i) Neither the Company nor any Subsidiary of the Company is a
"public utility company" or a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended, or a "public utility" within the
meaning of the Federal Power Act, as amended.
(ii) Neither the Company nor any Subsidiary of the Company is an
"investment company" or an "affiliated person" of an "investment company" or a
company "controlled" by an "investment company" as such terms are
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<PAGE>
defined in the Investment Company Act of 1940, as amended. Neither the Company
nor any Subsidiary of the Company is an "investment advisor" or an "affiliated
person" of an "investment advisor" as such terms are defined in the Investment
Advisors Act of 1940, as amended.
(s) FOREIGN ASSETS CONTROL REGULATIONS. None of the transactions
contemplated by this Agreement will result in a violation of any of the foreign
assets control regulations of the United States Treasury Department, 31 CFR
Subtitle B, Chapter V, as amended, or any ruling issued thereunder or any
enabling legislation or Presidential executive order granting authority
therefor, nor will the proceeds of the Notes be used by the Company in a manner
that would violate any of the foregoing.
(t) MARGIN REGULATIONS. None of the transactions contemplated by this
Agreement will violate or result in a violation of Section 7 of the Securities
Exchange Act of 1934, as amended, or any regulation issued pursuant thereto,
including Regulations G, T, U, and X of the Board of Governors of the Federal
Reserve System.
(u) COMPLIANCE WITH LAW. Neither the Company nor any Subsidiary of the
Company (a) is in violation of any law, ordinance, franchise, or governmental
rule or regulation to which it is subject, which violation could reasonably be
expected to materially adversely affect the Assets, business, profits, or
condition (financial or otherwise) of the Company or any of its Subsidiaries, or
impair the ability of the Company to perform its obligations contained in this
Agreement or the Notes; (b) is in default with respect to any order of any court
or governmental authority or arbitration board or tribunal; or (c) has failed to
obtain any license, permit, franchise, or other governmental authorization
necessary to the ownership of its Assets or to the conduct of its business,
which failure could reasonably be expected to materially adversely affect the
Assets, business, profits, or condition (financial or otherwise) of the Company
or any of its Subsidiaries.
(v) COMPLIANCE WITH ENVIRONMENTAL LAWS. The Company and its
Subsidiaries are not in violation of (i) any Environmental Laws, the violation
of which could reasonably be expected to materially adversely affect the Assets,
business, profits, or condition (financial or otherwise) of the Company or any
of its Subsidiaries, or (ii) any order, notice, or demand issued pursuant to any
Environmental Laws, in each case applicable to the Assets of the Company or its
Subsidiaries.
(w) NO EVENT OF DEFAULT. No event has occurred and is continuing, and
no condition exists, that, if the Notes had been issued and were outstanding on
the date hereof, would constitute an Event of Default or a Default.
(x) INCORPORATION OF NEW REVOLVING CREDIT AGREEMENT REPRESENTATIONS AND
WARRANTIES. The representations and warranties set forth in the
24
<PAGE>
New Revolving Credit Agreement are hereby incorporated by reference into this
Agreement, as if set forth in full herein. For purposes of this Section 4.1(x),
--------------
all defined terms used in the representations and warranties that are
incorporated from the New Revolving Credit Agreement are also incorporated by
reference into this Agreement.
4.2 REPRESENTATIONS OF THE PURCHASERS. Each Purchaser represents and
warrants to the Company as of the date hereof and as of the Closing Date that
(i) it is an "accredited investor" within the meaning of Rule 501(a) under the
Act, (ii) it is acquiring the Notes for its own account for the purposes of
investment and not with a view to the resale or distribution thereof; it being
understood, however, that the disposition of its Assets shall at all times be
and remain within its control, and (iii) it is domiciled in the state or
province included in the address for notices set forth in Schedule 1.
----------
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Act, the Notes (and all
securities issued in exchange therefor or substitution thereof) shall bear a
legend in substantially the following form:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED, SOLD, OR OTHERWISE
TRANSFERRED, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS, OR AN EXEMPTION FROM SUCH STATUTES.
Each Purchaser further represents that either:
(a) if it is an insurance company, no part of the funds to be used by
it to purchase the Notes constitutes assets allocated to any separate account
maintained by it in which any employee benefit plan (or its related trust) has
any interest; or
(b) if it is an insurance company, to the extent that any part of such
funds constitutes assets allocated to any separate account maintained by it in
which any employee benefit plan (or its related trust) has any interest, (i)
such separate account is a "pooled separate account" within the meaning of
Prohibited Transaction Class Exemption 90-1, in which case it has disclosed to
the Company the name of each employee benefit plan whose assets in such separate
account exceed 10% of the total assets or are expected to exceed 10% of the
total assets of such account as of the date of such purchase (and for the
purposes of this paragraph (b), all employee benefit plans
25
<PAGE>
maintained by the same employer or employee organization are deemed to be a
single plan), or (ii) such separate account contains only the assets of a
specific employee benefit plan, complete and accurate information as to the
identity of which it has delivered to the Company; or
(c) if it is other than an insurance company, no part of the funds to
be used by it to purchase the Notes constitutes assets of any employee benefit
plan (or its related trust).
As used in this Section 4.2, the term "employee benefit plan" and "separate
-----------
account" shall have the respective meanings assigned to such terms in Section 3
of ERISA and the term "plan assets" shall have the meaning specified in
Department of Labor Regulation Section 2510.3-101.
SECTION 5. CONSENT TO RESTRUCTURING TRANSACTIONS AND CLOSING CONDITIONS.
5.1 CONSENT TO RESTRUCTURING TRANSACTIONS. Subject to Section 5.2 and
effective as of the Closing Date, the Noteholders hereby consent to the
Restructuring Transactions.
5.2 CONDITIONS. The Noteholders' consent to the Restructuring Transactions
and the Purchasers' obligation to purchase the Notes against payment therefor by
concurrent delivery of the Original Notes on the Closing Date shall be subject
to the performance by the Company of its agreements hereunder which by the terms
hereof are to be performed at or prior to the time of delivery of the Notes and
to the following further conditions precedent:
(a) ACCRUED INTEREST. Each of the Noteholders shall have received an
amount equal to all interest accrued on that Noteholder's Original Note(s) prior
to the Closing Date pursuant to the Existing Agreement and remaining unpaid as
of the Closing Date.
(b) REORGANIZATION. Merisel, Inc. shall have completed the
Reorganization, including the Merisel Transfers, in a manner satisfactory to the
Noteholders.
(c) CLOSING DATE. The Closing Date shall occur on or before December
17, 1993.
(d) CLOSING CERTIFICATE. Each Purchaser shall have received a
certificate dated the Closing Date, signed by a Responsible Officer of the
Company, the truth and accuracy of which shall be a condition to each
Purchaser's obligation to
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<PAGE>
purchase the Note proposed to be sold to it and to the effect that (i) the
representations and warranties of the Company set forth in Section 4.1 are true
-----------
and correct in all material respects on and with respect to the Closing Date;
(ii) the Company has performed all of its obligations hereunder which are to be
performed on or prior to the Closing Date; (iii) the issuance of the Notes by
the Company and the purchase thereof by the Purchasers does not violate Sections
9.11 or 9.12 of the Subordinated Note Purchase Agreement; and (iv) no Default or
Event of Default has occurred and is continuing.
(e) LEGAL OPINION. Each Purchaser shall have received from (i) Riordan
& McKinzie, counsel for the Company, Merisel Canada, Merisel Europe, and
Merisel, Inc.; (ii) McCarthy, Tetrault, counsel for Merisel Canada; (iii)
Brobeck, Phleger & Harrison, California counsel for the Purchasers; and (iv)
Fraser & Beatty, Ontario counsel for the Purchasers, opinion letters dated the
Closing Date, substantially in the form of Exhibits O-1, O-2, O-3, and O-4
-------------------------------
hereto, respectively.
(f) CANADA GUARANTY, THE EUROPE GUARANTY, AND PARENT GUARANTY. Each
Purchaser shall have received a counterpart of each of the Canada Guaranty, the
Europe Guaranty, and the Parent Guaranty, duly executed by Merisel Canada,
Merisel Europe, and Merisel, Inc., respectively, and in each case in full force
and effect.
(g) EXCHANGE OF ALL NOTES. The Company and the Purchasers shall have
agreed to exchange the entire principal amount of the Notes scheduled to be
issued and exchanged on the Closing Date pursuant to this Agreement, and the
Company shall have duly issued the Notes.
(h) LEGALITY. The Notes shall qualify as a legal investment for each
Purchaser under the laws and regulations of each jurisdiction to which each such
Purchaser is subject (without reference to any so-called "basket" provision
which permits the making of an investment without restrictions to the character
of the particular investment being made) and the purchase of and payment for the
Notes shall not be prohibited by any applicable law or governmental regulation
(including Regulations G, T, U, and X of the Board of Governors of the Federal
Reserve System). Each Purchaser shall have received such information as it
shall reasonably request in writing from the Company to satisfy it as to
compliance with this condition.
(i) SATISFACTORY PROCEEDINGS. All corporate proceedings taken in
connection with the transactions contemplated by this Agreement, and all
documents necessary to the consummation thereof, shall be satisfactory in form
and substance to each Purchaser and special counsel to the Purchasers, and each
Purchaser shall have received a copy (executed or certified as may be
appropriate) of all legal documents or corporate proceedings taken in connection
with the consummation of said transactions, including the following:
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(i) Certified copies of the certificate of incorporation and
bylaws of the Company, Merisel Canada, Merisel Europe, and Merisel, Inc.;
(ii) Certified copies of resolutions of the Board of Directors of
the Company authorizing the execution, delivery, and performance of this
Agreement, the Notes, and any other documents provided for in this Agreement;
(iii) Certified copies of resolutions of the Board of Directors of
Merisel Canada authorizing the execution, delivery, and performance of the
Canada Guaranty;
(iv) Certified copies of resolutions of the Board of Directors of
Merisel Europe authorizing the execution, delivery and performance of the Europe
Guaranty;
(v) Certified copies of resolutions of the Board of Directors of
Merisel, Inc. authorizing the execution, delivery, and performance of the Parent
Guaranty;
(vi) A certificate of the Secretary of the Company certifying the
names of the Responsible Officers of the Company authorized to sign this
Agreement, the Notes, and any other documents provided for in this Agreement,
together with a sample of the true signature of each such Responsible Officer;
(vii) A certificate of the Secretary of Merisel Canada certifying
the names of the Responsible Officers of Merisel Canada authorized to sign the
Canada Guaranty, together with a sample of the true signature of each such
Responsible Officer;
(viii) A certificate of the Secretary of Merisel Europe certifying
the names of the Responsible Officers of Merisel Europe authorized to sign the
Europe Guaranty, together with a sample of the true signature of each such
Responsible Officer; and
(ix) A certificate of the Secretary of Merisel, Inc. certifying
the names of the Responsible Officers of Merisel, Inc. authorized to sign the
Parent Guaranty, together with a sample of the true signature of each such
Responsible Officer.
(j) NEW REVOLVING CREDIT AGREEMENT AND NATIONSBANK CREDIT AGREEMENT.
Each of the New Revolving Credit Agreement, the related guaranty by Merisel
Canada, and the NationsBank Credit Agreement shall be in form and substance
reasonably satisfactory to the Purchasers, shall be in full force and effect, no
material term or condition thereof shall have been amended, modified, or waived
28
<PAGE>
since the date of its execution and delivery (unless previously disclosed to the
Purchasers), and no default or event of default shall exist and be continuing
thereunder as of the Closing Date. Each of the Purchasers shall have received a
certified, true and correct copy of each of the New Revolving Credit Agreement,
the related guaranty by Merisel Canada, and the NationsBank Credit Agreement.
(k) SUBORDINATED DEBT. The Debt evidenced by the Notes shall be
"Senior Debt" and "Designated Senior Debt" (as such terms are defined in the
Subordinated Note Purchase Agreement) for all purposes under the Subordinated
Note Purchase Agreement, and the Company shall have delivered a written notice
to the holders of the Subordinated Notes specifying that the Debt evidenced by
the Notes is "Designated Senior Debt".
(l) TAXES. All taxes, fees, and other charges due in connection with
the issue and sale of the Notes shall have been paid in full by the Company.
(m) APPROVALS AND CONSENTS. The Company shall have duly received all
authorizations, consents, reaffirmations, waivers, and estoppel certificates (in
form and substance acceptable to the Noteholders) by or of all Persons, and all
approvals, licenses, franchises, permits, and certificates by or of all federal,
state, and local governmental authorities, necessary for the Restructuring
Transactions, including the issuance of the Notes.
(n) PAYMENT OF LEGAL FEES. The Company shall have reimbursed the
Purchasers in full for the fees and expenses (including an estimate of
post-closing fees and expenses) of its counsel, Brobeck, Phleger & Harrison, and
its Canadian counsel, Fraser & Beatty, incurred in connection with due diligence
and the preparation, negotiation, and execution of this Agreement, the Notes,
the Canada Guaranty, the Europe Guaranty, the Parent Guaranty, and any other
documents executed in connection herewith and therewith.
(o) REORGANIZATION DOCUMENTS. The documents effecting the
Reorganization shall be in form and substance satisfactory to the Purchasers.
5.3 WAIVER OF CONDITIONS. If on the Closing Date the Company fails to
deliver to each Purchaser the Note to be issued to each such Purchaser on such
date or if the conditions specified in Section 5.2 have not been satisfied, the
-----------
Purchasers shall be relieved of all further obligations under this Agreement.
Without limiting the foregoing, if the conditions specified in Section 5.2 have
-----------
not been satisfied, the Purchasers may waive compliance by the Company with any
such condition to such extent as they may in their sole discretion determine.
Nothing in this Section 5.3 shall operate to relieve the Company of any of its
-----------
obligations hereunder or to waive any of the Purchasers' rights against the
Company occasioned by any such failure to satisfy a condition of this Agreement.
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SECTION 6. COMPANY COVENANTS.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Notes:
6.1 CORPORATE EXISTENCE, ETC. Except as permitted by Sections 6.10 and
-------------
6.14, the Company shall preserve and keep in full force and effect, and shall
- ----
cause each Subsidiary of the Company to preserve and keep in full force and
effect, its corporate existence and all licenses and permits necessary to the
proper conduct of its business.
6.2 INSURANCE. The Company shall maintain, and shall cause each Subsidiary
of the Company to maintain, insurance coverage by financially sound and
reputable insurers and in such forms and amounts and against such risks as are
customary for corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties.
6.3 TAXES, CLAIMS FOR LABOR AND MATERIALS, COMPLIANCE WITH LAWS.
(a) The Company shall promptly pay and discharge, and shall cause each
Subsidiary of the Company promptly to pay and discharge, all lawful taxes,
assessments, and governmental charges or levies when due imposed upon the
Company or such Subsidiary, respectively, or upon or in respect of all or any
part of the Assets or business of the Company or such Subsidiary, all trade
accounts payable in accordance with usual and customary business terms, and all
claims for work, labor, or materials, prior to such claims becoming a Lien upon
any Assets of the Company or such Subsidiary; provided, however, the Company or
-------- -------
such Subsidiary shall not be required to pay any such tax, assessment, charge,
levy, account payable, or claim the validity, applicability, or amount of which
is being contested in good faith by appropriate actions or proceedings, the
pendency of which actions or proceedings will, and which actions or proceedings,
if determined favorably to the Company or such Subsidiary will, prevent the
forfeiture or sale of any Assets of the Company or such Subsidiary or any
interference with the use thereof by the Company or such Subsidiary, and the
Company or such Subsidiary has set aside on its books adequate reserves with
respect thereto
(b) The Company promptly shall comply, and shall cause each Subsidiary
of the Company to comply, with all laws, ordinances, or governmental rules and
regulations to which it is subject, the violation of which would materially and
adversely affect the Assets, business, profits, or condition (financial or
otherwise) of the Company or any of its Subsidiaries, or would result in the
creation of any Lien not permitted under Section 6.8.
-----------
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6.4 MAINTENANCE, ETC. The Company shall maintain, preserve, and keep, and
shall cause each Subsidiary of the Company to maintain, preserve, and keep, all
material Assets used or useful in the conduct of its business (whether owned in
fee, a leasehold interest, or otherwise) in good repair and working order
(subject to ordinary course wear and tear) and from time to time shall make all
necessary repairs, replacements, renewals, and additions so that the business of
the Company and its Subsidiaries carried on in connection therewith may be
properly conducted at all times.
6.5 NATURE OF BUSINESS. Neither the Company nor any Subsidiary of the
Company shall engage in any business other than (i) the businesses in which they
are engaged as of the Closing Date, and (ii) Permitted Lines of Business.
6.6 CONSOLIDATED TANGIBLE NET WORTH. As of the Closing Date, the Company
shall have and maintain Consolidated Tangible Net Worth of not less than
$130,000,000. As of December 31, 1993, the Company shall have and maintain
Consolidated Tangible Net Worth of not less than $140,939,000. As of the end of
each fiscal quarter following December 31, 1993, the Company shall have and
maintain Consolidated Tangible Net Worth of not less than the sum of (a)
$140,939,000 plus (b) seventy-five percent (75%) of the cumulative Consolidated
----
Net Income (without any deduction for any negative Consolidated Net Income)
earned after December 31, 1993.
6.7 LIMITATION ON CONSOLIDATED DEBT.
(a) The Company and its Subsidiaries shall not incur, create, assume,
or guarantee any Debt unless, after giving effect thereto, the ratio of
Consolidated Debt to Total Capitalization does not exceed .60 to 1.0.
(b) The Company and its Subsidiaries shall not incur, create, assume,
or guarantee any Debt unless, after giving effect thereto, the ratio of
Consolidated Debt plus Securitization Proceeds to Total Capitalization plus
Securitization Proceeds does not exceed .635 to 1.0.
For purposes of the calculation required by the foregoing subsections (a) and
(b) in the case of Debt being incurred, created, assumed, or guaranteed in
connection (i) with an acquisition by the Company or any of its Subsidiaries of
assets, (ii) a merger involving the Company or any of its Subsidiaries, or (iii)
the acquisition of stock or securities by the Company or any of its
Subsidiaries, Earnings before Interest and Taxes shall be deemed to include (in
addition to Earnings before Interest and Taxes of the Company and its
Subsidiaries) the earnings before interest and taxes (x) attributable to such
assets, (y) of the corporation, other than the Company or its Subsidiaries,
involved in the merger, or (z) attributable to such stock or securities, in each
case for the four fiscal quarters preceding the effectiveness of the
transaction.
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6.8 LIMITATION ON LIENS. Except for Permitted Liens, the Company shall
not, and shall not permit any of its Subsidiaries to create, incur, or suffer to
exist, any Lien upon any of its Assets, whether now owned or hereafter acquired,
or upon any income or profits thereof.
6.9 LIMITATION ON RESTRICTED PAYMENTS. The Company shall not, and shall
not permit its Subsidiaries to, directly or indirectly, declare, order, pay,
make, or set apart any funds or Assets for any Restricted Payment, unless, after
giving effect thereto, (a) no Default or Event of Default shall have occurred
and be continuing, (b) the Company would be entitled to incur at least $1.00 of
additional Debt under Section 6.7, and (c) the aggregate amount of all
-----------
Restricted Payments declared, ordered, paid, made, or set apart subsequent to
the Closing Date does not exceed an amount equal to (i) 25% of Consolidated Net
Income realized subsequent to January 1, 1994 (in each case reduced by 100% of
any losses, if Consolidated Net Income is a loss during any fiscal period), plus
----
(ii) 100% of the aggregate amount of net cash proceeds received by the Company
from the sale of additional common stock issued after the Closing Date or other
Securities issued after the Closing Date and subsequently converted into common
stock.
6.10 LIMITATION ON MERGERS, CONSOLIDATIONS AND SALES OF SUBSTANTIALLY ALL
ASSETS. The Company shall not, and shall not permit any of its Subsidiaries to,
(i) consolidate with or be a party to a merger with any other corporation or
(ii) sell, lease, or otherwise dispose of all or substantially all of the Assets
of the Company or any of its Subsidiaries, except:
(a) any Subsidiary of the Company may merge or consolidate with or into
the Company or any Domestic Subsidiary so long as the Company or the Domestic
Subsidiary is the surviving corporation and any Subsidiary of the Company that
is not a Domestic Subsidiary can merge or consolidate with or into any other
Subsidiary that is not a Domestic Subsidiary;
(b) any Subsidiary of the Company may sell, lease, or otherwise dispose
of all or substantially all of its Assets to the Company or any Domestic
Subsidiary and any Subsidiary of the Company that is not a Domestic Subsidiary
may sell, lease, or otherwise dispose of all or substantially all of its Assets
to any other Subsidiary that is not a Domestic Subsidiary;
(c) the Company may merge or consolidate with or into any other
corporation if (i) the Company is the surviving corporation or the surviving
corporation is a corporation organized and existing under the laws of the United
States, any state thereof or the District of Columbia, (ii) after giving effect
to the consolidation or merger, no Default or Event of Default shall have
occurred and be continuing or would result therefrom; (iii) the surviving
corporation (if other than the Company) expressly assumes the obligations of the
Company under this Agreement and the Notes;
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and (iv) after giving effect to the merger or consolidation, the ratio of
Consolidated Debt to Total Capitalization (of the merged or consolidated
corporation) does not exceed .60 to 1.0; and
(d) in connection with an acquisition of stock or securities of a
corporation permitted under clause (a) of the definition of "Permitted
Investments", any Subsidiary may merge or consolidate with such corporation so
long as the surviving corporation of such merger is a Subsidiary.
6.11 LIMITATION ON OPERATING LEASES. The Company shall not, and shall not
permit any of its Subsidiaries to incur, create, assume or guarantee any
obligations under Operating Leases, unless, after giving effect thereto, the
aggregate amount of minimum annual rentals under all Operating Leases does not
exceed 3.5% of Consolidated Total Assets.
6.12 LIMITATION ON SUBSIDIARY DEBT. Other than Debt owed to the Company,
the Company shall not permit any of its Subsidiaries to incur, create, assume or
guarantee any Debt (which, for purposes of this Section 6.12, shall be deemed to
------------
include preferred stock issued by a Subsidiary of the Company that is not held
by the Company), unless, after giving effect thereto, (a) the total amount of
Debt of the Companies' Subsidiaries does not exceed 15% of Total Capitalization,
and (b) the Company would be entitled to incur at least $1.00 of additional Debt
under Section 6.7.
-----------
6.13 LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Company shall
not, and shall not permit any of its Subsidiaries to, enter into any Sale and
Leaseback Transactions, except:
(a) Sale and Leaseback Transactions so long as the aggregate Value of
all Assets transferred in such Sale and Leaseback Transactions during any fiscal
year of the Company does not exceed 5% of Consolidated Total Assets;
(b) if the aggregate Value of all Assets transferred in Sale and
Leaseback Transactions during any fiscal year of the Company exceeds 5% of
Consolidated Total Assets, all such Sale and Leaseback Transactions in which the
aggregate Value of the Assets transferred exceeds 5% of Consolidated Total
Assets so long as the Company offers to prepay, on a pro rata basis, a principal
amount of the Notes (plus accrued interest and a Credit Integrity Make-Whole
Premium) (the portion of any such prepayment payable to the Noteholders to be
apportioned pro rata among those Noteholders that accept such prepayment) and
the Debt outstanding under the New Revolving Credit Agreement equal to the
amount of the aggregate Value of the Assets transferred that exceeds 5% of
Consolidated Total Assets; and
(c) if the aggregate Value of all Assets transferred in Sale and
Leaseback Transactions during any fiscal year of the Company exceeds 5% of
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Consolidated Total Assets, as an alternative to the exception set forth in
clause (b) above, all Sale and Leaseback Transactions in which the aggregate
- ----------
Value of the Assets transferred exceeds 5% of Consolidated Total Assets but is
less than 10% of Consolidated Total Assets so long as (i) (A) the consideration
received is cash only and is at least equal to the Value of the Assets
transferred, (B) the consideration received is used within 18 months after such
transfer to purchase Assets of comparable worth and purpose, and (C) the
consideration received is deposited in a segregated bank account until used to
purchase such Assets, or (ii) the consideration received is cash only, is at
least equal to the Value of the Assets transferred, and is used to repay Debt of
the Company under the Notes and the New Revolving Credit Agreement (together
with any applicable premium thereon).
6.14 LIMITATION ON SALES OF ASSETS. The Company shall not, and shall not
permit its Subsidiaries to, sell or otherwise dispose of, or suffer the
disposition of, its Assets, except:
(a) sales or other dispositions of Assets in the ordinary course of the
Company's business;
(b) sales or other dispositions of Assets permitted under Section 6.10
------------
or Section 6.13;
------------
(c) sales or other dispositions of Assets (not excepted under clauses
-------
(a) or (b) above) so long as the aggregate Value of all Assets transferred
- ----------
during any fiscal year of the Company does not exceed 5% of Consolidated Total
Assets;
(d) if the aggregate Value of all Assets sold or otherwise disposed of
during any fiscal year of the Company (not excepted under clauses (a) or (b)
------------------
above) exceeds 5% of Consolidated Total Assets, all such sales or other
dispositions of Assets in which the aggregate Value of the Assets transferred
exceeds 5% of Consolidated Total Assets so long as the Company offers to prepay,
on a pro rata basis, a principal amount of the Notes (plus accrued interest and
a Credit Integrity Make-Whole Premium) (the portion of any such prepayment
payable to the Noteholders to be apportioned pro rata among those Noteholders
that accept such prepayment) and the Debt outstanding under the New Revolving
Credit Agreement equal to the amount of the aggregate Value of the Assets
transferred that exceeds 5% of Consolidated Total Assets; and
(e) sales of accounts receivable (or interests therein), including
transfers or securitizations thereof, pursuant to an Approved Securitization
Transaction so long as (i) the consideration received therefor is cash and (ii)
an amount equal to the aggregate amount paid for such accounts receivable (or
interests therein) to be recovered from such accounts receivable (or interests
therein) is used to repay Debt of the Company owing under the New Revolving
Credit Agreement or this Agreement or,
34
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with respect to proceeds received after the initial purchase and sale, is
reinvested in the Company.
6.15 LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company shall not,
and shall not permit any of its Subsidiaries, to enter into or permit to exist
any transaction with any Affiliate which is not the Company or a Subsidiary of
the Company on terms that are less favorable than those that could be obtained
in an arm's length transaction in the ordinary course of business with a Person
that is not an Affiliate, except for any such transactions which, in the
aggregate among all Affiliates, do not exceed $5,000,000 in total consideration
paid by either party.
6.16 REPURCHASE OF NOTES. Neither the Company nor any Subsidiary of the
Company, directly or indirectly, may repurchase or make any offer to repurchase
any Notes (including pursuant to the requirements of Sections 6.13 and 6.14)
----------------------
unless an offer has been made to repurchase Notes, pro rata, from all
Noteholders at the same time and upon the same terms. If any Notes are
repurchased, such Notes shall thereafter be cancelled and no Notes shall be
issued in substitution therefor.
6.17 REPORTS. The Company shall (i) keep proper books of record and
account for itself and its Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied, and (ii) furnish to each Noteholder the
information set forth below:
(a) QUARTERLY STATEMENTS. As soon as available and in any event within
45 days after the end of each of the first three fiscal quarters in each fiscal
year of the Company, unaudited consolidated and consolidating balance sheets of
the Company and its Subsidiaries as of the end of such fiscal quarter and
consolidated and consolidating statements of income and retained earnings of the
Company and its Subsidiaries for such fiscal quarter and for the period
commencing at the end of the previous fiscal year and ending with the end of
such fiscal quarter, and setting forth in comparative form the corresponding
figures for the corresponding periods of the previous fiscal year, all in
reasonable detail and duly certified (subject to year-end audit adjustments and
the absence of footnotes) by the Chief Financial Officer or Treasurer of the
Company as having been prepared in accordance with GAAP consistently applied.
(b) ANNUAL STATEMENTS. As soon as available and in any event within 90
days after the end of each fiscal year of the Company, a copy of the annual
audit report for such year for the Company and its Subsidiaries, including
therein a consolidated balance sheet of the Company and its Subsidiaries as of
the end of such fiscal year and consolidated statements of income and retained
earnings and of source and application of funds of the Company and its
Subsidiaries for such fiscal year, together with a consolidating balance sheet
of the Company and its Subsidiaries as of the end of such fiscal year and
consolidating statements of income and retained earnings and of source and
application of funds of the Company and its Subsidiaries for such fiscal year,
which consolidated balance sheets and financial statements are certified by
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<PAGE>
independent public accountants of recognized standing acceptable to the
Purchasers, together with a certificate of such accounting firm to the
Purchasers stating that in the course of the regular audit of the business of
the Company and its Subsidiaries, which audit was conducted by such accounting
firm in accordance with generally accepted auditing standards, such accounting
firm has read this Agreement insofar as necessary for such certificate and that,
in making its audit examination, such accounting firm has obtained no knowledge
of any condition or event pertaining to accounting or financial matters or the
consolidated financial condition of the Company and its Subsidiaries that then
constitutes an Event of Default or Default, or if, in the opinion of such
accounting firm, such an Event of Default or Default has occurred and is
continuing, a statement as to the nature thereof and the period of existence
thereof.
(c) SEC AND OTHER REPORTS. Promptly upon their becoming available, a
copy of each financial statement, report, notice, or proxy statement (if any)
sent by Merisel, Inc. or the Company to stockholders generally, each regular,
periodic, or special report (including the auditors' comment letter to
management) submitted to Merisel, Inc. or the Company by its independent
certified public accountants in connection with any audit of the accounts of
Merisel, Inc. or the Company made by such accountants, and each registration
statement or prospectus filed by Merisel, Inc. or any Subsidiary thereof with
any securities exchange or the Securities and Exchange Commission or any
successor agency, including each Annual Report and each Quarterly Report.
(d) OFFICERS' CERTIFICATES. Within the periods provided in clauses (a)
-----------
and (b) above, a certificate of the Chief Financial Officer or Treasurer of the
- -------
Company stating that such officer has reviewed the provisions of this Agreement,
setting forth the information and computations (in sufficient detail) required
in order to establish whether the Company was in compliance with the
requirements of Section 6.6 through Section 6.15 at the end of the period
----------- ------------
covered by the financial statements then being furnished, and stating that there
exists no Event of Default or Default, or if any Event of Default or Default
exists, specifying the nature and period of existence thereof and the action the
Company is taking and proposes to take with respect thereto.
(e) NOTICE OF DEFAULT. Promptly, and in any event within five days,
after any Responsible Officer of the Company obtains knowledge of the occurrence
of an Event of Default or Default, a certificate of a Responsible Officer of the
Company setting forth details of such Event of Default or Default and the period
of existence thereof and the action which the Company proposes to take with
respect thereto.
(f) NOTICE OF LITIGATION. Promptly after the institution of any suit,
action, or proceeding against the Company or any Subsidiary of the Company
which, if adversely determined, could reasonably be expected to have a
materially adverse effect on the Assets, business, profits, or condition
(financial or otherwise) of
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the Company or any of its Subsidiaries, written notice of such suit, action,
or proceeding.
(g) ERISA MATTERS. Promptly upon becoming aware of the occurrence of
any Termination Event or "prohibited transaction" (as defined in Section 4975 of
the Code), in connection with any Plan or any trust created thereunder, written
notice specifying the nature thereof, what action the Company has taken, is
taking or proposes to take with respect thereto, and, when known, any action
taken or threatened by the Internal Revenue Service or the PBGC with respect
thereto.
(h) OTHER INFORMATION. Promptly upon request therefor, such other
data, filings, and information as may be reasonably requested by a Noteholder
from time to time.
6.18 RIGHTS OF INSPECTION. The Company shall permit each Noteholder of the
then outstanding Notes by its representatives, to inspect any of the Assets,
corporate books, and financial records of the Company and each Subsidiary of the
Company, to examine and make copies of all of the books of accounts and other
financial records of the Company and each Subsidiary of the Company, to discuss
the affairs, finances, and accounts of the Company and each Subsidiary of the
Company with, and to be advised as to the same by, their respective officers,
and to discuss their respective affairs, finances, and accounts with their
respective officers, employees, and independent public accountants (and by this
provision the Company authorizes said accountants to discuss with the
Noteholders the finances and affairs of the Company and its Subsidiaries), all
at such reasonable times and as often as may be reasonably requested. The
Company shall be required to pay or reimburse any such Noteholder for expenses
which it may incur in connection with any such visitation or inspection only if
such visitation or inspection takes place after the occurrence and during the
continuance of an Event of Default or Default.
6.19 ENVIRONMENTAL LAWS. (a) The Company shall, and shall cause its
Subsidiaries to, comply with (i) all Environmental Laws in all material respects
and (ii) any order, notice or demand issued pursuant to such Environmental Laws,
in each case applicable to the Assets of the Company or its Subsidiaries.
(b) The Company shall promptly advise each Noteholder in writing of (i)
any and all material enforcement, cleanup, removal, or other governmental or
regulatory actions instituted or completed, or overtly threatened or
contemplated pursuant to any Environmental Laws; (ii) all material claims made
or overtly threatened by any third party against the Company or any of its
Subsidiaries with respect to any property owned or leased by any of them,
relating to material damage, contribution, cost, recovery, compensation, loss,
or injury resulting from any Hazardous Substance; (iii) the Company's or any of
its Subsidiaries' discovery of any occurrence or condition on any real property
owned or leased by any of them that could
37
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reasonably be expected to cause such real property or any part thereof to be
subject to restrictions on the ownership, occupancy, transferability, or use,
which restrictions would or could reasonably be expected to have a material
adverse effect on the Assets, business, profits, or condition (financial or
otherwise) of the Company or any of its Subsidiaries.
6.20 USE OF PROCEEDS. None of the proceeds from the issuance of the
Original Notes or the Notes have been or will be used in such a way that
violates or will result in a violation of Section 7 of the Securities Exchange
Act of 1934, as amended, or any regulation issued pursuant thereto, including
Regulations G, T, U, and X of the Board of Governors of the Federal Reserve
System. None of the proceeds from the sale of the Original Notes or the Notes
have been or will be used to purchase, or refinance any borrowing, the proceeds
of which were used to purchase, any "margin stock" within the meaning of such
Regulation G.
6.21 NOTES TO BE PARI PASSU WITH NEW REVOLVING CREDIT AGREEMENT. The
Company's obligations to repay the Notes shall rank pari passu with the
Company's obligations to repay advances and other obligations under the New
Revolving Credit Agreement. Unless the Noteholders are offered the same benefit
on pari passu basis, the Company shall not, and shall not permit its
Subsidiaries to, (a) provide any guaranties of the indebtedness under the New
Revolving Credit Agreement (other than those provided at the closing of the New
Revolving Credit Agreement and disclosed to the Purchasers and those provided by
the Company in connection with the establishment of Foreign Subsidiary
Facilities (as defined in the New Revolving Credit Agreement)), (b) add any
co-obligors to the obligations of the Company under the New Revolving Credit
Agreement (other than in connection with the establishment of Foreign Subsidiary
Facilities (as defined in the New Revolving Credit Agreement)), or (c) provide
any collateral for the indebtedness under the New Revolving Credit Agreement,
except in goods shipped or documents presented in connection with commercial
letters of credit issued under the New Revolving Credit Agreement.
6.22 SUBORDINATED NOTE PAYMENTS. The Company shall not pay, make, or set
apart, or permit any of its Subsidiaries to, directly or indirectly, pay, make,
or set apart, any sum for any payment or prepayment of principal of, premium, if
any, or interest on, or redemption, purchase, retirement, defeasance, sinking
fund, or similar payment with respect to any Subordinated Note, except that, so
long as no "Blockage Period" under the Subordinated Note Purchase Agreement is
then in effect, the Company may make scheduled interest and principal payments
in respect of the Subordinated Notes in accordance with the terms of, and only
to the extent required by, and subject to the subordination provisions contained
in, the Subordinated Note Purchase Agreement as it exists on the Closing Date;
provided, however, that no prepayment of the principal amount of the
- -------- -------
Subordinated Notes or any other Subordinated Debt, or any redemption, purchase,
retirement, defeasance, sinking fund, or similar payment with respect to the
Subordinated Notes or any other Subordinated
38
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Debt shall be permitted at any time prior to the indefeasible payment in full of
the Notes.
6.23 AMENDMENTS OR WAIVERS OF CERTAIN DOCUMENTS. The Company shall not,
and shall not permit any Subsidiary to, amend or otherwise change the terms of
any Subordinated Debt if the effect of such amendment or change is to increase
the interest rate on such Debt, change the dates upon which payments of
principal or interest are due thereon, change any event of default or condition
to an event of default with respect to such Debt, change the redemption
provisions thereof, or change the subordination provisions thereof (or any
guaranty thereof), or which, together with all other amendments or changes made,
increase materially the obligations of the obligor or confer additional rights
on the holder of such Debt which could be adverse to the Company or the
Purchasers. The Company shall not, and shall not permit any Subsidiary to,
amend any of the documents relative to, or otherwise change the terms of, any
Approved Securitization Transaction which, together with all other amendments or
changes made, would increase materially and adversely the obligations of the
Company or any Subsidiary thereunder; provided that the amount of any Approved
Securitization Transaction may be increased without the consent of the
Noteholders so long as such increase does not result in a breach of any other
provision of this Agreement.
6.24 ERISA. (a) The Company and its ERISA Affiliates each shall take and
fulfill all actions necessary to continue, and will continue, any and each Plan
in substantial compliance with applicable requirements of ERISA and the Code, in
each case as in effect at the time, until each such Plan is terminated and the
liabilities thereof discharged, in accordance with applicable law.
(b) Neither the Company nor any of its ERISA Affiliates shall suffer or
permit any Unfunded Liabilities with respect to any Plans which could materially
adversely affect the Assets, business, profits, or condition (financial or
otherwise) of the Company.
6.25 RATIO OF EARNINGS BEFORE INTEREST AND TAXES TO INTEREST EXPENSE. The
Company and its Subsidiaries, on a consolidated basis, shall at all times
maintain a ratio of Earnings before Interest and Taxes for the Company's
preceding four fiscal quarters to Interest Expense for the Company's preceding
four fiscal quarters of at least 2.0 to 1.0.
6.26 MINIMUM INTERCOMPANY DEBT. The Company shall lend to Merisel Canada,
and shall cause Merisel Canada to borrow from and owe to the Company, at all
times from and after the Closing Date until the Notes are indefeasibly paid in
full, Debt (other than the items described in clauses (iii) and (iv) of the
deinition of Debt herein) in an amount not less than $20,000,000.
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SECTION 7. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
7.1 EVENTS OF DEFAULT. Any one or more of the following shall constitute
an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note when the
same shall have become due and payable and such default shall continue for three
(3) Business Days; or
(b) Default shall occur in the payment of the principal of any Note or
any Make-Whole Premium thereon at the expressed or any accelerated maturity
date; or
(c) (i) Merisel, Inc., the Company or any of its Subsidiaries shall
fail to pay any Debt (excluding Debt incurred hereunder) of Merisel, Inc., the
Company or such Subsidiary exceeding in the aggregate $5,000,000, or any
interest or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; (ii) any other default under any agreement or
instrument relating to any such Debt, or any other event, shall occur and shall
continue after the applicable grace period, if any, specified in such agreement
or instrument, if the effect of such default or event is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or (iii) any such Debt
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), prior to the stated maturity
thereof; or
(d) Default shall occur in the observance or performance of any
covenant or agreement or any other provision of this Agreement which, in any
case, is not remedied within ten (10) days after receipt by the Company of
written notice of such default from any Noteholder; provided that if the Company
--------
shall fail to timely provide notice of the occurrence of any such default as
required under Section 6.17(e), such default shall immediately become an Event
---------------
of Default; or
(e) Any representation or warranty made by the Company herein, or made
by the Company in any statement or certificate furnished by the Company in
connection with the consummation of the issuance and delivery of the Notes or
otherwise pursuant to this Agreement, is untrue in any material respect as of
the date of the issuance or making thereof; or
(f) Final judgment or judgments entered by a court of competent
jurisdiction for the payment of money aggregating in excess of One Million
Dollars ($1,000,000) is or are outstanding against the Company or any Subsidiary
of the Company or against any Assets of either and any one such judgment in
excess of One Million Dollars ($1,000,000) has, or such judgments aggregating in
excess of One
40
<PAGE>
Million Dollars ($1,000,000) have, remained unpaid, unvacated, unbonded or
unstayed by appeal or otherwise for a period of ten (10) days from the date of
entry; or
(g) An event or condition shall occur or exist with respect to any
Plan and, as a result of such event or condition, together with all other such
events or conditions, the Company or any of its ERISA Affiliates shall incur or
in the reasonable opinion of the Required Noteholders shall be reasonably likely
to incur a liability to a Plan, the PBGC, or the United States government (or
any combination of the foregoing), which is, in the reasonable determination of
the Required Noteholders, material in relation to the consolidated financial
position of the Company and its Subsidiaries; or
(h) Merisel Canada shall fail to make any payment when due under, or
be in violation of any material provision of, the Canada Guaranty; or the Canada
Guaranty shall be terminated (unless terminated with the consent of the
Purchasers), revoked, or declared void or invalid; or the validity or
enforceability of the Canada Guaranty shall be attacked or challenged by Merisel
Canada, the Company, or any third party; or any representation or warranty made
in the Canada Guaranty is untrue in any material respect as of the date of the
issuance or making thereof; or
(i) Merisel Europe shall fail to make any payment when due under the
Europe Guaranty; or the Europe Guaranty shall be terminated (unless terminated
with the consent of the Purchasers), revoked, or declared void or invalid; or
the validity or enforceability of the Europe Guaranty shall be attacked or
challenged by Merisel Europe, the Company, or any third party; or any
representation or warranty made in the Europe Guaranty is untrue in any material
respect as of the date of the issuance or making thereof; or
(j) Merisel, Inc. shall fail to make any payment when due under the
Parent Guaranty; or the Parent Guaranty shall be terminated (unless terminated
with the consent of the Purchasers), revoked, or declared void or invalid; or
the validity or enforceability of the Parent Guaranty shall be attacked or
challenged by Merisel, Inc., the Company, or any third party; or any
representation or warranty made in the Parent Guaranty is untrue in any material
respect as of the date of the issuance or making thereof; or
(k) A court or other governmental authority or agency having
jurisdiction in the premises shall enter a decree or order (i) for the
appointment of a receiver, liquidator, assignee, trustee, sequestrator, or other
similar official of the Company or any Subsidiary of the Company or of a
material portion of the Assets of either, or for the winding-up or liquidation
of its affairs, and such decree or order shall remain in force, undischarged and
unstayed for a period of more than thirty (30) days, or (ii) for the
sequestration or attachment of any material portion of the Assets of the Company
or any Subsidiary of the Company, without its unconditional return to the
41
<PAGE>
possession of the Company or such Subsidiary, or its unconditional release from
such sequestration or attachment, within thirty (30) days thereafter; or
(l) The Company or any Subsidiary of the Company makes an assignment
for the benefit of creditors, or the Company or any Subsidiary of the Company
applies for or consents to the appointment of a custodian, liquidator, trustee,
or receiver for the Company or such Subsidiary or for a material portion of the
Assets of either; or
(m) Bankruptcy, reorganization, arrangement, or insolvency
proceedings, or other proceedings for relief under any bankruptcy or similar law
or laws for the relief of debtors, are instituted by or against the Company or
any Subsidiary of the Company and, if instituted against the Company or any
Subsidiary of the Company, are consented to or are not dismissed within sixty
(60) days after such institution.
7.2 NOTICE TO NOTEHOLDERS. In addition to the Company's obligation to
provide notice to the Noteholders of the occurrence of an Event of Default or
Default under Section 6.17(e), if any Noteholder or a holder of any other
---------------
evidence of Indebtedness of the Company gives any notice or takes any other
action with respect to a claimed default, irrespective of whether such claimed
default is an Event of Default or Default hereunder, the Company agrees to give
written notice within three (3) Business Days of such event to all Noteholders,
such notice to be in writing and sent in accordance with Section 9.7.
-----------
7.3 ACCELERATION OF MATURITIES; EXERCISE OF REMEDIES. When any Event of
Default described in paragraphs (a) or (b) of Section 7.1 has happened and is
--------------------- -----------
continuing, any Noteholder or Noteholders may, with respect to the Notes then
held by such Noteholder or Noteholders, by notice in writing sent to the
Company, declare the entire principal and all interest accrued on the Notes held
by such Noteholder or Noteholders to be, and such Notes shall thereupon become,
forthwith due and payable, without any presentment, demand, protest, or other
notice of any kind, all of which are hereby expressly waived. When any Event of
Default described in paragraphs (c) through (h), inclusive, of Section 7.1 has
-------------------------- -----------
happened and is continuing, Noteholders holding 51% or more of the principal
amount of the Notes at the time outstanding may, by notice in writing sent to
the Company, declare the entire principal and all interest accrued on all Notes
to be, and all Notes shall thereupon become, forthwith due and payable, without
any presentment, demand, protest, or other notice of any kind, all of which are
hereby expressly waived. When any Event of Default described in paragraph (i),
--------------
(j), or (k) of Section 7.1 has occurred, then all outstanding Notes shall
- ----------- -----------
immediately become due and payable without presentment, demand, protest, or
notice of any kind. Upon the Notes becoming due and payable as a result of any
Event of Default as aforesaid, the Company shall forthwith pay to the
Noteholders the entire principal and interest accrued on the Notes and, except
for an Event of Default described in
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<PAGE>
paragraph (i), (j), or (k) of Section 7.1, to the extent permitted by law,
- -------------------------- -----------
liquidated damages for the loss of the bargain evidenced hereby (and not as a
penalty) in an amount equal to the Credit Integrity Make-Whole Premium then
payable on the Notes (determined as of the date of declaration of an
acceleration or, in the case of an Event of Default described in paragraph (i),
-------------
(j) or (k) of Section 7.1, the date of acceleration). No course of dealing on
- ---------- -----------
the part of any Noteholder nor any delay or failure on the part of any
Noteholder to exercise any right shall operate as a waiver of such right or
otherwise prejudice such Noteholder's rights, powers, and remedies. The Company
further agrees, to the extent permitted by law, to pay to the Noteholders all
costs and expenses (including reasonable attorneys fees) incurred by them in the
collection of any Notes upon any default hereunder or thereon (including such
costs and expenses incurred in connection with a workout or an insolvency or
bankruptcy proceeding).
Upon the occurrence and during the continuance of any Event of Default,
irrespective of whether any of the Notes have been accelerated, any Noteholder
may exercise any right, power, or remedy permitted by law for specific
performance of any covenant contained in this Agreement or in any Note, or for
an injunction against the violation of any of the terms of this Agreement or any
Note, or to enforce payment of any overdue payment under this Agreement or any
Note, or in aid of the exercise of any power granted in this Agreement or any
Note. Upon the acceleration of any or all of the Notes, the Noteholder or
Noteholders holding such accelerated Notes may forthwith proceed to exercise any
right, power, or remedy permitted by law to enforce payment of the accelerated
amount of such Notes or to enforce any other right held by such Noteholder or
Noteholders under this Agreement or the Notes. Upon the acceleration of at
least 51% of the outstanding principal amount of the Notes, the Noteholder or
Noteholders holding such accelerated Notes may, on behalf of all Noteholders,
forthwith proceed to exercise any right, power, or remedy permitted by law to
enforce payment of Merisel Canada's obligations under the Canada Guaranty,
Merisel Europe's obligations under the Europe Guaranty, and Merisel, Inc.'s
obligations under the Parent Guaranty or to enforce any other right held by such
Noteholders under the Canada Guaranty, the Europe Guaranty, and the Parent
Guaranty. Such Noteholder or Noteholders shall distribute any collections
received under the Canada Guaranty, the Europe Guaranty, and the Parent Guaranty
in accordance with the apportionment provision in Section 4 of the Canada
Guaranty, the Europe Guaranty, and the Parent Guaranty, as the case may be.
7.4 RESCISSION OF ACCELERATION. The provisions of Section 7.3 are subject
-----------
to the conditions (i) that if the principal of and accrued interest on any
outstanding Notes has been declared immediately due and payable by reason of the
occurrence of any Event of Default described in paragraphs (a) or (b) of Section
--------------------- -------
7.1, the Noteholder or Noteholders with respect to such Notes may, by written
- ---
notice to the Company rescind and annul its respective declaration and the
consequences thereof, and (ii) that if the principal of and accrued interest on
all or any outstanding Notes have
43
<PAGE>
been declared immediately due and payable by reason of the occurrence of any
Event of Default described in paragraphs (c) through (h), inclusive, of Section
-------------------------- -------
7.1, the Required Noteholders may, by written notice to the Company and the
- ---
other Noteholders, rescind and annul such declaration and the consequences
thereof, provided that at the time any such declaration is annulled and
rescinded:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(b) all arrearages of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any principal,
interest, or premium on the Notes which has become due and payable solely by
reason of such declaration under Section 7.3) shall have been duly paid; and
-----------
(c) each and every other Default and Event of Default shall have been
cured or waived pursuant to Section 8.1;
-----------
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
hereto.
SECTION 8. AMENDMENTS, WAIVERS AND CONSENT.
8.1 CONSENT REQUIRED. Any term, covenant, agreement, or condition of this
Agreement may, with the consent of the Company, be amended or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), if the Company shall have obtained the consent
in writing of the Required Noteholders; provided, however, that without the
-------- -------
written consent of all of the Noteholders, no such amendment or waiver shall be
effective (i) which will change the time of payment of the principal of or the
interest on any Note or change the principal amount thereof or reduce the rate
of interest thereon, or (ii) which will change any of the provisions with
respect to voluntary prepayments or the calculation of any Make-Whole Premium,
or (iii) which will reduce the percentage of Noteholders required to consent to
any amendment or waiver.
8.2 SOLICITATION OF NOTEHOLDERS. So long as there are any Notes
outstanding, the Company shall not solicit, request, or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement or the Notes unless each Noteholder (irrespective of the amount of
Notes then owned by it) shall be informed thereof by the Company and shall be
afforded the opportunity of considering the same and shall be supplied by the
Company with sufficient information to enable it to make an informed decision
with respect thereto. The Company shall not, directly or indirectly, pay or
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee, or otherwise, to any Noteholder as consideration for or as an
inducement to entering into by any Noteholder of any waiver or
44
<PAGE>
amendment of any of the terms and provisions of this Agreement or the Notes
unless such remuneration is concurrently offered, on the same terms, ratably to
all Noteholders.
8.3 EFFECT OF AMENDMENT OR WAIVER. Any such amendment or waiver shall
apply equally to all Noteholders and shall be binding upon them, upon each
future Noteholder and upon the Company, whether such Note shall have been marked
to indicate such amendment or waiver. No such amendment or waiver shall extend
to or affect any obligation not expressly amended or waived or impair any right
consequent thereon.
SECTION 9. MISCELLANEOUS.
9.1 REGISTERED NOTES. The Company shall cause the Note Register to be kept
at its principal office, and the Company shall register and transfer or cause to
be registered or transferred, as hereinafter provided and under such reasonable
regulations as it may prescribe, any Note issued pursuant to this Agreement.
At any time and from time to time the registered holder of any Note which
has been duly registered as hereinafter provided may transfer such Note upon
surrender thereof at the principal office of the Company duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of such Note or its attorney duly authorized in writing.
The Person in whose name any registered Note shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes of this
Agreement. Payment of or on account of the principal, any Make-Whole Premium,
and interest on any registered Note shall be made to or upon the written order
of such registered holder.
9.2 EXCHANGE OF NOTES. At any time and from time to time, upon not less
than (10) ten days notice to that effect given by any Noteholder initially
delivered or of any Note substituted therefor pursuant to Section 9.1, this
-----------
Section 9.2, or Section 9.3, and, upon surrender of such Note at its office, the
- ----------- -----------
Company shall deliver in exchange therefor, without expense to such Noteholder,
except as set forth below, Notes for the same aggregate principal amount as the
then unpaid principal amount of the Note so surrendered, in the denomination of
$500,000 or any amount in excess thereof as such Noteholder shall specify, dated
as of the date to which interest has been paid on the Note so surrendered, or,
if such surrender is prior to the payment of any interest thereon, then dated as
of the date of issue, payable to such Person or Persons, or order, as may be
designated by such Noteholder, and otherwise of the same form and tenor as the
Notes so surrendered for exchange. The Company may require the payment of a sum
sufficient to cover any stamp tax or governmental charge imposed upon such
exchange or transfer.
45
<PAGE>
9.3 LOSS, THEFT, ETC. OF NOTES. Upon receipt of evidence satisfactory to
the Company of the loss, theft, mutilation, or destruction of any Note, and in
the case of any such loss, theft, or destruction upon delivery of indemnity
reasonably satisfactory to the Company (a written indemnity agreement from a
Noteholder that is an Institutional Investor shall be deemed satisfactory to the
Company), or in the event of such mutilation upon surrender and cancellation of
the Note, the Company shall make and deliver without expense to the holder
thereof (other than pursuant to such indemnity), a new Note, of like tenor, in
lieu of such lost, stolen, destroyed, or mutilated Note. If a Purchaser or any
subsequent Institutional Holder is the owner of such lost, stolen, or destroyed
Note, then the affidavit of an authorized officer of such owner, setting forth
the fact of loss, theft, or destruction and of its ownership of such Note at the
time of such loss, theft, or destruction shall be accepted as satisfactory
evidence thereof and no further evidence of such loss, theft, or destruction
shall be required as a condition to the execution and delivery of a new Note.
9.4 DIRECT PAYMENT. Notwithstanding anything to the contrary contained in
this Agreement or the Notes, the Company will punctually pay when due the
principal of the Notes, interest thereon, and any Make-Whole Premium, without
any presentment thereof, directly to each Purchaser or to the nominee of any
Purchaser at the address set forth in Schedule 1 or such other address as a
----------
Purchaser or a Purchaser's nominee may from time to time designate in writing to
the Company, or, if a bank account with a United States bank is designated for a
Purchaser or a Purchaser's nominee on Schedule 1 hereto or in any written notice
----------
to the Company from a Purchaser or a Purchaser's nominee, the Company will make
such payments in immediately available funds to such bank account, marked for
attention as indicated. Each Purchaser of any Notes agrees that in the event
that it shall sell or transfer any Notes, it will, prior to the delivery of such
Notes, make a notation thereon of all principal, if any, prepaid on such Notes
and will also note thereon the date to which interest has been paid on such
Notes. The Company agrees that transferees of Notes shall be entitled to the
benefits of this Section 9.4 so long as any such transferee has made the same
-----------
agreements relating to the transferred Notes as the Purchasers have made in this
Section 9.4. The Company shall be entitled to presume conclusively that the
- -----------
Purchasers or any subsequent Noteholders remain the holders of the Notes until
such Notes shall have been presented to the Company as evidence of the transfer
of such Notes.
9.5 EXPENSES, STAMP TAX INDEMNITY. Whether the transactions herein
contemplated shall be consummated, the Company agrees to pay directly all of the
Purchasers' out-of-pocket expenses in connection with the preparation, execution
and delivery of this Agreement and the transactions contemplated hereby,
including the fees and disbursements of Brobeck, Phleger & Harrison, special
counsel for the Purchasers, duplication and printing costs and charges for
shipping the Notes, adequately insured to each Purchaser at its home office or
at such other place as it may designate, and all such expenses relating to any
amendments, waivers or consents pursuant to the
46
<PAGE>
provisions hereof, including any amendments, waivers, or consents resulting from
any workout, renegotiation or restructuring relating to the performance by the
Company of its obligations under this Agreement and the Notes whether any of the
foregoing are actually executed and delivered. The Company also agrees that it
will pay and save harmless the Purchasers against any and all liability with
respect to stamp and other similar taxes, if any, which may be payable or which
may be determined to be payable in connection with the execution and delivery of
this Agreement or the Notes, whether any Notes are then outstanding. The
Company agrees to protect and indemnify the Purchasers against any liability for
any and all brokerage fees and commissions payable or claimed to be payable to
any Person in connection with the transactions contemplated by this Agreement.
9.6 POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE. No delay or failure
on the part of any Noteholder in the exercise of any power or right shall
operate as a waiver thereof; nor shall any single or partial exercise of the
same preclude any other or further exercise thereof, or the exercise of any
other power or right, and the rights of any Noteholder are cumulative to, and
are not exclusive of, any rights or remedies any such Noteholder would otherwise
have.
9.7 NOTICES. All communications provided for hereunder shall be in writing
and, if to a Noteholder, personally delivered, mailed postage prepaid by
registered or certified mail, delivered by overnight air courier, or sent by
telefacsimile, addressed to such Noteholder at its address appearing on Schedule
--------
1 to this Agreement or such other address as a Noteholder may designate to the
- -
Company in writing, and if to the Company, personally delivered, mailed postage
prepaid by registered or certified mail, delivered by overnight air courier, or
sent by telefacsimile to the Company at 200 Continental Boulevard, El Segundo,
California 90245, Attention: Treasurer, or to such other address as the Company
may in writing designate to each Noteholder; provided, however, that a notice to
-------- -------
a Noteholder by overnight air courier shall only be effective if delivered to
such Noteholder at the street address designated for such purpose in Schedule 1
----------
or such other street address as such Noteholder may designate to the Company in
writing.
9.8 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the Purchasers'
benefit and to the benefit of their successors and assigns, including each
successive Noteholder or Noteholders; provided, however, that the Purchasers and
any subsequent Noteholders may not sell, assign, or transfer a Note or any
interest in a Note to any Institutional Investor whose business is a Permitted
Line of Business or the manufacture or sale of computer products or to any
Subsidiary of any such Institutional Investor.
9.9 SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
transactions occurring
47
<PAGE>
on the Closing Date, shall survive the closing and the delivery of this
Agreement and the Notes.
9.10 SEVERABILITY. Should any part of this Agreement for any reason be
determined to be invalid or unenforceable, such determination shall not affect
the validity or enforceability of any remaining portion, which remaining portion
shall remain in full force and effect as if this Agreement had been executed
with the invalid or unenforceable part hereof eliminated, and it is hereby
declared the intention of the parties hereto that they would have executed the
remaining portion of this Agreement without including therein any such part
which may, for any reason, be hereafter declared invalid or unenforceable.
9.11 CAPTIONS. The descriptive headings of the various Sections or parts
of this Agreement are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
9.12 EXECUTION IN COUNTERPARTS; TELECOPY EXECUTION. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Agreement. This Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto. Delivery of an executed counterpart of the signature page(s) of this
Agreement by telecopier shall be equally effective as delivery of a manually
executed counterpart. Any party delivering an executed counterpart of the
signature page(s) of this Agreement by telecopier shall thereafter also promptly
deliver a manually executed counterpart, but the failure to deliver such
manually executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
9.13 GOVERNING LAW. This Agreement and the Notes issued and sold hereunder
shall be governed by, and construed and enforced in accordance with, the laws of
the State of California.
9.14 CONSENT TO JURISDICTION. The Company irrevocably submits to the non-
exclusive jurisdiction of any California state or federal court sitting in the
City of Los Angeles, California over any suit, action, or proceeding arising out
of or relating to this Agreement or the Notes. To the fullest extent it may
effectively do so under applicable law, the Company irrevocably waives and
agrees not to assert, by way of motion, as a defense or otherwise, any claim
that it is not subject to the jurisdiction of any such court, any objection that
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding brought in any such court, and any claim that any such suit,
action, or proceeding brought in any such court has been brought in an
inconvenient forum.
48
<PAGE>
9.15 ENFORCEMENT OF JUDGMENTS; SERVICE OF PROCESS; JURY TRIAL WAIVER. The
Company agrees, to the fullest extent it may effectively do so under applicable
law, that a judgment in any suit, action, or proceeding of the nature referred
to in Section 9.14 brought in any such court shall be conclusive and binding
------------
upon the Company and may be enforced in the courts of the United States of
America or the State of California (or any other courts to the jurisdiction of
which the Company is or may be subject) by a suit upon such judgment.
THE COMPANY AGREES THAT SERVICE OF PROCESS SUFFICIENT FOR PERSONAL
JURISDICTION IN ANY ACTION, SUIT, OR PROCEEDING OF THE NATURE REFERRED TO IN
SECTION 9.14 MAY BE MADE BY REGISTERED OR CERTIFIED MAIL TO THE COMPANY'S
- ------------
ADDRESS SET FORTH IN SECTION 9.7.
-----------
EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT, ANY OF THE RELATED DOCUMENTS TO BE DELIVERED PURSUANT HERETO, OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION AND THE
CONTRACTUAL RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY
RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL
CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY
HERETO FURTHER WARRANTS AND REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER WITH
ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS, OR
MODIFICATIONS TO THIS AGREEMENT OR THE RELATED DOCUMENTS TO BE DELIVERED
PURSUANT HERETO. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
9.16 NO LIMITATION ON SERVICE OR SUIT. Nothing herein shall affect the
right of the Purchasers to serve process in any manner permitted by law, or
limit any
49
<PAGE>
right that any Noteholders may have to bring proceedings against the Company in
the courts of any jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
9.17 COMPLETE AGREEMENT. This Agreement, together with the exhibits and
schedules hereto, the Notes, the Canada Guaranty, the Europe Guaranty, the
Parent Guaranty and the other agreements referred to herein or therein, is
intended by the parties as a final expression of their agreement and is intended
as a complete statement of the terms and conditions of their agreement.
9.18 CONFIDENTIALITY.
(a) The Company acknowledges that any Noteholders may deliver copies
of any financial statements and other documents delivered to such Noteholder and
disclose any other confidential information disclosed to such Noteholder, by or
on behalf of the Company in connection with or pursuant to this Agreement to (i)
such Noteholder's directors, officers, employees, agents, and professional
consultants, (ii) any other Noteholder, (iii) any Person to which such
Noteholder offers to sell such Notes or any part thereof; provided, however,
-------- -------
that with respect to such financial statements and other documents that are
clearly designated by the Company as confidential, such disclosure may not be
made to any Institutional Investor whose business is a Permitted Line of
Business or the manufacture or sale of computer products or to any Subsidiary of
any such Institutional Investor without the prior written consent of the
Company, (iv) any federal or state regulatory authority having jurisdiction over
such Noteholder, (v) the National Association of Insurance Commissioners or any
similar organization, (vi) the certified public accountants of such Noteholder,
or (vii) any other Person to which such delivery or disclosure may be necessary
or appropriate (a) in compliance with any law, rule, regulation, or order
applicable to such Noteholder, (b) in response to any subpoena or other legal
process, or (c) in connection with any litigation to which such Noteholder is a
party, including the exercise of any remedy hereunder. Nothing in this Section
-------
9.18(a) shall be construed to create or give rise to any fiduciary duty on the
- -------
part of any Noteholder to the Company.
(b) Each Noteholder agrees to keep confidential any financial
information delivered by the Company or its Subsidiaries (other than information
that is publicly available) and such other non-public proprietary information
delivered by the Company or its Subsidiaries that is clearly designated in
writing to be confidential; provided, however, that nothing herein shall prevent
-------- -------
any Noteholder from disclosing such information to any of the parties or under
any of the circumstances described in clauses (i) through (vii), inclusive, of
the preceding paragraph.
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<PAGE>
IN WITNESS WHEREOF, the Company and the Purchasers have caused this
Agreement to be duly executed by their respective duly authorized officers, all
as of the day and year first above written.
MERISEL AMERICAS, INC.,
a Delaware corporation
By /s/ TIMOTHY N. JENSON
______________________________
Its Vice President & Treasurer
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY, an Iowa corporation
By /s/ WARREN SHANK
______________________________
Its Counsel
By /s/ JOHN D. CLEAVENGER
______________________________
Its Counsel
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY, a Massachusetts corporation
By /s/ JOHN B. JOICE
______________________________
Its Vice President
AUSA LIFE INSURANCE COMPANY
By /s/ GREGORY W. THEOBALD
______________________________
Its VP & Asst. Secretary
51
<PAGE>
PFL LIFE INSURANCE COMPANY
By /s/ GREGORY W. THEOBALD
______________________________
Its VP & Asst. Secretary
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
By /s/ GREGORY W. THEOBALD
______________________________
Its VP & Asst. Secretary
BANKERS UNITED LIFE ASSURANCE COMPANY
By /s/ GREGORY W. THEOBALD
______________________________
Its VP & Asst. Secretary
INTERNATIONAL LIFE INVESTORS INSURANCE COMPANY
By /s/ GREGORY W. THEOBALD
______________________________
Its VP & Asst. Secretary
CONNECTICUT MUTUAL LIFE INSURANCE
COMPANY, a Connecticut corporation
By /s/ NORMAN A. THETFORD
______________________________
Its Investment Officer
C M LIFE INSURANCE COMPANY,
a Connecticut corporation
By /s/ NORMAN A. THETFORD
______________________________
Its Investment Officer
52
<PAGE>
PACIFIC MUTUAL LIFE INSURANCE
COMPANY, a California corporation
By /s/ DIANE W. DALES
_____________________________
Its Assistant Vice President
AMERITAS LIFE INSURANCE CORP.,
a Nebraska corporation
By /s/ WILLIAM W. LESTER
______________________________
Its Vice President - Securities
SHENENDOAH LIFE INSURANCE COMPANY,
a Virginia corporation
By /s/ P. GREGGORY WILLIAMS
______________________________
Its Vice President - Investments
and Treasurer
THE CANADA LIFE ASSURANCE COMPANY,
By /s/ BRIAN J. LYNCH
______________________________
Its Associate Treasurer
CANADA LIFE INSURANCE COMPANY OF AMERICA,
a Michigan corporation
By /s/ BRIAN J. LYNCH
______________________________
Its Associate Treasurer
53
<PAGE>
PROVIDENT MUTUAL LIFE INSURANCE
COMPANY OF PHILADELPHIA, a Pennsylvania
corporation
By /s/ G.C. LANGE
______________________________
Its Vice President
PROVIDENT MUTUAL LIFE AND ANNUITY
COMPANY OF AMERICA, a Pennsylvania
corporation
By /s/ G.C. LANGE
______________________________
Its Vice President
GUARANTEE MUTUAL LIFE COMPANY, a
Nebraska corporation
By /s/ DAVID BOMBERGER
______________________________
Its Senior Vice President-
Investments & Treasurer
54
<PAGE>
_________________________________________
MERISEL AMERICAS, INC.
$22,000,000 IN AGGREGATE PRINCIPAL AMOUNT
OF
AMENDED AND RESTATED
11.28% SUBORDINATED NOTES
DUE March 10, 2000
_________________________________________
_________________________________________
AMENDED AND RESTATED SUBORDINATED
NOTE PURCHASE AGREEMENT
_________________________________________
Dated as of December 23, 1993
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. THE NOTES.................................................. 2
(S)1.1 Authorization of Notes........................................... 2
(S)1.2 Exchange of Notes................................................ 2
(S)1.3 Definitions...................................................... 3
SECTION 2. GENERAL REPRESENTATIONS AND
WARRANTIES OF THE COMPANY................................. 3
(S)2.1 Capitalization; Subsidiaries.................................... 3
(S)2.2 Organization and Authority...................................... 4
(S)2.3 Business........................................................ 4
(S)2.4 Financial Statements and Other Information; Financial Condition. 4
(S)2.5 No Material Adverse Change...................................... 6
(S)2.6 Licenses, Registrations, etc.................................... 6
(S)2.7 Title to Properties: Leases..................................... 6
(S)2.8 Compliance with Other Instruments. etc.......................... 6
(S)2.9 No Materially Adverse Contracts. etc............................ 7
(S)2.10 Compliance with Law. etc........................................ 7
(S)2.11 Compliance with ERISA; No Multiemployer Plans................... 8
(S)2.12 Pending Litigation, etc......................................... 8
(S)2.13 Taxes........................................................... 8
(S)2.14 Holding Company Act; Investment Company Act..................... 9
(S)2.15 No Foreign Assets Control Regulation Violation.................. 9
(S)2.16 No Margin Regulation Violation.................................. 10
(S)2.17 Consents, etc................................................... 10
(S)2.18 No Event of Default............................................. 10
(S)2.19 Full Disclosure................................................. 10
(S)2.20 Validity of Agreement and Notes................................. 11
(S)2.21 Solvency........................................................ 11
(S)2.22 Compliance With Environmental Laws.............................. 12
(S)2.23 Broker's or Finder's Commissions................................ 12
(S)2.24 Insurance....................................................... 12
SECTION 3. SECURITIES ACT AND ERISA
REPRESENTATIONS........................................... 12
(S)3.1 Offerees........................................................ 12
(S)3.2 Investment Intent, etc.......................................... 13
(S)3.3 ERISA Representations........................................... 13
i
<PAGE>
(S)3.4 Character of Purchasers........................................ 13
SECTION 4. CONSENT TO RESTRUCTURING
TRANSACTIONS AND CLOSING
CONDITIONS............................................... 13
(S)4.1 Opinion of Special Counsel for The Purchasers.................. 13
(S)4.2 Opinion of Counsel for the Company............................. 14
(S)4.3 Performance of Obligations..................................... 14
(S)4.4 Representations True, etc.; Officer's Certificate.............. 14
(S)4.5 Permitted Investment........................................... 14
(S)4.6 Proceedings, Instruments, etc.................................. 14
(S)4.7 Taxes.......................................................... 15
(S)4.8 No Merger, etc................................................. 15
(S)4.9 Certain Financial Transactions Prohibited...................... 15
(S)4.10 Consents and Approvals......................................... 15
(S)4.11 Other Purchasers............................................... 16
(S)4.12 Certificate as to Compliance with Covenants.................... 16
(S)4.13 Accrued Interest............................................... 16
(S)4.14 Reorganization................................................. 16
(S)4.15 Closing Date................................................... 16
(S)4.16 Payment of Legal Fees.......................................... 16
SECTION 5. EXPENSES................................................. 16
SECTION 6. CERTAIN SPECIAL RIGHTS................................... 17
(S)6.1 Home Office Payment............................................ 17
(S)6.2 Delivery Expenses.............................................. 17
(S)6.3 Issuance Taxes................................................. 17
SECTION 7. NOTE PREPAYMENTS......................................... 18
(S)7.1 Required Prepayments and Payment............................... 18
(S)7.2 Optional Prepayments........................................... 19
(S)7.3 Notice of Prepayment........................................... 19
(S)7.4 Partial Prepayment Pro Rata.................................... 20
SECTION 8. REGISTRATION, EXCHANGE AND
REPLACEMENT OF NOTES..................................... 20
(S)8.1 Registration................................................... 20
(S)8.2 Exchange....................................................... 20
(S)8.3 Replacement.................................................... 20
ii
<PAGE>
SECTION 9. CERTAIN COVENANTS OF THE
COMPANY............................................... 21
(S)9.1 Maintenance of Office.......................................... 21
(S)9.2 Corporate Existence............................................ 21
(S)9.3 General Maintenance of Properties and Business, etc............ 22
(S)9.4 Notice of Certain Events and Conditions........................ 22
(S)9.5 Inspection..................................................... 23
(S)9.6 Compliance with Law, etc....................................... 23
(S)9.7 Payment of Taxes and Claims.................................... 23
(S)9.8 ERISA.......................................................... 24
(S)9.9 Transactions with Affiliates................................... 24
(S)9.10 Current Ratio.................................................. 24
(S)9.11 Priority Debt.................................................. 24
(S)9.12 Debt........................................................... 24
(S)9.13 Consolidated Net Income Before Interest Expense and Taxes...... 24
(S)9.14 Consolidated Tangible Net Worth................................ 25
(S)9.15 Limitation on Restricted Payments.............................. 25
(S)9.16 Consolidation and Merger....................................... 25
(S)9.17 Sale of Assets................................................. 26
(S)9.18 Restricted Investments......................................... 26
SECTION 10. INFORMATION TO BE FURNISHED
HOLDERS OF NOTES......................................... 26
(S)10.1 Financial Statements of the Company............................ 26
(S)10.2 Other Information.............................................. 28
(S)10.3 Officer's Certificates......................................... 29
(S)10.4 Accountants' Certificates...................................... 29
SECTION 11. DEFAULTS AND REMEDIES.................................... 30
(S)11.1 Events of Default; Acceleration of Notes....................... 30
(S)11.2 Default Remedies............................................... 32
(S)11.3 Notice of Default.............................................. 33
(S)11.4 Annulment of Acceleration of Note.............................. 33
SECTION 12. INTERPRETATION OF AGREEMENT AND
NOTES.................................................... 34
(S)12.1 Definitions.................................................... 34
(S)12.2 Directly or Indirectly......................................... 47
(S)12.3 Accounting Terms............................................... 47
(S)12.4 Governing Law.................................................. 47
(S)12.5 Headings....................................................... 47
iii
<PAGE>
(S)12.6 Independence of Covenants..................................... 47
SECTION 13. SUBORDINATION........................................... 47
(S)13.1 Subordination................................................. 47
(S)13.2 Definitions................................................... 47
(S)13.3 Payment Blockage.............................................. 50
(S)13.4 Acceleration Blockage......................................... 50
(S)13.5 Insolvency.................................................... 50
(S)13.6 Other Actions for Benefit of Senior Debt...................... 51
(S)13.7 Subrogation................................................... 51
(S)13.8 Obligations Unaffected........................................ 52
(S)13.9 Effect of Bankruptcy or Other Proceedings..................... 52
(S)13.10 Constructive Trust............................................ 52
(S)13.11 Revival of Rights............................................. 52
SECTION 14. MISCELLANEOUS........................................... 52
(S)14.1 Notices....................................................... 53
(S)14.2 Survival...................................................... 53
(S)14.3 Successors and Assigns........................................ 53
(S)14.4 Amendment and Waiver.......................................... 53
(S)14.5 Counterparts.................................................. 54
(S)14.6 Reproduction of Documents..................................... 54
iv
<PAGE>
SIGNATURES
SCHEDULE A
SCHEDULE I
SCHEDULE II-A
SCHEDULE II-B
SCHEDULE II-C
SCHEDULE III
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT F
v
<PAGE>
AMENDED AND RESTATED SUBORDINATED
NOTE PURCHASE AGREEMENT
Re: $22,000,000 of Amended and Restated 11.28% Subordinated
Notes due March 10, 2000
THIS AMENDED AND RESTATED SUBORDINATED NOTE PURCHASE AGREEMENT (this
"Agreement"), dated as of December 23, 1993, is entered into by and among the
Noteholders identified on the signature pages hereof (the "Purchasers") and
Merisel Americas, Inc., a Delaware corporation (the "Company").
R E C I T A L S
- - - - - - - -
WHEREAS, Softsel Computer Products, Inc., a Delaware corporation and
predecessor-in-interest to Merisel, Inc., and the Purchasers entered into that
certain Note Purchase Agreement, dated as of March 30, 1990 (the "Original
Agreement"), whereby the Purchasers purchased the $22,000,000 of 11.28%
Subordinated Notes, Due March 10, 2000 (the "Original Notes");
WHEREAS, pursuant to that certain First Amendment to Note Purchase
Agreement, dated as of April 1, 1991 (the "First Amendment"), that certain
Second Amendment to Note Purchase Agreement, dated as of October 30, 1991 (the
"Second Amendment"), and that certain Third Amendment to Note Purchase
Agreement, dated as of June 22, 1992 (the "Third Amendment"), Merisel, Inc. and
the Noteholders made certain amendments to the Original Agreement (the Original
Agreement, as amended by the First Amendment, the Second Amendment, and the
Third Amendment, is hereafter referred to as the "Existing Agreement");
WHEREAS, Merisel, Inc. concurrently herewith has completed a corporate
reorganization (the "Reorganization") whereby, among other things, Merisel, Inc.
transferred to the Company all of Merisel, Inc.'s right, title and interest in
and to the properties, assets, contracts, business, and liabilities identified
on Schedule A hereto (including, without limitation the capital stock and equity
interests in Merisel Canada Inc., Softsel Foreign Sales Corporation, Merisel
Latin America, Merisel Mexico S.A. de C.V., Merisel Asia, Inc., Intersell, Inc.,
and Merisel Pty. Ltd.) (collectively, the "Merisel Transfers") in exchange for
all of the Company's issued and outstanding stock, such that the Company becomes
a direct, wholly owned Subsidiary of Merisel, Inc., and whereby the Company
agreed to assume all of the obligations of Merisel, Inc. with respect to, among
other things, the Existing Agreement and the Original Notes;
1
<PAGE>
WHEREAS, the Reorganization requires the consent of the Noteholders
under the terms and conditions of the Existing Agreement and the Noteholders are
willing to give such consent subject to the terms and conditions set forth
herein; and
WHEREAS, the Company and the Noteholders desire to amend and restate
the Existing Agreement and the Original Notes as set forth herein.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing and subject to the
terms and conditions herein contained, the parties hereto do hereby amend and
restate the Existing Agreement and covenant and agree as follows:
SECTION 1. THE NOTES.
(S)1.1 Authorization of Notes. The Company has authorized the
----------------------
issuance for exchange of $22,000,000 in aggregate principal amount of its
Amended and Restated 11.28% Subordinated Notes due March 10, 2000, to be dated
(except as otherwise set forth in (S)(S) 8.2 and 8.3) the date of original
issuance thereof and to be substantially in the form of Exhibit A hereto (the
"Notes"). Each Note shall bear interest from the date thereof until such Note
shall become due and payable in accordance with the terms thereof and hereof
(whether at maturity, by acceleration or otherwise) at the rate of 11.28% per
annum, payable semiannually on each September 10 and March 10 (an "Interest
Payment Date"), commencing March 10, 1994, and shall have a stated maturity of
March 10, 2000. Interest on the Notes shall be computed on the basis of a 360-
day year of twelve 30-day months. Any overdue portion of the principal amount
of any Note and premium, if any, and any overdue installment of interest shall
bear interest at a rate equal to the lesser of (a) 12.28% per annum or (b) the
highest rate permitted by applicable law, until paid. Each Note shall be issued
in a denomination of $1,000,000 or more.
(S)1.2 Exchange of Notes. In reliance upon the representations and
-----------------
warranties of the Purchasers herein, the Company agrees to issue to each
Purchaser, and upon and subject to the terms and conditions hereof and in
reliance upon the representations and warranties of the Company contained
herein, each Purchaser agrees to accept from the Company, a Note in the
aggregate principal amount thereof specified opposite such Purchaser's name in
Schedule I hereto in exchange for the corresponding Original Note theretofore
held by that Purchaser as a "Noteholder" thereof. The Notes are to be exchanged
and delivered at one closing, to be held on December 17, 1993 at 10:00 a.m., Los
Angeles time, or such other date and time as shall be agreed upon by the
Purchasers and the Company (such date and time being hereinafter called the
"Closing Date"), at the offices of Riordan & McKinzie in Los Angeles,
California. On the Closing Date, the
2
<PAGE>
Company will deliver to each Purchaser a Note substantially in the form of
Exhibit A hereto dated the Closing Date, in the principal amount specified
therefor opposite that Purchaser's name in Schedule I hereto and in that
Purchaser's name, or in the name of such nominee as that Purchaser shall have
designated by notice to the Company at least five business days prior to the
Closing Date. The delivery of such Note to that Purchaser shall be made against
payment therefor by concurrent delivery by that Purchaser of the corresponding
Original Note.
If at the Closing the Company shall fail to tender such Notes to the
Purchasers as provided above in this (S)1.2, or any of the conditions specified
in (S)4 shall not have been fulfilled to the Purchasers' satisfaction, the
Purchasers shall, at the Purchasers' election, be relieved of all obligations
under this Agreement, without thereby waiving any other rights the Purchasers
may have by reason of such failure or such nonfulfillment.
(S)1.3 Definitions. Certain capitalized terms used in this
-----------
Agreement are defined in (S)12; references to a "Schedule" or an "Exhibit" are,
unless otherwise specified, to the Schedules and Exhibits attached to this
Agreement.
SECTION 2. GENERAL REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(S)2.1 Capitalization; Subsidiaries. (a) The authorized capital
----------------------------
stock of the Company consists of 1,000 shares of common stock, $0.01 par value,
of which 100 shares are issued and outstanding on the Closing Date. All such
outstanding shares have been validly issued and are fully paid, nonassessable
shares free of preemptive rights and are held of record by Merisel, Inc. No
shares of the common stock are held on the date hereof in the treasury of the
Company. The issuance and sale of all such shares have been in full compliance
with all applicable federal and state securities laws except as would not have a
material adverse effect on the Company or any Subsidiary or on the Company's
ability to perform its obligations hereunder or under the Notes. There are no
subscriptions, options, warrants or calls relating to the issuance by the
Company of any shares of its capital stock, including any right of conversion or
exchange under any outstanding security or other instrument other than as set
forth in the Company Financial Statements or SEC filings described in
(S)2.4(b)(i). There are no voting trusts or other agreements or understandings
with respect to the voting of the capital stock of the Company. The common
stock of the Company is presently vested with all the voting rights in the
Company. Except as contemplated by this Agreement, the Company is not subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of its capital stock or any security convertible into or
exchangeable for any of its capital stock.
3
<PAGE>
(b) The Company has the Subsidiaries set forth on Schedule III hereto.
Schedule III correctly sets forth as to each Subsidiary its name, the
jurisdiction of its formation, if a partnership, or incorporation, if a
corporation, the parent corporation of such Subsidiary and the value of the
investment in such Subsidiary as carried on the books of the Company or such
parent corporation. All of the outstanding shares of the capital stock of each
class of each Subsidiary of the Company have been validly issued and are fully
paid and nonassessable and, except as otherwise indicated in Schedule III, are
owned, beneficially and of record, by the Company free and clear of any Liens.
(S)2.2 Organization and Authority. The Company and its Subsidiaries
--------------------------
each:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has all requisite power and authority (corporate and other)
to own and operate its properties, to conduct its business as currently
conducted and as currently proposed to be conducted, and, in the case of the
Company, to execute and deliver this Agreement to offer, issue, sell and deliver
the Notes and to perform its obligations under this Agreement and the Notes; and
(c) has duly qualified to do business as a foreign corporation
and is in good standing in every jurisdiction in which the properties owned (or
held under lease) by it or the nature of its respective activities makes such
qualification necessary except where failure to qualify as a foreign corporation
would not have a material adverse effect on the Company or any Subsidiary or on
the Company's ability to perform its obligations hereunder or under the Notes.
(S)2.3 Business. The Company Financial Statements after giving
--------
effect to the Restructuring Transactions contain accurate descriptions of the
general nature of the business of the Company and its Subsidiaries, as presently
conducted and as presently proposed to be conducted, and the major properties
leased by the Company and its Subsidiaries. The Company and its Subsidiaries
are not presently engaged in any material line of business not so disclosed and
do not own or lease any significant properties not so disclosed.
(S)2.4 Financial Statements and Other Information; Financial
-----------------------------------------------------
Condition.
- ---------
(a) The Company has heretofore furnished to the Purchasers copies
of (i) an audited consolidated balance sheet of Merisel, Inc. as of December 31,
1992, and related audited consolidated statements of income, cash flow and
changes in stockholders' equity for the fiscal year ended on said date
accompanied by a report thereon by Deloitte & Touche, Merisel, Inc.'s
independent and certified public accountants, (ii) the unaudited consolidated
4
<PAGE>
balance sheet of Merisel, Inc. as of September 30, 1993, and related
consolidated statements of income, cash flow and changes in stockholders' equity
for the fiscal quarter ended on said date, and (iii) the pro forma balance sheet
--- -----
of the Company based upon Merisel, Inc.'s September 30, 1993 balance sheet and
giving effect to the Restructuring Transactions (a copy of which is attached
hereto as Exhibit F) (such financial statements, including the notes thereto,
being hereinafter called the "Company Financial Statements"). Except as may be
stated in any notes thereto and except, in the case of such unaudited financial
statements, for the absence of footnotes and subject to year end adjustments,
the Company Financial Statements have been prepared in accordance with GAAP
consistently applied, present fairly the pertinent results of operations and the
financial position of the Company and its Subsidiaries as of the respective
dates of the statements of consolidated financial position included therein and
the results of operations of the Company and its Subsidiaries for the respective
periods covered by the consolidated statements of income, cash flow and changes
in Stockholders' equity included therein. Except as fully reflected in the
Company Financial Statements after giving effect to the Restructuring
Transactions, there are no liabilities or obligations with respect to the
Company or any of its Subsidiaries of any nature whatsoever (whether absolute,
accrued, contingent or otherwise and whether or not due) which, either
individually or in the aggregate, would be material to the Company or to the
Company and its Subsidiaries taken as a whole, except liabilities incurred in
the ordinary course of business since September 30, 1993. Except liabilities
incurred in the ordinary course of business since September 30, 1993, as of the
date hereof the Company does not know of any basis for the assertion against the
Company or any of its Subsidiaries of any liability or obligation of any nature
whatsoever that is not fully reflected in the Company Financial Statements after
giving effect to the Restructuring Transactions which, either individually or in
the aggregate, could be material to the Company or to the Company and its
Subsidiaries taken as a whole.
(b) The Company has delivered to you copies of the documents
listed on Schedule II and makes the representations that follow:
(i) Schedule II-A lists all reports and proxy statements filed by
Merisel, Inc. with the SEC since December 31, 1992. As of their respective
dates, none of such reports or statements contained any untrue statement of a
material fact or omitted to state any material fact necessary to make the
statements contained therein not misleading.
(ii) The reports listed in Schedule II-A, taken together, contain
a true and correct description of the business, operations and principal
properties of Merisel, Inc. and its Subsidiaries, including the Company and each
Subsidiary.
5
<PAGE>
(iii) Schedule II-B sets forth a correct and complete list and
description of all Funded Debt of the Company and each Subsidiary (other than
intercompany items), and of any Liens securing such Funded Debt, outstanding, or
for which the Company or any Subsidiary has commitments, on the date there
stated; and neither the Company nor any Subsidiary is in default with respect to
any Funded Debt or any instrument or agreement relating thereto, and no
instrument or agreement applicable to or binding on the Company or any of its
Subsidiaries contains any restrictions on the incurrence by the Company of
additional Funded Debt except the agreements relating to Funded Debt referred to
in Schedule II-B.
(iv) Schedule II-C sets forth a correct and complete list and
description of all investments of the Company and its Subsidiaries in
Subsidiaries and all material guarantees of the Company and each Subsidiary
existing on the date therein stated.
(S)2.5 No Material Adverse Change. Since September 30, 1993, there
--------------------------
has been no material adverse change in the business, earnings, prospects,
properties or condition (financial or otherwise) of the Company or its
Subsidiaries as shown on the Company Financial Statements after giving effect to
the Restructuring Transactions. Since September 30, 1993, neither the Company
nor any Subsidiary has directly or indirectly declared, ordered, paid, made or
set apart any sum or property for any Restricted Payment or agreed to do so
except in connection with Restructuring Transactions.
(S)2.6 Licenses, Registrations, etc. The Company and its
----------------------------
Subsidiaries each owns or possesses, and holds free from default, burdensome
restrictions or known conflicts with the rights of others, all licenses,
registrations, franchises, permits, copyrights, trademarks, service marks, trade
names and patents, and all rights with respect to the foregoing, necessary for
the conduct of its business as now conducted and as proposed to be conducted.
(S)2.7 Title to Properties: Leases. The Company and its
---------------------------
Subsidiaries each has good and indefeasible fee simple title to all its real
property, and good and indefeasible title to all its other properties and
assets, including all properties reflected on the Company Financial Statements
as of September 30, 1993 after giving effect to the Restructuring Transactions,
referred to in clause (a) of (S)2.4, as well as to the properties acquired since
said date (except property disposed of since said date in the ordinary course of
business). The Company and its Subsidiaries each has the right to, and does,
enjoy peaceful and undisturbed possession under all material leases under which
it is leasing property. All such material leases are valid, subsisting and in
full force and effect and the Company is not in default of such leases.
6
<PAGE>
(S)2.8 Compliance with Other Instruments. etc. Neither the Company
---------------------------------
nor any Subsidiary is (a) in violation of any term of its charter or by-laws or
(b) in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in, and is not otherwise in
default under, (i) any evidence of Indebtedness or any instrument or agreement
under or pursuant to which any evidence of Indebtedness has been issued or (ii)
any other instrument or agreement to which it is a party or by which it is bound
or any of its properties is affected where such default would have a material
adverse impact on the Company or any Subsidiary or on the Company's ability to
perform its obligations hereunder or under the Notes. Neither the Company nor
any Subsidiary has defaulted in, nor has it failed to make at the time
contemplated, payment of any principal of, or premium or interest on, any
Indebtedness for Money Borrowed. Neither the execution, delivery or performance
of this Agreement, nor the offer, issuance, sale, delivery or performance of the
Notes, does or will (A) conflict with or violate the charter or by-laws of the
Company or any Subsidiary, (B) conflict with or result in a breach of any of the
terms, conditions or provisions of, or constitute a default under, or result in
the creation of (or impose any obligation on the Company or any Subsidiary to
create) any Lien on any of the properties or assets of the Company or any
Subsidiary pursuant to the terms of, any evidence of Indebtedness, or any
instrument or agreement under or pursuant to which any evidence of Indebtedness
has been issued, or any other material instrument or agreement to which the
Company or any Subsidiary is a party or by which it is bound, or (C) require the
consent of or other action by any trustee or any creditor of, any lessor to or
any investor in the Company or any Subsidiary.
(S)2.9 No Materially Adverse Contracts. etc. Neither the Company
------------------------------------
nor any Subsidiary is a party to or bound by (nor are any of its properties
affected by) any contract or agreement, or subject to any order, writ,
injunction or decree or other action of any court or any governmental
department, commission, bureau, board or other administrative agency or
official, or any charter or other corporate or contractual restriction, which
materially and adversely affects, or in the future may (so far as the Company
can now foresee) materially and adversely affect, the business, earnings,
prospects, properties or condition (financial or otherwise) of the Company or
any Subsidiary.
(S)2.10 Compliance with Law. etc. The Company and its Subsidiaries
------------------------
each is in compliance with all statutes, laws and ordinances, all governmental
rules and regulations to which it is subject, the violation of which, either
individually or in the aggregate, could materially adversely affect the
business, earnings, prospects, properties or condition (financial or otherwise)
of the Company and its Subsidiaries. Neither the execution, delivery or
performance of this Agreement nor the offer, issuance, sale, delivery or
performance of the Notes does or will cause the Company or any Subsidiary to be
in violation of any statute, law or ordinance, or any order, rule or regulation
of any federal,
7
<PAGE>
state, county, municipal or other governmental or public authority or agency or
of any judgment, decree, writ, injunction, order or award of any arbitrator,
court or government authority which is applicable to the Company or any of its
Subsidiaries.
(S)2.11 Compliance with ERISA; No Multiemployer Plans.
---------------------------------------------
(a) The acquisition of the Notes by the Purchasers does not and
will not constitute a "prohibited transaction" within the meaning of Section
4975 of the Code or Section 406 of ERISA. The representation by the Company in
the preceding sentence is made in reliance upon and subject to the accuracy of
each Purchaser's representation in (S)3.3 of this Agreement as to the source of
the funds used to pay the Purchase Price of the Notes purchased by that
Purchaser.
(b) The Company has delivered to the Purchasers a complete and
correct list of all Plans maintained by the Company or any of its Subsidiaries
or ERISA Affiliates. Each Plan is in substantial compliance with ERISA. No
Pension Plan has an accumulated funding deficiency (within the meaning of
Section 412 of the Code), whether or not waived. No proceedings have been
instituted by the PBGC to terminate any Pension Plan. Except for liabilities to
make contributions and to pay PBGC premiums and administrative costs, neither
the Company nor any ERISA Affiliate has incurred any material liability to or on
account of any Plan under ERISA, and no condition exists which presents a
material risk to the Company or any ERISA Affiliate of incurring such a
liability. Neither the Company nor any ERISA Affiliate is obligated to
contribute to any Multiemployer Plan, and neither the Company nor any ERISA
Affiliate has maintained, contributed to or been obligated to contribute to any
Multiemployer Plan at any time within the preceding five (5) years. The Company
and its Subsidiaries each have made all contributions to the Plans required to
be made by them.
(S)2.12 Pending Litigation, etc. There is no action at law, suit in
-----------------------
equity or other proceeding or investigation (whether or not purportedly on
behalf of the Company or any Subsidiary) in any court or by or before any other
governmental or public authority or agency or any arbitrator or arbitration
panel, pending or, to the best knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective properties
that, either individually or in the aggregate, (a) could materially adversely
affect the business, earnings, prospects, properties or condition (financial or
otherwise) of the Company or any Subsidiary or (b) could question the legality,
validity or enforceability of (i) this Agreement or the Notes or (ii) the
Restructuring Transactions. Neither the Company nor any Subsidiary is in
default with respect to any order, writ, injunction, judgment or decree of any
court or other governmental or public authority or agency or arbitrator or
arbitration panel. Except for collection matters in which the
8
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Company is plaintiff, there is no litigation in which the Company or any
Subsidiary is currently involved.
(S)2.13 Taxes. All federal, state and other tax returns of the
-----
Company and its Subsidiaries required by law to be filed have been duly filed,
and all federal, state and other taxes, assessments, fees and other governmental
charges upon the Company or any Subsidiary or upon any of their properties,
incomes or assets that are due and payable have been paid except for such taxes,
assessments, fees or other government charges the validity of which is being
contested in good faith and for which a reserve or other appropriate provision,
if any, as shall be required by generally accepted accounting principles shall
have been made. No extensions of the time for the assessment of deficiencies
have been granted by the Company or any Subsidiary. There are no material Liens
on any properties or assets of the Company or any Subsidiary imposed or arising
as a result of the delinquent payment or the non-payment of any tax, assessment,
fee or other governmental charge. Federal income tax returns for the Company
and its Subsidiaries have been audited by the Internal Revenue Service or the
applicable statutes of limitation with respect to such tax obligations have
expired through the fiscal year ended December 31, 1988 and all prior fiscal
years. The charges, accruals and reserves, if any, on the books of the Company
and its Subsidiaries in respect of federal, state and local corporate franchise
and income taxes for all fiscal periods to date are adequate, and the Company
does not know of any additional unpaid material assessments for such periods or
of any basis therefor. There are no applicable taxes, fees or other
governmental charges payable by the Company or any Subsidiary in connection with
the execution and delivery of this Agreement or the offer, issuance, sale and
delivery of the Notes by the Company.
(S)2.14 Holding Company Act; Investment Company Act. (a) Neither
-------------------------------------------
the Company nor any Subsidiary is a "public utility company" or a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended;
or a "public utility" within the meaning of the Federal Power Act, as amended.
(b) Neither the Company nor any Subsidiary is an "investment
company" or an "affiliated person" of an "investment company" or a company
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended. Neither the Company nor any
Subsidiary is an "investment adviser" or an "affiliated person" of an
"investment adviser" as such terms are defined in the Investment Advisers Act of
1940, as amended.
(S)2.15 No Foreign Assets Control Regulation Violation. None of the
----------------------------------------------
transactions contemplated by this Agreement will result in a violation of any of
the foreign
9
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assets control regulations of the United States Treasury Department, 31 C.F.R.,
Subtitle B, Chapter V, as amended (including, without limitation, the Foreign
Assets Control Regulations, the Transaction Control Regulations, the Cuban
Assets Control Regulations, the Foreign Funds Control Regulations, the Iranian
Assets Control Regulations, the Nicaraguan Trade Control Regulation, the South
African Transactions Regulations, the Libyan Sanctions Regulations and the
Soviet Gold Coin Regulations contained in said Chapter V), or any ruling issued
thereunder or any enabling legislation or Presidential Executive Order granting
authority therefor, nor will the proceeds of the Notes be used by the Company in
a manner that would violate any thereof.
(S)2.16 No Margin Regulation Violation. None of the transactions
------------------------------
contemplated by this Agreement (including, without limitation, the direct or
indirect use of the proceeds from the sale of the Notes) will violate or result
in a violation of Section 7 of the Exchange Act or any regulations issued
pursuant thereto, including, without limitation, Regulation G (12 C.F.R., Part
207), as amended, Regulation T (12 C.F.R., Part 220), as amended, or any other
regulation of the Board of Governors of the Federal Reserve System. The
proceeds of the sale of the Original Notes and the Notes were not used and will
not be used to purchase any "margin securities" within the meaning of such
Regulation G.
(S)2.17 Consents, etc. Except as have been made or received, no
-------------
prior consent, approval or authorization of, registration, qualification,
designation, declaration or filing with, or notice to (a) any federal, state or
local governmental or public authority or agency, or (b) any stockholder,
creditor, lessor or other non-governmental person, is required for (i) the valid
execution, delivery and performance of this Agreement by the Company, (ii) the
valid offer, issuance, sale, delivery and performance of the Notes by the
Company, or (iii) the consummation of the Restructuring Transactions, except
those of which the failure to make or receive would not have a material adverse
effect on the Company and its Subsidiaries, taken as a whole. No consent,
approval or authorization of, declaration or filing with, or notice to, any
federal, state or local governmental or public authority or agency on the part
of the Company or any Subsidiary is necessary for the continued conduct by the
Company or any Subsidiary of its business as now conducted or as proposed to be
conducted, except for routine corporate filings all of which have been or will
be duly and properly obtained and are or will be in full force and effect on the
Closing Date.
(S)2.18 No Event of Default. No event has occurred and is
-------------------
continuing, and no condition exists, that, if the Notes had been issued and were
outstanding on the date hereof, would constitute a Default or an Event of
Default.
10
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(S)2.19 Full Disclosure. Neither this Agreement, the Notes or the
----------------
Company Financial Statements nor any certificate, report, statement or other
writing furnished to the Purchasers by or on behalf of the Company in connection
with the negotiation of this Agreement and the sale of the Notes contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements contained herein or
therein not misleading. Any projections and pro forma financial information
contained in this Agreement, the Notes or the Company Financial Statements, or
any such certificate, statement or other writing are based upon good faith
estimates and assumptions believed by the Company to be reasonable at the time
made, it being recognized by the Purchasers that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from the projected
results. There is no fact known to the Company that has not been disclosed to
the Purchasers in writing that (a) materially adversely affects or in the future
may (so far as the Company can now foresee) materially adversely affect the
business, earnings, prospects, properties, operations or condition (financial or
otherwise) of the Company or any Subsidiary or (b) adversely affects or in the
future may (so far as the Company can now foresee) materially adversely affect
the ability of the Company to perform its obligations under this Agreement and
the Notes.
(S)2.20 Validity of Agreement and Notes. This Agreement has been
--------------------------------
duly authorized, executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable in accordance
with its terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws or equitable principles
relating to or limiting creditors' rights generally or the availability of
equitable remedies. Upon receipt by the Company of the corresponding Original
Notes as payment for the Notes as provided in this Agreement, the Notes will
have been duly issued and will constitute legal, valid and binding obligations
of the Company, enforceable in accordance with their terms except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws or equitable principles relating to or limiting
creditors' rights generally or the availability of equitable remedies.
(S)2.21 Solvency. The Company is and, immediately after giving
---------
effect to the issue and sale of the Notes and the consummation of the other
transactions contemplated by this Agreement, will be, Solvent.
For purposes of this (S)2.21, the term "Solvent" shall mean, with
-------
respect to any Person, that:
11
<PAGE>
(a) the assets of such Person, at a fair valuation, exceed the
total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of such Person;
(b) based on current projections, which are based on underlying
assumptions which provide a reasonable basis for the projections and which
reflect such Person's judgment based on present circumstances of the most likely
set of conditions and such Person's most likely course of action for the period
projected, such Person believes it has sufficient cash flow to enable it to pay
its debts as they mature; and
(c) such Person does not have an unreasonably small capital with
which to engage in its anticipated business.
For purposes of this (S)2.21, the "fair valuation" of the assets of
any Person shall be determined on the basis of the amount which may be realized
within a reasonable time, either through collection or sale of such assets at
the regular market value, conceiving the latter as the amount which could be
obtained for the property in question within such period by a capable and
diligent businessman from an interested buyer who is willing to purchase under
ordinary selling conditions.
(S)2.22 Compliance With Environmental Laws. The Company and its
-----------------------------------
Subsidiaries are in compliance with all applicable statutes, rules, regulations
and orders of all governmental authorities relating to environmental protection
and pollution control, with respect to the conduct of their respective
businesses and the ownership of their respective properties, except where such
failure to comply will not individually or in the aggregate have a material
adverse effect on the condition, financial or otherwise, of the Company or any
Subsidiary.
(S)2.23 Broker's or Finder's Commissions. No broker's or finder's
---------------------------------
placement fee or commission will be payable by the Company with respect to the
issue of the Notes, or any of the transactions contemplated hereby. The Company
will hold the Purchasers harmless from any claim, demand or liability for
broker's or finder's placement fees or commissions (other than any such fees or
commissions payable by or to the Purchasers) whether or not payable by the
Company alleged to have been incurred in connection with this transaction.
(S)2.24 Insurance. The Company and its Subsidiaries have, with
----------
respect to the properties and business of the Company and its Subsidiaries, with
financially sound and reputable insurers, insurance against such casualties and
contingencies of such types and in such amounts as is customary in the case of
corporations engaged in the same or a similar business or having similar
properties similarly situated.
12
<PAGE>
SECTION 3. SECURITIES ACT AND ERISA REPRESENTATIONS.
(S)3.1 Offerees. The Company agrees that it will not, and that it
---------
will use its best efforts to cause any agent on behalf of it to not, sell or
offer any of the Notes or any similar securities to, or solicit offers to buy
any thereof from, or otherwise approach or negotiate in respect thereof with,
any other Person or Persons whomsoever, or take any other action, so as to bring
the issuance and sale of the Notes within the provisions of Section 5 of the
Securities Act or the provisions of any state securities law requiring
registration of securities, notification of the issuance and sale thereof or
confirmation of the availability of any exemption from registration thereof,
PROVIDED, HOWEVER THAT THE COMPANY MAY FILE FORM 20 WITH THE ONTARIO SECURITIES
- -----------------
COMMISSION WITHIN 10 DAYS OF THE CLOSING DATE.
(S)3.2 Investment Intent, etc. This Agreement is made with each of
-----------------------
the Purchasers in reliance upon such Purchaser's representation to the Company,
which by such Purchaser's execution hereof such Purchaser confirms, that such
Purchaser is purchasing the Notes to be purchased by it hereunder for its own
account for investment and not with a view to the distribution thereof, and that
such Purchaser has no present intention of distributing any of the same;
provided, however, that the disposition of such Purchaser's property shall be at
- -----------------
all times within such Purchaser's own control, and that its right to sell or
otherwise dispose of all or any part of the Notes purchased by it pursuant to an
effective registration statement under the Securities Act or under an exemption
from such registration available under the Securities Act shall not be
prejudiced. The Company and the Purchasers each acknowledges that the Notes are
securities (as defined in the Securities Act and the Exchange Act).
(S)3.3 ERISA Representations. Each of the Purchasers represents
----------------------
that no part of the purchase price for the Note to be purchased by it will be
drawn from the assets of any separate account (within the meaning of Section
3(17) of ERISA) maintained by it in which any Plan maintained by the Company or
any ERISA Affiliate has any interest, all of which Plans are identified in the
list referred to in (S)2.11(b) of this Agreement. The Company acknowledges that
the foregoing representation is made in reliance upon, and subject to the
accuracy of, the above-mentioned list of Plans supplied by the Company.
(S)3.4 Character of Purchasers. Each of the Purchasers further
------------------------
represents that (i) it is an Institutional Investor, (ii) it has had an
opportunity to investigate the business and financial condition of the Company
and to obtain such information as it requires from the Company's officers and
directors and (iii) it is domiciled in the state included in its address for
notices set forth in Schedule I.
13
<PAGE>
SECTION 4. CONSENT TO RESTRUCTURING TRANSACTIONS AND CLOSING
CONDITIONS.
Subject to the following sentence and effective as of the Closing
Date, the Noteholders hereby consent as to the Restructuring Transactions. The
Noteholders' consent to the Restructuring Transactions and the Purchasers'
obligation to purchase the Notes against payment therefor by concurrent delivery
of the Original Notes on the Closing Date shall be subject to the satisfaction,
prior to or concurrently with such purchase and payment, of the following
conditions:
(S)4.1 Opinion of Special Counsel for The Purchasers. The
---------------------------------------------
Purchasers shall have received from Brobeck, Phleger & Harrison, Los Angeles,
California, who are acting as special counsel for the Purchasers in connection
with the transactions contemplated by this Agreement, an opinion, dated the
Closing Date, in form and substance satisfactory to the Purchasers, to the
effect specified in Exhibit B hereto.
(S)4.2 Opinion of Counsel for the Company. The Purchasers shall
-----------------------------------
have received from Riordan and McKinzie, counsel for the Company, an opinion
dated the Closing Date, in form and substance satisfactory to the Purchasers and
their special counsel, to the effect specified in Exhibit C hereto.
(S)4.3 Performance of Obligations. The Company shall have performed
---------------------------
all its obligations to be performed hereunder prior to or on the Closing Date,
and each of the Purchasers shall have received an Officer's Certificate from the
Company, dated the Closing Date, to such effect.
(S)4.4 Representations True, etc.; Officer's Certificate. The
--------------------------------------------------
representations and warranties of the Company in (S)(S)2 and 3 shall be true on
and as of the Closing Date with the same effect as if made on and as of the
Closing Date. There shall exist on the Closing Date no Event of Default and no
condition or event which, with notice or lapse of time, would constitute an
Event of Default if the Notes had been outstanding at all times from and after
the date hereof, and all agreements and conditions to be performed or satisfied
by the Company hereunder on or before the Closing Date shall have been duly
performed or satisfied. The Company shall have delivered to each of the
Purchasers an Officer's Certificate, dated the Closing Date, to such effect.
(S)4.5 Permitted Investment. On the Closing Date each Purchaser's
---------------------
purchase of Notes shall be permitted by the laws and regulations of each
jurisdiction to which that Purchaser is subject, and, without recourse to
provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting
limited investments by life insurance companies without restriction as to the
character of the particular investment,
14
<PAGE>
shall not subject that Purchaser to any penalty or, in that Purchaser's
reasonable judgment, other onerous condition under or pursuant to any such law
or regulation. The Company shall have delivered to each Purchaser, if
requested, such evidence or information as that Purchaser may reasonably request
to enable it to determine whether such purchase is so permitted.
(S)4.6 Proceedings, Instruments, etc. All proceedings and actions
------------------------------
taken on or prior to the Closing Date in connection with the transactions
contemplated by this Agreement, and all instruments incident thereto, shall be
in form and substance satisfactory to the Purchasers and their special counsel,
and the Purchasers and their special counsel shall have received copies of all
documents that any of them may reasonably request in connection with such
proceedings, actions and transactions, including, without limitation, the
following:
(a) Certified copies of the charter and bylaws of the Company;
(b) Certified copies of resolutions of the Board of Directors of
the Company authorizing the execution, delivery and performance of this
Agreement, the Notes and the other documents provided for in this Agreement;
(c) A certificate of the Secretary or an Assistant Secretary of
the Company certifying the names of the officer or officers of the Company
authorized to sign this Agreement, the Notes and the other documents provided
for in this Agreement, together with a sample of the true signature of each such
officer;
(d) copies of court documents, certifications and evidence of the
correctness of the representations and warranties contained herein and
certifications and evidence of the compliance with the terms and the fulfillment
of the conditions of this Agreement, in form and substance satisfactory to the
Purchasers and their special counsel;
(e) certified, true and correct copies of the NationsBank Credit
Agreement and the Revolving Credit Agreement, in form and substance satisfactory
to the Purchasers and their special counsel; and
(f) copies of the documents effecting the Reorganization, in form
and substance satisfactory to the Purchasers and their special counsel.
(S)4.7 Taxes. All taxes, fees and other charges due in connection
------
with the issue and sale of the Notes shall have been paid in full by the
Company.
15
<PAGE>
(S)4.8 No Merger, etc. The Company shall not have consolidated or
--------------
merged with, or sold, leased or otherwise disposed of its properties as an
entirety or substantially as an entirety to, any Person.
(S)4.9 Certain Financial Transactions Prohibited. The Company
-----------------------------------------
shall not have taken any action which would have been prohibited by (S)(S)9.15,
9.16, 9.17 or 9.18 if said Sections had been binding and effective at all times
after December 31, 1992.
(S)4.10 Consents and Approvals. The Company shall have delivered to
----------------------
each Purchaser an Officer's Certificate, dated the Closing Date, listing any
consents, waivers, approvals, authorizations, registrations, filings and
notifications of the character referred to in (S)2.17 which are necessary, to
which shall be attached evidence, satisfactory to the Purchasers, that the same
have been obtained or made and are in full force and effect, or stating that
none is necessary.
(S)4.11 Other Purchasers. Each of the Purchasers shall have
----------------
received, in exchange for the corresponding Original Note, the Note to be issued
to such Purchaser by the Company.
(S)4.12 Certificate as to Compliance with Covenants. Each Purchaser
-------------------------------------------
shall have received a certificate, dated as of the Closing Date and executed by
the chief financial officer of the Company, detailing the calculations by which
the Company has determined that it is in compliance with the financial covenants
contained herein which are applicable as of the Closing Date.
(S)4.13 Accrued Interest. Each of the Noteholders shall have
----------------
received an amount equal to all interest accrued on that Noteholder's Original
Note(s) prior to the Closing Date pursuant to the Existing Agreement and
remaining unpaid as of the Closing Date.
(S)4.14 Reorganization. Merisel, Inc. shall have completed the
--------------
Reorganization, including the Merisel Transfers, in a manner satisfactory to the
Noteholders.
(S)4.15 Closing Date. The Closing Date shall occur on or before
------------
December 31, 1993.
(S)4.16 Payment of Legal Fees. The Company shall have paid the
---------------------
disbursements and fees of Brobeck, Phleger & Harrison provided in (S)5(b).
16
<PAGE>
SECTION 5. EXPENSES.
Whether or not the Notes shall be sold or this Agreement shall be
terminated, the Company will pay, and will save the Purchasers harmless against
liability for, all reasonable costs and expenses relating to this Agreement and
the Notes, and to any modification, amendment, alteration or enforcement of this
Agreement or the Notes (whether or not the same shall have come into effect),
including, without limitation:
(a) the cost of preparing and reproducing this Agreement and the
Notes;
(b) the disbursements and reasonable fees of Brobeck, Phleger &
Harrison (an invoice for such fees and disbursements of special counsel will be
delivered on or prior to the Closing Date and the Company will pay such invoice
on the Closing Date and, with respect to any subsequent invoice delivered after
the Closing Date for fees and disbursements not yet posted on the Closing Date,
the Company will pay such invoice promptly upon its receipt);
(c) the cost of delivering to each Purchaser's home office,
insured to its reasonable satisfaction, the Note purchased by that Purchaser on
the Closing Date; and
(d) all reasonable costs and expenses (including, without
limitation, reasonable legal fees and disbursements) relating to any
modifications, amendments, waivers or consents involving the provisions hereof
or of the Notes, or relating to the enforcement of this Agreement or the Notes.
The obligations of the Company under this (S)5 shall survive the
payment of the Notes and the termination of this Agreement.
SECTION 6. CERTAIN SPECIAL RIGHTS.
(S)6.1 Home Office Payment. Notwithstanding any provision to the
-------------------
contrary in this Agreement or the Notes, the Company will punctually pay in
immediately available funds all amounts payable to each Purchaser with respect
to any Notes held by that Purchaser or its nominee in the manner and at the
address for such purpose specified below its name in Schedule I hereto, or at
any other address as that Purchaser may from time to time direct in writing,
without the necessity for any presentation or surrender thereof or any notation
of such payment thereon; provided, however, that as promptly as practicable
-----------------
after the payment or prepayment in whole of any Note held by that Purchaser or
its nominee and receipt by that Purchaser of a written request from the Company
to surrender such Note to the Company for cancellation, that Purchaser will
surrender such
17
<PAGE>
Note at the office of the Company maintained pursuant to (S)9.1. Each of the
Purchasers agrees that if it sells, assigns or transfers any Note, such sale,
assignment or transfer shall only be made to an Institutional Investor and it
will, prior to any such sale, assignment or transfer, either make a proper
notation thereon of the amount of principal paid thereon as of the date of such
sale, assignment or transfer and promptly notify the Company of the name and
address of the holder of such Note or surrender such Note in exchange for a new
Note or Notes pursuant to (S)8.2.
(S)6.2 Delivery Expenses. If any Noteholder shall surrender any
-----------------
Note to the Company pursuant to this Agreement, or if the Company shall issue
any new Note pursuant to this Agreement, the Company will pay all reasonable
costs and expenses of delivery of the surrendered Note and any Note or Notes
issued in exchange or replacement for, or on registration of transfer of, the
surrendered Note or any such new Note, as the case may be, in each case insured
to that Noteholder's reasonable satisfaction.
(S)6.3 Issuance Taxes. The Company will pay all taxes in connection
--------------
with the execution and delivery of this Agreement, the issuance and sale of the
Notes and any modification of this Agreement or the Notes and will save the
Purchasers and any subsequent holders of Notes harmless, without limitation as
to time, against any and all liabilities (including, without limitation, any
interest or penalty for nonpayment or delay in payment, or any income taxes paid
by the Purchasers in connection with any such reimbursement by the Company) with
respect to all such taxes. The obligations of the Company under this (S)6.3
shall survive the payment of the Notes and the termination of this Agreement.
SECTION 7. NOTE PREPAYMENTS.
(S)7.1 Required Prepayments and Payment.
--------------------------------
(a) Installments of Principal. The Company will, without notice,
-------------------------
prepay or pay, without premium, $4,400,000 aggregate principal amount of the
Notes on March 10, 1996 and on each March 10 thereafter to and including March
10, 1999, together, in each case, with interest accrued on the amount to be
prepaid to the date of prepayment or payment. Notwithstanding anything contained
in this (S)7.1, on the maturity date of the Notes, all amounts outstanding with
respect to the Notes shall be due and payable on such maturity date.
(b) Change of Control. Within 90 days of a Change of Control
-----------------
(other than in connection with the Reorganization), each Noteholder has the
right to notify the
18
<PAGE>
Company to pay all or a portion of the aggregate principal amount of the Notes
held by such Noteholder as of a date occurring not more than 30 days following
such notice and the Company shall pay on such date such principal amount,
without premium, together with interest accrued on the amount to be prepaid to
the date of prepayment unless (i) such date occurs during any (S)7.1(b) Blockage
Period with respect to a (S)7.1(b) Senior Financial Covenant Default or
(S)7.1(b) Senior Payment Default or (ii) such payment would create, or
immediately following such payment there would exist, a (S)7.1(b) Senior
Financial Covenant Default or (S)7.1(b) Senior Payment Default, whereupon the
Company shall make such payment on the earliest date on which neither of the
events or circumstances described in the foregoing clauses (i) and (ii) have
occurred or would occur. "Change of Control" means that any one Person alone or
together with its Affiliates directly or indirectly through one or more
intermediaries gains control of more than 50% of the outstanding Voting Stock of
the Company.
For purposes of this (S)7.1(b), the following terms shall have the
following meanings:
"(S)7.1(b) Blockage Period" means (i) in the case of a (S)7.1.(b)
-------------------------
Senior Payment Default, as to which the holder of the respective (S)7.1(b)
Senior Debt shall have delivered a Blockage Notice to the Company within thirty
days following such (S)7.1(b) Senior Payment Default, the period commencing on
the occurrence of such (S)7.1(b) Senior Payment Default and ending on the date
such (S)7.1(b) Senior Payment Default is cured or waived and (ii) in the case of
any (S)7.1(b) Senior Financial Covenant Default, as to which the holder of the
respective (S)7.1(b) Senior Debt shall have delivered a Blockage Notice to the
Company within 150 days following such (S)7.1(b) Senior Financial Covenant
Default, the period commencing on the occurrence of such (S)7.1(b) Senior
Financial Covenant Default and ending on the date such (S)7.1(b) Senior
Financial Covenant Default is cured or waived.
"(S)7.1(b) Senior Financial Covenant Default" means any default with
-------------------------------------------
respect to any financial test or financial ratio under either the Revolving
Credit Agreement or the Senior Note Purchase Agreement which in accordance with
the terms and provisions of the Revolving Credit Agreement or the Senior Note
Purchase Agreement, respectively, allows the holder or holders of the debt
issued thereunder to accelerate the maturity thereof.
"(S)7.1(b) Senior Debt" means any Senior Debt owed by the Company
---------------------
under the Senior Note Purchase Agreement and any Senior Debt owed by the Company
to the Lenders under the Revolving Credit Agreement.
"(S)7.1(b) Senior Payment Default" means any default in the payment on
--------------------------------
account of (S)7.1(b) Senior Debt when due.
19
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"Revolving Credit Agreement" has the meaning set forth in (S)13.2.
--------------------------
"Senior Note Purchase Agreement" has the meaning set forth in (S)13.2.
------------------------------
(S)7.2 Optional Prepayments. In addition to the prepayments
--------------------
required by (S)7.1, upon the terms and subject to the conditions hereinafter set
forth, the Company may, at its option, upon notice as provided in (S)7.3, prepay
the Notes at any time, in whole or in any part equal to $1,000,000 or more, at a
prepayment price equal to the aggregate principal amount so to be prepaid,
together with interest accrued on the amount to be prepaid to the date fixed for
prepayment, plus a premium equal to the Make-Whole Amount. Any such prepayment
shall be applied pro rata to the payment of the Notes at maturity and the
prepayments required under (S)7.1.
(S)7.3 Notice of Prepayment. Notice of any prepayment of Notes
--------------------
pursuant to (S)7.2 shall be given to each Noteholder not less than 30 or more
than 60 days before the date fixed for prepayment (the "Optional Prepayment
Date") and shall be accompanied by an Officer's Certificate stating (a) the
Optional Prepayment Date, (b) the aggregate principal amount of Notes to be
prepaid on such Optional Prepayment Date, (c) the principal amount of Notes held
by each such holder to be prepaid on such Optional Prepayment Date, and (d) the
amount of accrued interest applicable to such prepayment, (e) the premium, if
any, applicable to such prepayment. Notice of prepayment having been so given,
the aggregate principal amount of Notes specified in such notice, together with
the premium, if any, and accrued interest thereon, shall become due and payable
on such Optional Prepayment Date.
(S)7.4 Partial Prepayment Pro Rata. The aggregate principal amount
---------------------------
of each partial prepayment of Notes pursuant to (S)7.1 or (S)7.2 shall be
allocated among the holders of such Notes then outstanding in proportion, as
nearly as practicable, to the respective unpaid principal amounts of Notes then
held thereby, with adjustments, to the extent practicable, to compensate for any
prior prepayments not made in exactly such proportion.
SECTION 8. REGISTRATION, EXCHANGE AND REPLACEMENT OF NOTES.
(S)8.1 Registration. The Notes issuable under this Agreement shall
------------
be registered Notes. The Company will keep, at its office required to be
maintained pursuant to (S)9.1, books for the registration and registration of
transfer of Notes. Prior to presentation of any Note for registration of
transfer, the Company shall treat the Person in
20
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whose name such Note is registered as the owner and holder of such Note for all
purposes whatsoever, whether or not such Note shall be overdue, and the Company
shall not be affected by notice to the contrary.
(S)8.2 Exchange. Any Noteholder, at its option, may in person or by
--------
duly authorized attorney surrender its Note for exchange at the office of the
Company maintained pursuant to (S)9.1 and promptly thereafter and at the
Company's expense, except as provided below, receive in exchange therefor a new
Note or Notes, as the case may be, each in the denomination requested by such
Noteholder, dated the date to which interest shall have been paid on the Note
so surrendered or, if no interest shall have yet been so paid, dated the date of
the Note so surrendered and registered in the name of such Person or Persons as
shall have been designated in writing by such Noteholder or its attorney for the
same principal amount as the then unpaid principal amount of the Note so
surrendered. Subject to (S)9.1, the Company may require payment of a sum
sufficient to cover any stamp or other tax or governmental charge imposed in
respect of any transfer involved in such exchange.
(S)8.3 Replacement. Upon receipt by the Company of evidence
-----------
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note and (a) in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to it; provided, however, that
-----------------
if the holder of such Note is the original purchaser of the Notes listed on
Schedule I hereto or any Institutional Investor with stated capital and surplus
in excess of $100,000,000, such holder's own agreement of indemnity shall be
deemed to be satisfactory; or (b) in the case of mutilation, upon surrender
thereof, the Company, at its expense, will execute and deliver in lieu thereof a
new Note executed in the same manner as the Note being replaced, in the same
principal amount as the unpaid principal amount of such Note and dated the date
to which interest shall have been paid on such Note or, if no interest shall
have yet been so paid, dated the date of such Note.
SECTION 9. CERTAIN COVENANTS OF THE COMPANY.
The Company covenants and agrees that so long as any Notes shall
remain outstanding:
(S)9.1 Maintenance of Office. The Company will maintain at its
---------------------
office located at its address for notices pursuant to (S)14.1 an office where
notices, presentations and demands in respect of this Agreement and the Notes
may be given to and made upon it; provided, however, that it may, upon 15
-----------------
business days' prior written notice to the holders of the Notes, move such
office to any other location within the continental boundaries of the United
States of America. The Company hereby agrees that it will pay,
21
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and will save any holder of a Note harmless against liability for, any stamp or
other tax or governmental charge imposed in respect of any transfer of a Note
made at a time when the books for the registration and registration of transfer
of Notes are maintained at an office outside the State of California, to the
extent that such tax or charge exceeds the amount that would have been payable
had said books been maintained in the State of California. Said obligation of
the Company shall survive the payment or prepayment of the Notes and the
termination of this Agreement.
(S)9.2 Corporate Existence. The Company, and each of its
-------------------
Subsidiaries, will take and fulfill, or cause to be taken and fulfilled, all
actions and conditions necessary to preserve and keep in full force and effect
its existence, rights and privileges as a corporation and will not liquidate or
dissolve, and it will take and fulfill, or cause to be taken and fulfilled, all
actions and conditions necessary to qualify, and to preserve and keep in full
force and effect its qualification, to do business as a foreign corporation in
each jurisdiction in which the conduct of its business or the ownership or
leasing of its properties requires such qualification except where failure to do
so would not have a material adverse effect on the Company or any Subsidiary or
on the Company's ability to perform its obligations hereunder or under the
Notes; provided, however, that this (S)9.2 shall not be deemed to prohibit any
-----------------
transaction permitted by (S)9.16.
(S)9.3 General Maintenance of Properties and Business, etc. The
----------------------------------------------------
Company, and each of its Subsidiaries, will:
(a) maintain its property in good condition and make all
reasonable and necessary renewals, replacements, additions, betterments and
improvements thereof and thereto, so that the business carried on in connection
therewith may be conducted properly at all times;
(b) maintain or cause to be maintained, with financially sound
insurers of nationally recognized stature and responsibility, insurance with
respect to its property and business of such a nature, with such terms and in
such amounts, as is customary in the case of corporations engaged in the same or
a similar business similarly situated against loss or damage of the kinds and in
the amounts customarily insured against and for by such corporations, and carry
or cause to be carried, with such insurers in customary amounts, such other
insurance, including public liability insurance, as is usually carried by such
corporations;
(c) keep proper books of record and accounts in which entries
will be made of its business transactions in accordance with and to the extent
required by generally accepted accounting principles;
22
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(d) set aside on its books from its earnings for each fiscal
year, in amounts deemed adequate in the reasonable opinion of the Company, all
proper accruals and reserves which, in accordance with generally accepted
accounting principles, should be set aside from such earnings in connection with
its business, including reserves for depreciation, obsolescence and/or
amortization and accruals for taxes based on or measured by income or profits
and for all other taxes; and
(e) continue to operate in the same primary business in which it
currently operates as described in the Company Financial Statements after giving
effect to the Restructuring Transactions.
(S)9.4 Notice of Certain Events and Conditions. The Company will
---------------------------------------
give prompt written notice to each Noteholder of any event of default (or any
event which with notice or lapse of time or both would constitute an event of
default) under any evidence of Indebtedness (including the Notes) in an
aggregate amount of $2,000,000 or more of the Company or any Subsidiary or under
any indenture, mortgage or other agreement or instrument relating to any such
evidence of Indebtedness (including this Agreement) or under any other agreement
or instrument relating to preferred stock of the Company or Subsidiary or under
any capitalized lease the original principal amount of which exceeds $2,000,000
for or in respect of which the Company or any Subsidiary may be liable.
(S)9.5 Inspection. The Company and each of its Subsidiaries will
----------
permit any Institutional Investor Noteholder, by its representatives, agents or
attorneys, to examine all books of account, records, reports and other papers of
the Company and its Subsidiaries, to make copies and take extracts from any
thereof, to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with their respective officers and independent certified public
accountants (and by this provision the Company hereby authorizes said
accountants to discuss with any such holder the finances and accounts of the
Company and its Subsidiaries) and to visit and inspect, upon reasonable notice,
at reasonable times during normal business hours the properties of the Company
or any Subsidiary. Each such inspection shall be at the expense of the Person
making the inspection, unless such inspection shall be made during the
continuance of an Event of Default (in which event, the expense of such
inspection shall be borne by the Company). Notwithstanding the foregoing
sentence, it is understood and agreed by the Company that all expenses incurred
by the Company, any officers and employees thereof and the independent certified
public accountants therefor in connection with any such inspection shall be
expenses payable by the Company and shall not be expenses of the Person making
the inspection.
(S)9.6 Compliance with Law, etc. Neither the Company nor any
------------------------
Subsidiary will (a) violate any laws, ordinances, governmental rules or
regulations to which
23
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it is or may become subject or (b) fail to obtain or maintain any patents,
trademarks, service marks, trade names, copyrights, design patents, licenses,
permits, franchises or other governmental authorizations necessary to the
ownership of its property or the conduct of its business, in either case where
such failure would have a material adverse effect on the Company or any
Subsidiary or on the Company's ability to perform its obligations hereunder or
under the Notes.
(S)9.7 Payment of Taxes and Claims. The Company, and each of its
---------------------------
Subsidiaries, will pay and discharge promptly when due:
(a) all taxes, assessments and governmental charges and levies
payable by it which are imposed upon it, its income or profits or any of its
properties, before the same shall become delinquent; and
(b) all lawful claims of materialmen, mechanics, carriers,
warehousemen, landlords and other similar Persons for labor, materials, supplies
and rentals that, if unpaid, might by law become a Lien upon any of its
property;
provided, however, that none of the foregoing need be paid while the same is
- -----------------
being contested in good faith by appropriate proceedings diligently conducted so
long as adequate reserves shall have been established in accordance with
generally accepted accounting principles with respect thereto, title of the
Company or its Subsidiary, as the case may be, to the particular property shall
not be divested thereby and its right to use the particular property shall not
be materially adversely affected thereby.
(S)9.8 ERISA. (a) The Company and the ERISA Affiliates each will
-----
take and fulfill all actions necessary to continue, and will continue, any and
each Plan in substantial compliance with applicable requirements of ERISA and
the Code, in each case as in effect at the time, until the Plan is terminated,
and the liabilities thereof discharged, in accordance with applicable law.
(b) Neither the Company nor any ERISA Affiliate will suffer or
permit any accumulated funding deficiency (within the meaning of Section 412 of
the Code) with respect to any Pension Plans which deficiency could materially
adversely affect the business, earnings, prospects, properties or condition
(financial or otherwise) of the Company.
(S)9.9 Transactions with Affiliates. Neither the Company nor any
----------------------------
Subsidiary will enter into any transaction (including, without limitation, the
purchase, sale or exchange of any property, the rendering of any services or the
payment of management fees) with any Affiliate, except pursuant to the
reasonable requirements of the business of
24
<PAGE>
the Company and its Subsidiaries, and in good faith and upon commercially
reasonable terms that are no less favorable to the Company or such Subsidiary
than would obtain in a comparable arm's-length transaction with a Person other
than an Affiliate.
(S)9.10 Current Ratio. The ratio of Consolidated Current Assets to
-------------
Consolidated Current Liabilities will not at any time be less than 1.4 to 1.
(S)9.11 Priority Debt. Neither the Company nor any Subsidiary shall
-------------
incur any additional Priority Debt unless, after giving effect thereto, the sum
of (i) Consolidated Priority Debt plus (ii) all Accounts Payable of the Company
and its Subsidiaries which are secured by a Lien on any assets of such Persons
would be less than 50% of the sum of Consolidated Inventories plus Consolidated
Accounts Receivable.
(S)9.12 Debt. Neither the Company nor any Subsidiary shall incur any
----
additional Debt (a) during any Blockage Period unless such additional Debt is
Designated Senior Debt or is Debt owed to any Lender and is permitted under
(S)9.11 and (b) unless, after giving effect thereto, the sum of (i) Consolidated
Debt plus (ii) all Accounts Payable of the Company and its Subsidiaries which
are secured by a Lien on any assets of such Persons would be less than 66-2/3%
of Consolidated Net Tangible Assets.
(S)9.13 Consolidated Net Income Before Interest Expense and Taxes.
---------------------------------------------------------
The ratio of Consolidated Net Income Before Interest Expense and Taxes to
Consolidated Interest Expense for any fiscal quarter will not be less than 1.5
to 1.
(S)9.14 Consolidated Tangible Net Worth. Consolidated Tangible Net
-------------------------------
Worth as of any date will not be less than the sum of (a) 25% of the
Consolidated Net Income for the period from and after January 1, 1994, to the
end of the last preceding fiscal quarter plus (b) $73,000,000.
(S)9.15 Limitation on Restricted Payments . Neither the Company nor
---------------------------------
any Subsidiary will at any time, directly or indirectly, declare, make or pay,
or incur any liability to make or pay, or cause or permit to be declared, made
or paid, any Restricted Payment unless immediately thereafter and after giving
effect thereto, (i) the aggregate amount applied to (x) all such Restricted
Payments for the period subsequent to January 1, 1994, shall be less than an
amount equal to the sum of (l) $5,000,000, plus (2) 75% of Consolidated Net
Income for the period subsequent to January 1, 1994, through the end of the then
most recently completed fiscal quarter of the Company (or if Consolidated Net
Income for such period is a loss, minus 100% of Consolidated Net Income for such
period), plus (3) 100% of the net proceeds to the Company arising from the
issuance and sale of any shares of its capital stock; and (ii) no Default or
Event of Default shall exist.
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(S)9.16 Consolidation and Merger. The Company will not, and will not
------------------------
permit any Subsidiary to, merge into or consolidate with any other Person or
permit any other Person to merge into or consolidate with it or any Subsidiary,
except:
(a) the Company may merge into or consolidate with any other
Person or permit any other Person to merge into or consolidate with it so long
as (i) the corporation which survives such merger or results from such
consolidation is organized under the laws of the United States of America or a
jurisdiction thereof; (ii) the Company is the surviving corporation or the due
and punctual payment of the principal of and premium, if any, and interest on
all of the Notes, according to their tenor, and the due and punctual performance
and observance of all the covenants in this Agreement to be performed or
observed by the Company, is expressly assumed in writing by the surviving
corporation under an instrument reasonably satisfactory in form and substance to
the holders of 66-2/3% of the aggregate unpaid principal amount of the Notes
then outstanding; (iii) immediately after the consummation of the transaction,
and after giving effect thereto, the Company would be permitted by the
provisions of (S)(S)9.11 and 9.12 to incur at least $1.00 of additional Priority
Debt and Debt; and (iv) before and immediately after the consummation of the
transaction, and after giving effect thereto, no Default or Event of Default
would exist;
(b) any Subsidiary may merge into or consolidate with (i) the
Company if the Company is the surviving corporation or (ii) any other
Subsidiary; and
(c) the Company may consummate the Reorganization.
(S)9.17 Sale of Assets. The Company will not, and will not permit
--------------
any Subsidiary to, sell any of its assets to any other Person other than in the
ordinary course of business, except:
(a) any Subsidiary may sell, lease, transfer or otherwise dispose
of any of its assets to the Company or any other Subsidiary; and
(b) the Company or any Subsidiary may sell, lease, transfer or
otherwise dispose of any of its assets so long as before and immediately after
giving effect to the transaction the aggregate amount of the greater of the book
value or fair market value (determined with respect to any asset at the time of
sale, lease, transfer or disposition thereof) of all such assets of the Company
and its Subsidiaries sold, leased, transferred or disposed of (i) during any
fiscal year will not exceed 10% of Consolidated Total Assets as at the end the
most recently completed fiscal year of the Company and (ii) as of the fiscal
quarter immediately following consummation of the Reorganization will not in the
aggregate exceed 25% of Consolidated Total Assets, unless, in each case, within
180 days
26
<PAGE>
of receipt, such amounts are reinvested in the business of the Company or such
amounts are used to repay Debt.
(S)9.18 Restricted Investments. Neither the Company nor any
----------------------
Subsidiary will make any Restricted Investment.
SECTION 10. INFORMATION TO BE FURNISHED HOLDERS OF NOTES.
(S)10.1 Financial Statements of the Company. The Company covenants
-----------------------------------
that it will deliver to each Noteholder two copies of the following:
(a) as soon as practicable and, in any case, within 100 days
after the close of each fiscal year, the consolidated financial statements of
the Company and its Subsidiaries, setting forth the consolidated balance sheet
of the Company and its Subsidiaries as of the end of such fiscal year and the
consolidated statements of income, stockholders' equity and cash flow of the
Company and its Subsidiaries for such fiscal year, setting forth in each case,
in comparative form, the figures for the preceding fiscal year, all in
reasonable detail, such consolidated financial statements to be accompanied by
an opinion thereon of Deloitte & Touche, independent certified public
accountants, or another firm of independent certified public accountants of
nationally recognized standing, which opinion shall be unqualified and state
that (i) the audit by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards and, accordingly, included such tests of the accounting
records and such other auditing procedures as were considered necessary in the
circumstances and (ii) such consolidated financial statements present fairly the
financial condition of the Company and its Subsidiaries at such date and the
results of operations thereof for such period and have been prepared in
accordance with generally accepted accounting principles consistently applied,
except for changes in application in which such accountants concur;
(b) as soon as practicable and, in any case, within 60 days after
the end of each of the first three quarterly accounting periods in each fiscal
year, the consolidated financial statements of the Company and its Subsidiaries,
setting forth the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of the end of such accounting period and the unaudited
consolidated statements of income, stockholders' equity and cash flow of the
Company and its Subsidiaries for such quarterly accounting period and for the
fiscal year to date, setting forth in each case in comparative form the figures
for the corresponding periods of the preceding fiscal year, all in reasonable
detail and prepared and certified by the chief financial officer of the Company
as complete and correct, as having been prepared in accordance with generally
accepted accounting principles consistently applied and as presenting fairly the
financial condition of the
27
<PAGE>
Company and its Subsidiaries and results of operations thereof subject, in each
case, to changes resulting from normal year-end adjustments and to the absence
of footnotes;
(c) as soon as practicable and, in any case, within 100 days
after the close of each fiscal year, the financial statements of each
Significant Subsidiary, setting forth the balance sheet of such Significant
Subsidiary as of the end of such fiscal year and the statements of income,
stockholders' equity and cash flow of such Significant Subsidiary for such
fiscal year, setting forth in each case, in comparative form, the figures for
the preceding fiscal year, all in reasonable detail, such financial statements
to be accompanied by an opinion thereon of Deloitte & Touche, independent
certified public accountants, or another firm of independent certified public
accountants of nationally recognized standing, which opinion shall be
unqualified and state that (i) the audit by such accountants in connection with
such financial statements has been made in accordance with generally accepted
auditing standards and, accordingly, included such tests of the accounting
records and such other auditing procedures as were considered necessary in the
circumstances and (ii) such financial statements present fairly the financial
condition of such Significant Subsidiary at such date and the results of
operations thereof for such period and have been prepared in accordance with
generally accepted accounting principles consistently applied, except for
changes in application in which such accountants concur;
(d) as soon as practicable and, in any case, within 60 days after
the end of each of the first three quarterly accounting periods in each fiscal
year, the financial statements of each Significant Subsidiary, setting forth the
unaudited balance sheet of such Significant Subsidiary as of the end of such
accounting period and the unaudited statements of income, stockholders' equity
and cash flow of such Significant Subsidiary for such quarterly accounting
period and for the fiscal year to date, setting forth in each case in
comparative form the figures for the corresponding periods of the preceding
fiscal year, all in reasonable detail and prepared and certified by the chief
financial officer of such Significant Subsidiary as complete and correct, as
having been prepared in accordance with generally accepted accounting principles
consistently applied and as presenting fairly the financial condition of such
Significant Subsidiary and results of operations thereof subject, in each case,
to changes resulting from normal year-end adjustments and to the absence of
footnotes;
(e) as soon as practicable and, in any case, within 100 days
after the close of each fiscal year the unaudited consolidating financial
statements of the Company and its Subsidiaries, setting forth the consolidating
balance sheet of the Company and its Subsidiaries as of the end of such fiscal
year and the consolidating statements of income, stockholders' equity and cash
flow of the Company and its Subsidiaries for such fiscal year, setting forth in
each case, in comparative form, the figures for the preceding fiscal year,
28
<PAGE>
all in reasonable detail, if such consolidating financial statements are made
available to any holder of the Company's stock or Indebtedness.
(S)10.2 Other Information. The Company will deliver to each
-----------------
Noteholder the following:
(a) promptly after submission thereof to the Company, copies of
any detailed reports (including the auditors' comment letter to management)
submitted to the Company by its independent certified public accountants in
connection with each annual or interim audit of the accounts of the Company made
by such accountants;
(b) promptly upon distribution thereof, copies of all financial
or other statements (including proxy statements) and reports as the Company or
any Subsidiary shall send to any class of its stockholders (other than the
Company or any other subsidiary);
(c) promptly after filing thereof, copies of all regular and
periodic reports and registration statements which Merisel, Inc. may file with
the SEC or any governmental agency substituted therefor and, promptly upon,
written request therefor, copies of any financial statements which Merisel, Inc.
may file annually with any state regulatory agency or agencies;
(d) promptly and, in any event, within 30 days thereafter, notice
of the institution of any suit, action or proceeding against the Company or any
Subsidiary which could, in the reasonable judgment of the Company, have a
materially adverse effect on the business, earnings, prospects, properties or
condition (financial or otherwise) of the Company or any Subsidiary;
(e) promptly upon any officer of the Company obtaining knowledge
of any Default or Event of Default, an Officers Certificate of the Company
specifying the nature and period of existence thereof, what action the Company
has taken or is taking or proposes to take with respect thereto, and an estimate
of the time necessary to cure such condition or event;
(f) promptly upon becoming aware of the occurrence of any (i)
ERISA Termination Event or (ii) prohibited transaction, (within the meaning of
Section 4975 of the Code and Section 406 of ERISA) with respect to any Plan, a
written notice specifying the nature thereof, what action the Company is taking
or proposes to take with respect thereto, and, when known, any action taken by
the PBGC, Internal Revenue Service or the U. S. Department of Labor with respect
thereto; and
29
<PAGE>
(g) promptly upon request therefor, such other data, filings and
information as such Noteholder may from time to time reasonably request.
(S)10.3 Officer's Certificates. Each set of financial statements
----------------------
delivered pursuant to subsection (a) or (b) of (S)10.1 shall be accompanied by a
certificate, signed by the President, the Chief Financial Officer, Treasurer or
the Controller of the Company, stating, in the opinion of such officer and to
the best of his or her knowledge and belief, that the Company was not upon the
date of such certificate or at any time during the period covered by said
financial statements in default under any of the provisions of this Agreement or
the Notes; provided, however, that in the event that any such default shall have
-----------------
occurred, such Certificate shall so specify and shall state whether such default
has been cured or is continuing and, if continuing, what steps the Company has
taken or is taking or proposes to take to cure such default and an estimate of
the time necessary to cure such default.
(S)10.4 Accountants' Certificates. Each set of consolidated
-------------------------
financial statements delivered pursuant to subsection (a) of (S)10.1 shall be
accompanied by a report of the independent certified public accountants who
shall have reported on such consolidated financial statements (i) stating that
such accountants have read this Agreement insofar as is necessary for such
report and that, in making the audit examination necessary to express an opinion
on such consolidated financial statements, such accountants have obtained no
knowledge of any condition or event pertaining to accounting or financial
matters, or the consolidated financial condition of the Company and its
Subsidiaries, that then constitutes an Event of Default, or, if any Event of
Default then exists, specifying the nature and period of existence thereof and
(ii) setting forth in reasonable detail the calculations made as of the end of
the related fiscal year in determining compliance with the provisions of
(S)(S)9.10-9.14.
SECTION 11. DEFAULTS AND REMEDIES
(S)11.1 Events of Default; Acceleration of Notes. If any of the
----------------------------------------
following conditions or events ("Events of Default") shall occur and be
continuing:
(a) any payment or prepayment of principal of or premium, if any,
on any Note shall not be made when the same becomes due and payable, whether at
maturity, at a date fixed for prepayment, upon acceleration or otherwise and
such default shall continue for five days following the date on which such
payment was due; or
30
<PAGE>
(b) any payment of interest on any Note shall not be made when
the same becomes due and payable and such default shall continue for ten days
following the date on which such payment was due and payable; or
(c) any representation or warranty of the Company contained in
this Agreement or in any certificate, statement or other writing furnished in
connection herewith or pursuant hereto shall prove to have been false or
inaccurate in any material respect on the date as of which such representation
or warranty was made; or
(d) the Company shall default in the due and punctual performance
of or compliance with any covenant, condition or agreement to be performed or
observed by it under (S)(S)9.10-9.15 and, if such default is capable of being
remedied, such default shall continue unremedied for 30 days after the Company
is given notice of such default by any Noteholder; or
(e) the Company shall default in the due and punctual performance
of or compliance with any other covenant, condition or agreement to be performed
or observed by it under any provision hereof and any such default shall continue
unremedied for 30 days after the Company is given notice of such default by any
Noteholder; or
(f) (i) the Company or any Subsidiary shall, in respect of any of
its Indebtedness for Money Borrowed aggregating more than $5,000,000 in
principal amount (excluding the Notes), (A) fail to pay any amount when due,
whether at maturity, at a date fixed for prepayment, upon acceleration or
otherwise or (B) default in the performance or observance of any other provision
if the effect of such default is to cause such Indebtedness for Money Borrowed
to be declared due and payable prior to its scheduled maturity; or (ii) any
Indebtedness for Money Borrowed of Merisel, Inc. aggregating more than
$5,000,000 in principal amount shall be declared due and payable prior to the
stated maturity thereof; or
(g) a final judgment or judgments entered by a court of competent
jurisdiction for the payment of money, of which more than $5,000,000 in the
aggregate is not fully covered by insurance, shall be rendered against the
Company or any Subsidiary and shall remain in force undischarged and unstayed
for a period of more than 60 days from the date of its entry or, if stayed, from
the date such stay expires; or
(h) the Company or any Significant Subsidiary shall commence a
voluntary case under any chapter of the Federal Bankruptcy Code, or shall
consent to (or fail to controvert in a timely manner) the commencement of an
involuntary case against the Company or any Significant Subsidiary under said
Code; or
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(i) the Company or any Significant Subsidiary shall institute
proceedings for liquidation (or for any related or similar purpose) under any
law (other than the Federal Bankruptcy Code) relating to financially distressed
debtors, their creditors or property, or shall consent to (or fail to controvert
in a timely manner) the institution of any such proceedings against the Company
or any Significant Subsidiary; or
(j) a court or other governmental authority or agency having
jurisdiction in the premises shall enter a decree or order (i) for the
appointment of a receiver, liquidator, assignee, trustee or sequestrator (or
other similar official) of the Company or any Significant Subsidiary or of all
or substantially all of its property, or for the winding-up or liquidation of
its affairs, and such decree or order shall remain in force undischarged and
unstayed for a period of more than 60 days, or (ii) for the sequestration or
attachment of any material part of the property of the Company, or of all or
substantially all of the property of any Significant Subsidiary, without its
unconditional return to the possession of the Company or such Significant
Subsidiary or its unconditional release from such sequestration or attachment,
within 60 days thereafter; or
(k) a court having jurisdiction in the premises shall enter an
order for relief in any involuntary case commenced against the Company or any
Significant Subsidiary under the Federal Bankruptcy Code, and such order shall
remain in force undischarged and unstayed for a period of more than 60 days; or
(l) a court or other governmental authority or agency having
jurisdiction in the premises shall enter a decree or order approving, with
respect to the Company or any Significant Subsidiary, a petition or proceedings
for liquidation, rehabilitation, readjustment or composition (or for any related
or similar purpose) under any law (other than the Federal Bankruptcy Code)
relating to financially distressed debtors, their creditors or property, and any
such decree or order shall remain in force undischarged and unstayed for a
period of more than 60 days; or
(m) an event or condition shall occur or exist with respect to
any Plan and, as a result of such event or condition, together with all other
such events or conditions, the Company or any ERISA Affiliate shall incur or in
the reasonable opinion of 51% of the Noteholders shall be reasonably likely to
incur a liability to a Plan, the U. S. Government or the PBGC (or any
combination of the foregoing) which is, in such Noteholders' reasonable
determination, material in relation to the consolidated financial position of
the Company and its Subsidiaries;
then (x) upon the occurrence and continuance of any of the Events of Default set
forth in subsections (h) through (l) of this (S)11.1 with respect to the
Company, the Notes shall automatically mature and become due and payable without
presentment, demand, protest
32
<PAGE>
or notice of any kind, all of which are hereby expressly waived, together with
interest accrued thereon and, except for an Event of Default set forth in
subsections (h) and (i) of this (S)11.1, the Make-Whole Amount, all without
presentment, demand or notice of any kind, all of which are hereby waived; (y)
upon the occurrence and continuance of any of the Events of Default set forth in
subsection (a) or (b) of this (S)11.1, any Noteholder or Noteholders may, in
respect of the Notes then held by such Noteholder or Noteholders, at any time
(unless all Defaults shall theretofore have been waived by such Noteholder or
remedied), at its or their option by written notice or notices to the Company,
declare the Notes held by such Noteholder or Noteholders, as the case may be, to
be due and payable, whereupon the same shall mature and become due and payable
together with interest accrued thereon and the Make-Whole Amount, all without
presentment, demand, protest or notice of any kind, all of which are hereby
waived, or (z) upon the occurrence and continuance of any of the Events of
Default set forth in subsections (c) through (g), inclusive, subsection (m) of
this (S)11.1 or subsections (h) through (l) of this (S)11.1 with respect to any
Significant Subsidiary, the Noteholder or Noteholders of at least 33-1/3% in
aggregate principal amount of the Notes at the time outstanding may, in respect
of all the Notes, at its or their option by written notice or notices to the
Company declare all the Notes to be due and payable, whereupon all the Notes
shall mature and become due and payable, together with interest, if any, accrued
thereon, and, except for an Event of Default set forth in subsections (h) and
(i) of this (S)11.1, the Make-Whole Amount, all without presentment, demand,
protest or notice of any kind, all which are hereby waived. Notwithstanding the
foregoing, no acceleration of the Notes shall be effective until five days after
notice of such acceleration has been delivered to the Designated Senior Agent.
(S)11.2 Default Remedies. Subject to the provisions of (S)13, if an
----------------
Event of Default shall occur and be continuing, any Noteholder may exercise any
right, power or remedy permitted to it by law, either by action in equity or at
law, or both, whether for specific performance of any covenant or agreement
contained in this Agreement or in any Note, or for an injunction against a
violation of any of the terms of this Agreement or such Note or in aid of the
exercise of any power granted in this Agreement or in such Note, or may proceed
to enforce payment of such Note or to enforce any other legal or equitable right
of the holder of such Note. No remedy herein conferred upon any Noteholder is
intended to be exclusive of any other remedy and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law, in equity, by statute or otherwise. No course of
dealing on the part of any Noteholder, or any delay or failure on the part of
any Noteholder to exercise any right or power, shall operate as a waiver of such
right or power or otherwise prejudice the rights, powers and remedies of such
Noteholder or of any other Noteholder. No failure to insist upon strict
compliance with any covenant, term, condition or other provision of this
Agreement or the Notes shall constitute a waiver by any Noteholder of any such
covenant, term, condition or other provision or of any default or Event of
Default in
33
<PAGE>
connection therewith. To the extent effective under applicable law, the Company
hereby agrees to waive, and does hereby absolutely and irrevocably waive and
relinquish, the benefit and advantage of any valuation, stay, appraisement,
extension or redemption laws now existing or that may hereafter exist that, but
for this provision, might be applicable to any sale made under any judgment,
order or decree of any court, or otherwise, based on the Notes or on any claim
for interest on the Notes. If an Event of Default shall occur and be
continuing, the Company will pay to the Noteholders, to the extent not
prohibited by applicable law, such further amount as shall be sufficient to
cover the cost and expenses of collection and of the taking of remedial actions
and the maintenance of enforcement proceedings, including, without limitation,
reasonable attorneys' fees and disbursements. All sums payable by the Company
under the Notes shall be paid without counterclaim, setoff, deduction or defense
and without abatement, suspension, deferment, diminution or reduction.
(S)11.3 Notice of Default. If the holder of any Note or the holder
-----------------
of any other evidence of Indebtedness exceeding $2,000,000 in aggregate original
principal amount of the Company shall give any notice or take any other action
with respect to a claimed default, the Company shall forthwith give written
notice thereof to all Noteholders describing such notice or action and the
nature of the claimed default.
(S)11.4 Annulment of Acceleration of Note. If notice is delivered
---------------------------------
pursuant to (a) clause (y) of (S)11.1 by any Noteholder or Noteholders, then
such Noteholder or each of such Noteholders, as the case may be, may, by written
instrument filed with the Company, rescind and annul its respective declaration
and the consequences thereof; (b) clause (z) of (S)11.1, by any Noteholder or
Noteholders, the holders of at least 66-2/3% of the aggregate unpaid principal
amount of the Notes then outstanding, may, by written instrument filed with the
Company, rescind and annul the respective declaration and the consequences
thereof or of such Event of Default pursuant to this Agreement or (c) clause (z)
of (S)11.1 by any Noteholder or Noteholders with respect to any Event of Default
described in clause (f) of (S)11.1, the respective declaration shall be
automatically rescinded and annulled upon the cure by the Company of any related
failure to make payment (whether by payment or waiver) and upon the rescission
of any related acceleration of the Indebtedness for Money Borrowed; provided,
---------
however, that at the time of an annulment and rescission pursuant to the
- -------
foregoing clause (a), (b) or (c) of this (S)11.4:
(i) no judgment or decree shall have been entered for payment or
any monies due pursuant to the Notes or this Agreement;
(ii) all arrears of principal, premium and interest upon all the
Notes and all other sums payable under the Notes and this Agreement (including
reasonable costs and expenses of the holders incurred in connection with such
notice under (S)11.1 or annulment
34
<PAGE>
under this (S)11.4, but excluding any principal or interest on the Notes that
shall have become due and payable by reason of such notice under (S)11.1 or
happening of such Event of Default) shall have been duly paid; and
(iii) each and every other default hereunder and Event of Default
shall have been waived pursuant to (S)14.4 or cured;
and provided, further, that no such rescission and annulment shall extend to or
-----------------
affect any subsequent Default or Event of Default or impair any right or power
consequent thereon.
SECTION 12. INTERPRETATION OF AGREEMENT AND NOTES
(S)12.1 Definitions. Except as the context shall otherwise require,
-----------
the following terms shall have the following meanings for all purposes of this
Agreement (the definitions to be applicable to both the singular and the plural
form of the terms defined, where either such form is used in this Agreement):
"Accounts Receivable" of any Person means all obligations to such
-------------------
person as of the date of determination which, in accordance with generally
accepted accounting principles, would be included as accounts receivable on the
balance sheet of such Person (after deducting any applicable reserves for
uncollectible receivables or bad debts).
"Affiliate" with respect to any Person (hereinafter "such Person"),
---------
means any other Person (a) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
such Person or another Affiliate of such Person, (b) which beneficially owns or
holds 5% or more of the shares of any class of the Voting Stock of such Person
or (c) 5% or more of the shares of any class of Voting Stock of which is
beneficially owned or held of record by such Person or any Subsidiary of such
Person. For purposes of this definition, the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise. The term "Affiliate," when
----------
used herein without reference to any Person, means an Affiliate of the Company.
"Agreement" and "this Agreement" means this Note Purchase Agreement
--------- --------------
(including the Exhibits and Schedules annexed hereto), as it may from time to
time be amended, supplemented or modified in accordance with its terms.
"Blockage Period" has the meaning set forth in (S)13.2.
---------------
35
<PAGE>
"Capital Lease" means any lease which is required to be capitalized on
-------------
a balance sheet of the lessee in accordance with generally accepted accounting
principles.
"Cash Equivalent" means (i) marketable direct obligations issued or
---------------
unconditionally guaranteed by the United States Government or issued by an
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within 90 days from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within 90 days from the date of
acquisition thereof and, at the time of acquisition, having the highest rating
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc.; and (iii) certificates of deposit or bankers' acceptances
maturing within 30 days from the date of acquisition thereof issued by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia whose commercial paper has the highest
rating obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc.
"Closing Date" has the meaning set forth in (S)1.2.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time. Reference to a specific section of the Code shall include such
section, any valid regulation promulgated thereunder and any comparable
provision of any future legislation amending, supplementing or superseding such
section.
"Company" means Merisel Americas, Inc., a Delaware corporation, and
-------
its successors and assigns.
"Company Financial Statements" has the meaning set forth in (S)2.4.
----------------------------
"Consolidated" when used in connection with any item defined herein
------------
means, in addition to the rest of the definition of such item, the aggregate of
such item for the Company and its Subsidiaries, after eliminating all offsetting
debits and credits between the Company and its Subsidiaries and all other items
required to be eliminated in accordance with generally accepted accounting
principles.
"Consolidated Net Income Before Interest Expense and Taxes" means, for
--------------------------------------------------- -----
any period, the sum of (a) Consolidated Net Income for such period, plus (b) all
provisions made on the accounting records of the Company and its Subsidiaries
for Taxes for such period, plus (c) Consolidated Interest Expense for such
period.
36
<PAGE>
"Consolidated Net Income (or Net Loss)," means, for any period, the
--------------------------------------
consolidated net income (or net loss) of the Company and its Subsidiaries for
such period determined in accordance with generally accepted accounting
principles applied on a consistent basis, after excluding Minority Interests and
eliminating all offsetting debits and credits between the Company and its
Subsidiaries and other items to be eliminated in accordance with generally
accepted accounting principles, but, in any event, excluding:
(a) any gains or losses on the sale or other disposition of
investments or fixed or capital assets, and any taxes on such excluded gains and
any tax deductions or credits on account of any such excluded losses;
(b) all items properly classified as extraordinary in accordance
with generally accepted accounting principles;
(c) net earnings and losses of any Subsidiary accrued prior to
the date it became a Subsidiary;
(d) net earnings and losses of any Person (other than a
Subsidiary), substantially all the assets of which have been acquired by the
Company or any Subsidiary in any manner, realized by such other Person prior to
the date of such acquisition;
(e) net earnings and losses of any Person (other than a
Subsidiary) which has been merged into or consolidated with the Company or any
Subsidiary realized by such other Person prior to the date of such merger or
consolidation;
(f) net earnings of any Person (other than a Subsidiary) in which
the Company or any Subsidiary has an ownership interest except to the extent
such net earnings shall have actually been received by the Company or such
Subsidiary in the form of cash distributions;
(g) any portion of the net earnings of any Subsidiary which for
any reason is unavailable for payment of dividends to the Company;
(h) earnings resulting from any reappraisal, revaluation or
write-up of assets subsequent to December 31, 1993;
(i) any income resulting from any excess of the equity in any
Person at the date of acquisition thereof over the amount invested in such
Person;
(j) any gain arising from the acquisition of any capital stock or
other securities of the Company or any Subsidiary; and
37
<PAGE>
(k) earnings resulting from any reversal of any reserve
established prior to December 31, 1992, other than earnings realized during the
Company's 1992 fiscal year resulting from any reversal of any reserve
established prior to December 31, 1992 up to (1-1/3 X)% of total reserves
established prior to December 31, 1992 where X equals the decrease in Total
Assets as of the end of any quarter during the Company's 1992 fiscal year
expressed as a percentage of Total Assets as of December 31, 1992 (using for
this purpose the Total Assets of the Company on a pro forma basis as if the
Reorganization had occurred on or prior to December 31, 1992.
"Consolidated Net Tangible Assets" means, as of the date of
--------------------------------
determination thereof, (a) the Consolidated Tangible Assets of the Company and
its Subsidiaries (valued in accordance with generally accepted accounting
principles) less (b) Consolidated Current Liabilities other than short-term bank
debt, in all cases after excluding Minority Interests and eliminating all
offsetting debits and credits between the Company and its Subsidiaries and all
other items to be eliminated in accordance with generally accepted accounting
principles.
"Consolidated Shareholders' Equity" means the total shareholders'
---------------------------------
equity of the Company and its Subsidiaries as determined on a consolidated basis
in accordance with generally accepted accounting principles.
"Consolidated Tangible Net Worth" means, as of the date of any
-------------------------------
determination thereof, Consolidated Shareholders' Equity after excluding
Minority Interests as determined in accordance with generally accepted
accounting principles, but in any event, excluding all intangible assets and
deferred taxes.
"Current Assets", with respect to any Person, means as of the date of
---------------
any determination thereof, all assets which, in accordance with generally
accepted accounting principles, would be included as current assets.
"Current Indebtedness for Money Borrowed" of any Person means all
---------------------------------------
Indebtedness for Money Borrowed of such Person which does not constitute Funded
Debt.
"Current Liabilities", with respect to any Person, means as of the
--------------------
date of any determination thereof, all liabilities (including taxes accrued as
estimated) which in accordance with generally accepted accounting principles
would be included as current liabilities.
"Debt" of any Person means, as of the date of determination, such
----
Person's Funded Debt and Current Indebtedness for Money Borrowed.
38
<PAGE>
"Default" means any occurrence or event which with the passage of time
-------
and/or the giving of notice would constitute an Event of Default.
"Designated Senior Agent" has the meaning set forth in (S) 13.2.
-----------------------
"Designated Senior Debt" has the meaning set forth in (S)13.2.
----------------------
"Designated Senior Financial Covenant Default" has the meaning set
--------------------------------------------
forth in (S)13.2.
"Designated Senior Payment Default" has the meaning set forth in
---------------------------------
(S)13.2.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time. Reference to a specific section of ERISA shall
include such section, any valid regulation promulgated thereunder and any
comparable provision of any future legislation amending, supplementing or
superseding such section.
"ERISA Affiliate" means any Person which is under "common control"
---------------
with the Company (within the meaning of Section 4001(b)(l) of ERISA).
"ERISA Termination Event" means (a) a reportable event (within the
-----------------------
meaning of Section 4043(b) of ERISA) with respect to a Plan (other than a
reportable event as to which the PBGC has waived the 30-day notice requirement
under Section 4043(a) of ERISA); provided, however, that a failure to meet the
-----------------
minimum funding standards of Section 412 of the Code shall be an ERISA
Termination Event regardless of the issuance of any waivers under Section 412(d)
of the Code; (b) the complete or partial withdrawal of the Company or any ERISA
Affiliate from a Multiemployer Plan under Section 4201 or 4204 of ERISA, (c) the
receipt by the Company or any ERISA Affiliate of notice from a Multiemployer
Plan that is in reorganization or insolvency under Section 4241 or 4245 of ERISA
or that it intends to terminate or has terminated under Section 4041A of ERISA;
(d) the providing of a notice of intent to terminate a Plan pursuant to Section
4041(a)(2) of ERISA or the treatment of a Pension Plan amendment as a
termination under Section 4041 of ERISA; (e) the institution of proceedings by
the PBGC to terminate a Plan or the appointment of a trustee to administer any
Pension Plan under Section 4042 of ERISA; (f) the receipt by the Company or any
ERISA Affiliate of a notice from any Multiemployer Plan that any action
described in clause (e) has been taken with respect to such Multiemployer Plan;
or (g) any other event or condition which might constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension or Multiemployer Plan.
"Event of Default" has the meaning set forth in (S)11.1.
----------------
39
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time.
"Existing Agreement" has the meaning set forth in the Recitals.
------------------
"First Amendment" has the meaning set forth in the Recitals.
---------------
"Funded Debt," with respect to any Person, means, as of the date of
------------
any determination thereof, all Indebtedness of such Person (a) having a final
maturity of one or more than one year from the date of creation thereof,
including all payments in respect thereof that are required, or that may be
required by the Person obligated with respect thereto, to be made within one
year from the date of any determination of Funded Debt, whether or not included
in Current Liabilities of such Person, or (b) which is renewable or extendible
at the option of the obligor for a period or periods more than one year from the
date of origin.
"Guaranty," with respect to any Person, means all obligations of such
--------
Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or
other obligation or investment of any other Person (the "primary obligor") in
any manner, whether directly or indirectly, including obligations incurred
through an agreement, contingent or otherwise, by such Person (a) to purchase
such Indebtedness, obligation or investment or any property or assets
constituting security therefor, (b) to advance or supply funds (i) for the
purchase or payment of such Indebtedness, obligation or investment or (ii) to
maintain working capital or equity capital, or otherwise to advance or make
available funds for the purchase or payment of such Indebtedness, obligation or
investment, (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of such Indebtedness, obligation or investment of
the ability of the primary obligor to make payment of such indebtedness,
obligation or investment or (d) otherwise to assure the owner of such
Indebtedness, obligation or investment against loss in respect thereof,
provided, however, that "guaranty" does not include endorsements of negotiable
- -----------------
instruments for collection or deposit in the ordinary course of business.
The terms "hereof," "herein," "hereunder" and other words of similar
------ ------ ---------
import shall be construed to refer to this Agreement as a whole and not to any
particular Section or other subdivision.
"Holder," with respect to any Note, means the Person in whose name
------
such Note shall be registered.
"Indebtedness" with respect to any Person means all obligations of
------------
such Person which in accordance with generally accepted accounting principles
shall be classified
40
<PAGE>
upon a balance sheet of such Person as liabilities of such Person, and in any
event shall include all (i) obligations of such Person for money borrowed or
which have been incurred in connection with the acquisition of property or
assets, (ii) obligations (including, without limitation, all obligations
described in (i) above, but without duplication) which are secured by any Lien
or other charge upon property or assets owned by such Person, even though such
Person has not assumed or become liable for the payment of such obligations,
provided that the amount of any obligation referred to in this clause (ii) shall
be the lesser of the principal amount of such obligation or the fair market
value of the property securing the payment of such obligation, (iii) obligations
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person, notwithstanding the fact that
the rights and remedies of the seller, lender or lessor under such agreement in
the event of default are limited to repossession or sale of Property, (iv) the
capitalized component of rentals under capitalized leases and (v) all guaranties
by such Person of indebtedness of others. Notwithstanding the foregoing, in
determining the Indebtedness of the Company and its Subsidiaries, there shall be
included all obligations of the Company or any of its Subsidiaries of the
character referred to in the foregoing clauses (i) through (v) deemed to be
extinguished under generally accepted accounting principles but for which such
Person remains legally liable.
"Indebtedness for Money Borrowed" with respect to any Person, means
-------------------------------
all Indebtedness of such Person (a) in respect of money borrowed or evidenced by
a promissory note, debenture or other like written obligation to pay money, (b)
in respect of obligations under any capital lease or (c) representing all or
part of the purchase price of any assets acquired by such Person, which is
evidenced by a conditional sale agreement, promissory note or other like written
obligation.
"Institutional Investor" means any Person who qualifies as an
----------------------
accredited investor pursuant to Rule 501(a) promulgated under the Securities Act
of 1933.
"Interest Expense" of any Person means, for any period, the amount of
----------------
interest paid or payable during such period by such Person on the Debt of such
Person, including, without limitation, the interest portion of periodic rent
payments on capital leases and the amortization of debt discount and expense.
"Interest Payment Date" has the meaning set forth in (S)1.1.
---------------------
"Inventories" of any Person means, as of the date of determination,
-----------
the aggregate value (determined at the lower of fair market value and book
value) of those assets of such Person which in accordance with generally
accepted accounting principles would be included in inventories.
41
<PAGE>
"Lenders" has the meaning set forth in (S)13.2.
-------
"Lien" means any interest in property securing an obligation owed to,
----
or a claim by, any Person other than the owner of the property, whether such
interest shall be based on the common law, statute or contract, whether or not
such interest shall be recorded or perfected and whether or not such interest
shall be contingent upon the occurrence of some future event or events or the
existence of some future circumstance or circumstances, and including the lien
or security interest arising from a mortgage, deed of trust, encumbrance,
pledge, adverse claim or charge, conditional sale or trust receipt, or from a
lease, consignment or bailment for security purposes. "Lien" shall also include
----
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting property. For the purposes of this Agreement, a Person shall be
deemed to be the owner of any property that such Person shall have acquired or
shall hold subject to a conditional sale agreement or other arrangement
(including a leasing arrangement) pursuant to which title to the property shall
have been retained by or vested in some other Person for security purposes.
"Make-Whole Amount" means, (a) in connection with the prepayment of
-----------------
any Note pursuant to (S)7.2 or (S)11.2, an amount equal to the greater of (i)
zero or (ii) the difference between (x) the sum of the present values, as at the
Optional Prepayment Date, of the amount of each remaining scheduled payment of
interest on and principal of such Note, or portion of such payment, which will
not be required to be made as a result of such prepayment (each such amount
separately discounted semi-annually at an annual rate equal to 0.75% per annum
plus the Treasury Rate, determined as at the date five days before the Optional
Prepayment Date) from the date such amount would be due), minus (y) the
principal amount of such Note.
"Merisel FAB" shall mean Merisel FAB, Inc., a Delaware corporation,
-----------
and its successors and assigns.
"Merisel, Inc." shall mean Merisel, Inc., a Delaware corporation, and
-------------
its successors and assigns.
"Merisel Transfers" has the meaning set forth in the Recitals.
-----------------
"Minority Interests" means any shares of stock of any class of a
------------------
Subsidiary (other than directors' qualifying shares as required by law) that are
not owned by the Company and/or one or more of its Subsidiaries. "Minority
--------
Interests" shall be valued by valuing "Minority Interests" constituting
- --------- ------------------
preferred stock at the voluntary or involuntary liquidation value of such
preferred stock, whichever is greater, and by valuing "Minority Interests"
------------------
constituting common stock at the book value of capital and surplus applicable
42
<PAGE>
thereto adjusted, if necessary, to reflect any changes from the book value of
such common stock required by the foregoing method of valuing "Minority
--------
Interests" in preferred stock.
- ---------
"Multiemployer Plan" means a Plan which is a multiemployer plan within
------------------
the meaning of Section 4001(a)(3) of ERISA.
"NationsBank Credit Agreement" shall mean that certain Credit
----------------------------
Agreement, dated as of December 23, 1993, between Merisel, Inc. and NationsBank
of Texas, N.A., as the same may be amended, supplemented, extended, refinanced
(so long as such refinancing is through Debt, other than Debt in connection with
a "distribution" as such term is used in the Securities Act of 1933) or
otherwise modified from time to time.
"Noteholder" means each holder from time to time of an outstanding
----------
Note.
"Notes" has the meaning set forth in (S)1.1.
-----
"Officer's Certificate" means a certificate executed on behalf of the
---------------------
Company by the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President or the Treasurer of the Company.
"Optional Prepayment Date" has the meaning set forth in (S)7.3.
------------------------
"Original Agreement" has the meaning set forth in the Recitals.
------------------
"Original Notes" has the meaning set forth in the Recitals.
--------------
"Outstanding," with respect to the Notes, means, as of the date of
-----------
determination, all Notes theretofore delivered pursuant to this Agreement,
except Notes theretofore cancelled or delivered for cancellation and Notes in
exchange or replacement for which other Notes have been delivered pursuant to
this Agreement; provided, however, that, in determining whether the holders of
-----------------
the requisite aggregate unpaid principal amount of Notes outstanding have given
any notice or taken any action hereunder, Notes held or owned, directly or
indirectly, by the Company, any Subsidiary or any other Affiliate of the Company
shall be disregarded and deemed not to be outstanding.
"Pension Plan" means a Plan which is a single-employer plan (within
------------
the meaning of Section 4001(a)(15) of ERISA) or a Plan (other than a
Multiemployer Plan) to which Section 412 of the Code applies.
43
<PAGE>
"Person" means any individual, corporation, partnership, joint
------
venture, association, joint stock company, trust, estate, unincorporated
organization or government (or any agency or political subdivision thereof).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
----
successor thereto.
"Plan" means any employee pension benefit plan (within the meaning of
----
Section 3(2) of ERISA) which is not described in Section 401(a)(1) OF ERISA,
that the Company or any ERISA Affiliate maintains or is obligated to contribute
to for the benefit of employees or former employees of the Company or any ERISA
Affiliate.
"Priority Debt" means Senior Debt plus Subsidiary Debt.
-------------
"Purchasers" has the meaning set forth in the Preamble.
----------
"Reorganization" has the meaning set forth in the Recitals.
--------------
"Restricted Investment" means (a) any direct or indirect purchase or
---------------------
other acquisition of stock or other securities of any Person (other than
Merisel, Inc. or any Person which is, or after such purchase or other
acquisition will be, a Subsidiary of Merisel, Inc., (other than Merisel FAB and
its Subsidiaries)), (b) any loan, advance or capital contribution to any Person
(other than Merisel, Inc. or any Person which is, or after such purchase or
other acquisition will be, a Subsidiary of Merisel, Inc. (other than Merisel FAB
and its Subsidiaries)) and (c) any guarantee of any obligations of any Person
(other than Merisel, Inc. or any Person which is, or after such purchase or
other acquisition will be, a Subsidiary of Merisel, Inc. (other than Merisel FAB
and its Subsidiaries)) other than:
(i) obligations, stock or securities of a Subsidiary or of a
corporation which immediately after such purchase or acquisition will be a
Subsidiary;
(ii) obligations, stock or securities received in connection with
a settlement of debts owing to the Company or any Subsidiary, including, without
limitation, accounts receivable arising from the sale of goods or services in
the ordinary course of business of the Company and its Subsidiaries;
(iii) commercial paper, bankers' acceptances, time deposits and
certificates of deposit with final maturities of one year or less issued by
banks, trust companies and savings and loan institutions organized under the
44
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laws of a jurisdiction within the United States of America each having (x)
capital and surplus at the end of its most recently ended fiscal year in excess
of $50,000,000 and (y) a commercial paper rating of "A-1" or better by
Standard & Poor's Corporation ("S&P") or "P-l" or better by Moody's Investors
Service, Inc. ("Moody's");
(iv) direct obligations of the United States of America or
obligations of any instrumentality or agency thereof the payment of the
principal of and interest on which is unconditionally guaranteed by the United
States of America; provided, however, that any such obligation shall be
-----------------
payable in Dollars and shall have a final maturity date no more than one year
after the acquisition thereof;
(v) Repurchase agreements of banks or brokerage institutions
organized under the laws of a jurisdiction within the United States of America
each having capital and surplus at the end of its most recently ended fiscal
year in excess of $50,000,000; provided, however, that any such agreement shall
-----------------
be payable in Dollars, shall have a final maturity date no more than one year
after the acquisition thereof and shall be fully collateralized;
(vi) Time deposits, Eurodollar certificates of deposit of foreign
branches of the institutions described in clause (iii) above and obligations of
money market funds which invest in any such time deposits and Eurodollar
certificates of deposit; provided however, that any such deposit or obligation
----------------
shall be payable in Dollars and shall have a final maturity date no more than
one year after the acquisition thereof;
(vii) travel or like advances to officers and employees in the
ordinary course of business; and
(viii) other obligations, stock or other securities, (in addition to
those referred to in clauses (i) through (vii) above); provided, however, that
-----------------
the aggregate amount of all such other obligations, stock or other securities at
any time owned or maintained by the Company and its Subsidiaries shall not
exceed an amount equal to 10% of Consolidated Total Assets as at the end of the
most recently completed fiscal year of the Company.
In computing the amount of any Restricted Investment in any Person,
unrealized increases or decreases in value, or write-ups, write-downs or write-
offs of
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<PAGE>
Restricted Investments in the Person shall be disregarded (except to the
extent included in the determination of net income of the Company or a
Subsidiary).
"Restricted Payment" means (a) a dividend or other distribution,
------------------
direct or indirect, in respect of any shares of the capital stock of the Company
or any Subsidiary (except dividends payable solely in shares its capital stock)
or (b) any purchase, redemption, retirement or other acquisition of any shares
of capital stock of the Company or any Subsidiary, now or hereafter outstanding,
or of any warrants, rights or options evidencing a right to purchase or acquire
any such shares (except in exchange for other shares of capital stock or
warrants, rights or options evidencing a right to purchase or acquire any such
shares). The amount of any Restricted Payment in property shall be deemed to be
the greater of its fair market value (as determined by the Board of Directors)
or its net book value.
"Restructuring Transactions" means, collectively, the Reorganization,
--------------------------
the issuance of the notes pursuant to the Senior Note Purchase Agreement, the
issuance of the Notes, the execution and delivery of the NationsBank Credit
Agreement and the execution and delivery of the Revolving Credit Agreement
together with, in each case, all other transaction documents and instruments
related thereto and provided for therein.
"Revolving Credit Agreement" has the meaning set forth in (S)13.2.
--------------------------
"SEC" means the Securities and Exchange Commission and any successor
---
organization.
"Second Amendment" has the meaning set forth in the Recitals.
----------------
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time.
"Senior Debt" has the meaning set forth in (S) 13.2.
-----------
"Significant Subsidiary" means any Subsidiary or, for purposes of
----------------------
(S)11.1, combination of Subsidiaries, the Total Assets or Net Income of which
equals 10% or more of Consolidated Total Assets or Consolidated Net Income, as
the case may be.
"Subsidiary," with respect to any Person, means any corporation at
----------
least 50% of the outstanding shares of Voting Stock or similar interest of which
are owned, directly or indirectly, by such Person. "Subsidiary," when used
-----------
herein without reference to any particular Person, means a Subsidiary of the
Company.
46
<PAGE>
"Subsidiary Debt" means the aggregate Debt of all Subsidiaries.
---------------
"Tangible Assets," with respect to any Person, means, as of the date
----------------
of any determination thereof, Total Assets of such Person (less depreciation,
depletion, obsolescence, amortization and all other deferrals and reserves
properly established in accordance with generally accepted accounting
principles) except (a) goodwill (whether representing the excess of cost over
book value of assets acquired or otherwise), patents, trade names, trademarks,
copyrights, franchises, research and development expense, organization expense,
unamortized debt discount and expense, deferred assets other than prepaid
insurance, prepaid taxes and deferred taxes, the excess of cost of shares
acquired over book value of related assets and such other assets as are properly
classified as "intangible assets" in accordance with generally accepted
accounting principles, (b) treasury stock of such Person, (c) cash set apart and
held in any sinking fund or similar or analogous fund for the purpose of
redeeming or otherwise retiring stock of such Person, and (d) any write-up of
the book value of any assets of such Person resulting from revaluation thereof
subsequent to December 31, 199 .
"Taxes" means all taxes including all foreign and United States
-----
Federal, state, county or local income, excise, withholding, sales, franchise or
other tax.
"Third Amendment" has the meaning set forth in the Recitals.
---------------
"Total Asset" with respect to any Person, means, as of the-date of any
-----------
determination thereof, all amounts which in accordance with generally accepted
accounting principles would be included as total assets.
"Treasury Rate," as of the date of any determination thereof in
-------------
connection with the determination of the Make-Whole Amount, means the rate per
annum equal to the arithmetic average of the two most recent weekly average
yields on issues of United States Treasury securities adjusted to a constant
maturity equal to the Weighted Average of Life to Maturity of the Notes
(determined, if necessary, by interpolating on a straight line basis such yields
on United States Treasury Securities adjusted to the particular constant
maturities greater than (but nearest to) and less than (but nearest to) the
Weighted Average Life to Maturity of the Notes), as published by the Federal
Reserve Board for release on the first business day of the week in which such
determination is made in its Statistical Release H.15 (519) under the heading
"Treasury Constant Maturities" for the two calendar weeks ending on the two
Wednesdays immediately preceding the date of such release or, if such average is
not published for such periods, of such reasonably comparable index as may be
designated for such period by the holder or holders of at least 51% in aggregate
unpaid principal amount of the Notes then outstanding.
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<PAGE>
"Voting Stock," with respect to a corporation, means the stock of such
-------------
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect members of the Board of Directors (or other
governing body) of such corporation.
"Weighted Average Life to Maturity" of any borrowed funds, as of the
---------------------------------
date of the determination thereof, means the number of years obtained by
dividing the then Remaining Dollar-years of such borrowed funds or preferred
stock by the then outstanding principal amount thereof. "Remaining Dollar-
----------------
years" of any borrowed funds means the amount obtained by (a) multiplying the
amount of each then remaining sinking fund, serial maturity or other required
repayment or redemption price, including repayment at final maturity, by the
number of years (calculated to the nearest one-twelfth) which will elapse
between the time in question and the date of the repayment or redemption and (b)
totaling all of the products obtained in (a).
(S)12.2 Directly or Indirectly. Any provision in this Agreement
----------------------
referring to action to be taken by any person, or that such Person is prohibited
from taking, shall be applicable whether such action is taken directly or
indirectly by such person.
(S)12.3 Accounting Terms. All accounting terms used herein that are
----------------
not otherwise expressly defined shall have the respective meanings given to them
in accordance with generally accepted accounting principles at the particular
time.
(S)12.4 Governing Law. This Agreement and the Notes shall be
-------------
governed by and construed in accordance with the law of the State of California.
(S)12.5 Headings. The headings of the Sections and other
--------
subdivisions of this Agreement have been inserted for convenience of reference
only, and shall not be deemed to constitute a part hereof.
(S)12.6 Independence of Covenants. Each covenant made by the Company
-------------------------
herein is independent of each other covenant so made. The fact that the
operation of any such covenant permits a particular action to be taken or
condition to exist does not mean that such action or condition is not
prohibited, restricted or conditioned by the operation of the provisions of any
other covenant herein.
SECTION 13. SUBORDINATION.
(S)13.1 Subordination. All indebtedness evidenced by the Notes
-------------
(including all principal thereof and interest and premium, if any, thereon) and
all other rights of Noteholders under the Notes or this Agreement (including all
fees, costs, penalties,
48
<PAGE>
indemnities, claims (whether in contract or tort) for breach of representations
or warranties, or any other like amounts) shall, to the extent and in the manner
set forth in this (S)13, be subordinated and subject in right of payment to the
prior payment in full in cash or Cash Equivalents of all Senior Debt (as defined
in (S)13.2 hereof). Each Noteholder, whether upon original issue or upon
transfer or assignment thereof, by its acceptance thereof, agrees that the Notes
shall be subject to the provisions contained in this (S)13. The provisions of
this (S)13 shall be for the benefit of the holders of the Senior Debt and may be
enforced directly by such holders.
(S)13.2 Definitions. For the purposes of this (S)13, the following
-----------
terms shall have the following meanings:
"Acceleration Blockage Period" as to any Note means the period
----------------------------
commencing on the date any Note is accelerated pursuant to (S)11.1 and ending on
the earlier of the date all Senior Debt is paid in cash or Cash Equivalents or
such acceleration is annulled pursuant to (S)11.4.
"Blockage Default" means a Designated Senior Payment Default or
----------------
a Designated Senior Covenant Default.
"Blockage Notice" means a written certificate executed by an obligee
---------------
of a Senior Debt and delivered to the Company to the effect that a Blockage
Default has occurred and is continuing as of the date of such certificate and a
Blockage Period shall be in effect as of the date of such certificate.
"Blockage Period" means (i) in the case of a Designated Senior Payment
---------------
Default, as to which the holder of the respective Designated Senior Debt shall
have delivered a Blockage Notice to the Company within thirty days following
such Designated Senior Payment Default, the period commencing on the occurrence
of such Designated Senior Payment Default and ending on the date such Designated
Senior Payment Default is cured or waived and (ii) in the case of a Designated
Senior Covenant Default, the period commencing on the date that the obligee of
the respective Designated Senior Debt shall have delivered a Blockage Notice to
the Company and ending on the earlier of the date which is 180 days after the
date of such Blockage Notice or the date on which each Blockage Default which
has been the subject of a Blockage Notice is not continuing or has been waived,
provided, however, that no new Blockage Period with respect to any Blockage
- -----------------
Default which was the subject of a Blockage Notice shall begin before 365 days
after the date of such Blockage Notice.
"Designated Senior Agent" means Citicorp USA, Inc. or any successor,
-----------------------
acting as Agent under the Revolving Credit Agreement.
49
<PAGE>
"Designated Senior Covenant Default" means any default with respect to
----------------------------------
Designated Senior Debt which, in accordance with the terms and provisions of the
instrument or agreement evidencing such Designated Senior Debt, allows the
obligee of such Designated Senior Debt to accelerate the maturity thereof.
"Designated Senior Debt" means (i) any indebtedness owed by the
----------------------
Company to the Lenders under the Revolving Credit Agreement, (ii) any
indebtedness owed by the Company under the Senior Note Purchase Agreement or
(iii) any other Senior Debt specified by the Company in writing delivered to all
Noteholders.
"Designated Senior Financial Covenant Default" means any default with
--------------------------------------------
respect to any financial test or financial ratio under the Revolving Credit
Agreement which, in accordance with the terms and provisions of the Revolving
Credit Agreement, allows the holder or holders of the debt issued thereunder to
accelerate the maturity thereof.
"Designated Senior Payment Default" means any default in the
---------------------------------
payment of Designated Senior Debt when due.
"Lenders" means at any date of determination, any of the
-------
creditors party to the Revolving Credit Agreement.
"Revolving Credit Agreement" means (i) that certain Revolving Credit
--------------------------
Agreement dated as of December 23, 1993, among the Company and Merisel Europe,
Inc. as borrowers, Merisel, Inc. as guarantor, the Lenders party thereto,
Citibank, N.A., as Designated Issuer and Citicorp USA, Inc., as Agent, as it may
be amended (including, without limitation, any amendment to increase the amount
of principal or any other amount thereunder), restated, or otherwise modified
from time to time, and (ii) any agreement or agreements under which Indebtedness
is incurred to refund or refinance any indebtedness under any Revolving Credit
Agreement.
"Senior Note Purchase Agreement" means (i) that certain Amended and
------------------------------
Restated Senior Note Purchase Agreement dated as of December 23, 1993 among the
Company and the purchasers party thereto, as it may be amended (including,
without limitation, any amendment to increase the amount of principal or any
other amount thereunder), restated or otherwise modified from time to time,
governing the sale by the Company to the purchasers part thereto of $100,000,000
in principal amount of Amended and Restated 8.58% Senior Notes due June 30,
1997, and (ii) any agreement or agreements under which Indebtedness is incurred
to refund or refinance any indebtedness under any Senior Note Purchase
Agreement.
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<PAGE>
"Senior Payment Default" means any default in the payment of
----------------------
Senior Debt when due.
"Senior Debt" means all (i) principal, interest (including without
-----------
limitation interest that accrues after the filing by or against the Company of a
petition under the United States Bankruptcy Code or the commencement of a
proceeding under any other bankruptcy, insolvency or similar law nor or
hereafter in effect) and premium, and (ii) all fees, costs and indemnities owed
by the Company in the aggregate as to all such fees, costs and indemnities up to
$750,000, in each case with respect to any Debt of the Company which by its
terms is not subordinated to any other Debt of the Company and which is
permitted by (S)(S)9.11 and 9.12.
(S)13.3 Payment Blockage.
----------------
(a) Blockage Period. During any Blockage Period, unless and until
---------------
the related Blockage Default is cured or waived, and except as permitted by
(S)7.1(b), no payment on account of principal of or premium, if any, or interest
on the Notes or on account of any other rights of or amounts due to Noteholders
under the Notes or this Agreement (including all fees, costs, penalties,
indemnities, claims (whether in contract or tort) for breach of representations
or warranties, or any other like amounts) shall be made, taken or received, nor
shall any assets be applied to the purchase or other acquisition or retirement
of the Notes, and the Company shall not make any loans, advances or extensions
of credit to a Noteholder with respect to any such Notes or in connection with a
Note pay or acquire any obligation or liability upon which the holder of such
Note is the obligee; provided, however, that nothing contained in this (S)13.3
-----------------
shall prohibit the Company from incurring any obligation or liability to any
Noteholder so long as such obligation or liability is subordinated, to the
extent and on the conditions provided in this (S)13, to the prior payment in
full in cash or Cash Equivalents of all Senior Debt.
(b) Acceleration Blockage Period. During any Acceleration
----------------------------
Blockage Period as to any Note, no payment on account of any accelerated
principal of or premium, if any, or interest on such Note or of any other rights
of or amounts due to Noteholders under the Notes or this Agreement (including
all fees, costs, penalties, indemnities, claims (whether in contract or in tort)
for breach of representations or warranties, or any other like amounts), shall
be made, taken or received, nor shall any assets be applied to the purchase or
other acquisition or retirement of the accelerated principal of or premium, if
any, or interest on such Note, and the Company shall not make any loans,
advances or extensions of credit to a Noteholder with respect to any such Note
or in connection with such Note pay or acquire any obligation or liability upon
which the holder of such Note is the obligee; provided, however, that, unless
-----------------
otherwise provided in this Agreement, the
51
<PAGE>
Company may make, and the Noteholders may take and receive, payments of
principal and interest required under (S)1.1 and (S)7.1(a).
(S)13.4 Acceleration Blockage. Notwithstanding the provisions of
---------------------
(S)11.1, if a Blockage Default has occurred and in continuing, an acceleration
of the Notes as a result of the occurrence and continuance of an Event of
Default set forth in subsections (c), (d), (e), (f) or (g) of said (S)11.1 shall
not be effective until the earlier of (a) 30 days following the date that notice
of acceleration is given to the Company and to the Designated Senior Agent
pursuant to said (S)11.1 and (b) the date that the payment of any Debt of the
Company and its Subsidiaries aggregating more than $5,000,000 is accelerated.
(S)13.5 Insolvency. Upon (i) any acceleration of the principal
----------
amount due on the Senior Debt or (ii) any payment or distribution of assets of
the Company, whether in cash, property or securities (other than securities of
the Company or any other corporation provided for in a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in this (S)13 with respect to the Notes, to the payment of all Senior
Debt then outstanding), to creditors upon any dissolution or winding-up or total
or partial liquidation or reorganization of the Company whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
amounts due or to become due upon all Senior Debt then outstanding shall first
be paid in full in cash or Cash Equivalents, before the Noteholders shall be
entitled to receive any payment or distribution of assets of the Company. Upon
any such dissolution or winding-up or liquidation or reorganization any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities (other than securities of the Company or any other
corporation provided for in a plan of reorganization or readjustment the payment
of which is subordinate, at least to the extent provided in this (S)13 with
respect to the Notes, to the payment of all Senior Debt then outstanding), to
which the Noteholders would be entitled, except for these provisions, shall be
paid by the Company, its successors or assigns, or by any receiver, trustee in
bankruptcy, liquidation trustee, agent or other person making such payment or
distribution, directly to the holders of Senior Debt then outstanding to the
extent necessary to pay in full all such Senior Debt which was then outstanding
in full in cash or Cash Equivalents, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Debt, before any payment
or distribution is made to the Subordinated Noteholders.
(S)13.6 Other Actions for Benefit of Senior Debt. If the Noteholders
----------------------------------------
do not timely file a claim against the Company in any bankruptcy proceeding,
then the Noteholders hereby irrevocably authorize and empower the holders of the
Senior Debt, during the continuation of any bankruptcy proceeding, to (i)
demand, sue for, collect and receive every such payment or distribution and give
acquittance therefor, (ii) file claims and proofs of claims in any statutory or
non-statutory proceeding, and (iii) take such other
52
<PAGE>
proceedings, in the name of such holders, as they may deem necessary or
advisable for the enforcement of the subordination provisions of this Agreement.
(S)13.7 Subrogation. Subject to the payment in full of all Senior
-----------
Debt, the holders of Notes shall be subrogated to the rights of the holders of
Senior Debt to receive payments or distributions of assets of the Company made
on the Senior Debt until the principal of, premium, if any, and interest on the
Notes shall be paid in full. For the purposes of such subrogation, no payments
or distributions to the holders of Senior Debt of any cash, property or
securities to which the Noteholders would be entitled except for those
provisions shall, as among the Company, its creditors other than the holders of
Senior Debt, and the Subordinated Noteholders, be deemed to be a payment by the
Company to or on account of Senior Debt, it being understood that these
provisions in this (S)13 are used, and are intended, solely for the purpose of
defining the relative rights of the Noteholders, on the one hand, and the
holders of Senior Debt, on the other hand.
(S)13.8 Obligations Unaffected. (a) Nothing contained in this (S)13
----------------------
is intended to or shall impair as among the Company, its creditors other than
the holders of Senior Debt, and the Noteholders, the obligation of the Company,
which shall be absolute and unconditional, to pay to the Noteholders the
principal of, premium, if any, and interest on the Notes, as and when the same
shall become due and payable in accordance with their terms, or is intended to
or shall affect the relative rights of the Noteholders and creditors of the
Company other than the holders of Senior Debt.
(b) Nothing herein shall prevent any Noteholder from exercising
any remedies otherwise permitted by applicable law upon the occurrence of an
Event of Default, subject to the rights, if any, under these provisions of the
holders of Senior Debt. Upon any distribution of assets of the Company referred
to in this (S)13, the Noteholders shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, or a
certificate of the liquidating trustee or agent or other person making any
distribution to the Noteholders, for the purpose of ascertaining the person
entitled to participate in such distribution, the holders of the Senior Debt and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this (S)13.
(S)13.9 Effect of Bankruptcy or Other Proceedings. The provisions of
-----------------------------------------
this (S)13 shall continue to be effective as between the Noteholders and the
holders of Senior Debt regardless of whether the Company shall have taken
advantage of or be subject to any bankruptcy or reorganization or similar
proceeding.
53
<PAGE>
(S)13.10 Constructive Trust. In the event that any money, property or
------------------
securities are received by a holder of a Note (i) in violation of this (S)13 or
(ii) in a manner which does not comply with (S)7.1(b) such holder shall hold the
same in trust for, and shall deliver the same in kind to, the holders of Senior
Debt to be applied to the payment of Senior Debt in such order of payment as the
holder or holders of Senior Debt shall determine.
(S)13.11 Revival of Rights. In the event that any Senior Debt shall
-----------------
be paid in full and subsequently for whatever reasons (including, but not
limited to, an order or judgment for disgorgement of a preference under Title XI
of the United States Code or any similar law, or the settlement of any claim in
respect thereof) former, satisfied or additional obligations with respect to
Senior Debt become unpaid or unsatisfied, then the priority provided in this
(S)13 shall again be operative until all such Senior Debt is again paid in full.
SECTION 14. MISCELLANEOUS.
(S)14.1 Notices. (a) All communications under this Agreement or the
-------
Notes shall be in writing and shall be delivered or mailed (i) if to a
Purchaser, to that Purchaser at that Purchaser's address set forth in Schedule I
hereof, marked for attention as there indicated, or at such other address as
that Purchaser may have furnished to the Company in writing, (ii) if to any
other holder of a Note, to it at its address listed in the books for the
registration and registration of transfer of Notes required to be maintained by
the Company pursuant to a (S)9.1, or at such other address as such holder shall
have furnished to the Company in writing, and (iii) if to the Company, to it at
200 Continental Boulevard, El Segundo, California 90245-0984, or at such other
address as it shall have furnished in writing to the Purchasers and all other
holders of the Notes at the time outstanding.
(b) Any written communication so addressed and mailed by
certified mail, return receipt requested, shall be deemed to have been given
when so mailed. All other written communications shall be deemed to have been
given upon receipt therefor.
(S)14.2 Survival. All representations, warranties and covenants made
--------
by the Company herein or by the Company or any Subsidiary in any certificate or
other instrument delivered under or in connection with this Agreement shall be
considered to have been relied upon by the Purchasers and shall survive the
delivery to the Purchasers of the Notes regardless of any investigation made by
the Purchasers or on their behalf. All statements in any such certificate or
other instrument shall constitute representations and warranties of the Company
hereunder.
54
<PAGE>
(S)14.3 Successors and Assigns. This Agreement shall be binding upon
----------------------
the parties hereto and their respective successors and assigns, and shall inure
to the benefit of and be enforceable by the parties hereto and their respective
successors and assigns permitted hereunder. Whether or not expressly so stated
and subject to the restrictions set forth therein, the provisions of (S)(S)5
through 11 of this Agreement are intended to be for the benefit of the
Purchasers and for the benefit of all holders from time to time of the Notes,
and shall be enforceable by the Purchasers and any other such holders whether or
not an express assignment to such holders of rights under this Agreement shall
have been made by any Purchaser or its successors or assigns; and provided,
---------
further, that the provisions of (S)(S)5, 6.2, 6.3, 9.1 and 9.5 shall also be for
- -------
the benefit of, and shall be enforceable by, any Person who shall no longer be a
holder of any Note but who shall have incurred any expense or been subjected to
any liability referred to therein while, or on the basis of being, such a
holder.
(S)14.4 Amendment and Waiver. This Agreement and the Notes may be
--------------------
amended or supplemented, and the observance of any term hereof or thereof may be
waived, with the written consent of the Company and (a) on or prior to the
Closing Date, the Purchasers, and (b) after the Closing Date, the holders of at
least 66-2/3% in aggregate unpaid principal amount of the Notes then
outstanding; provided, however, that no such amendment, supplement or waiver
-----------------
shall, without the written consent of the holders of all the Notes then
outstanding, (i) change, with respect to the Notes, the amount or time of any
required prepayment or payment of principal or premium or the rate or time of
payment of interest, or change the funds in which any prepayment or payment on
the Notes is required to be made; (ii) amend or supplement (S)(S)11.1-11.4
(except as specifically provided therein and except an amendment of (S)11.1 for
the purpose of adding additional Events of Default); (iii) waive any default
arising by reason of the failure of the Company to comply with its covenants
contained in (S)(S)11.2 or 11.3; or (iv) amend or supplement, or waive any
default arising by reason of the failure of the Company to comply with, this
(S)14.4 provided, further, that no such amendment, supplement or waiver that
-------- -------
would adversely affect the interests of the holders of Designated Senior Debt
shall be effected without the written consent of the holders of 66-2/3% or more
of the outstanding principal amount of such Designated Senior Debt. The Company
will not increase the rate of interest on any Note held by any Noteholder, or
otherwise grant any other Noteholder any additional payment or other benefit,
for or in connection with (x) any amendment or waiver proposed to be effected
pursuant to this (S)14.4 or (y) any other action the Company requests such
Noteholder to take, unless such increase in interest or other payment or benefit
is extended upon the same terms ratably to all Noteholders. Any amendment or
waiver effected in accordance with this (S)14.4 shall be binding upon each
Noteholder, each future Noteholder and the Company.
55
<PAGE>
(S)14.5 Counterparts. This Agreement may be executed and delivered
------------
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute but one and the
same instrument.
(S)14.6 Reproduction of Documents. This Agreement and all documents
-------------------------
relating hereto (other than the Notes), including, without limitation, (a)
consents, waivers and modifications that may hereafter be executed, (b)
documents received by the Purchasers at the closing of their purchase of the
Notes and (c) financial statements, certificates and other information
heretofore or hereafter furnished to the Purchasers, may be reproduced by the
Purchasers by any photographic or other similar process and the Purchasers may
destroy any original document so reproduced. The Company agrees and stipulates
that, to the extent permitted by applicable law and court or agency rules, any
such reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Purchasers in the
regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall be admissible in evidence to the same
extent.
56
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchasers have caused this
Agreement to be duly executed by their respective duly authorized officers, all
as of the day and year first above written.
MERISEL AMERICAS, INC.
By: /s/ TIMOTHY N. JENSON
------------------------------------
Name: Timothy N. Jenson
Title: Vice President & Treasurer
THE UNION CENTRAL LIFE INSURANCE COMPANY
By: /s/ JOSEPH A. TUCKER, III
------------------------------------
Name: Joseph A. Tucker, III
Title: Assistant Treasurer
THE CANADA LIFE ASSURANCE COMPANY
By: /s/ BRIAN LYNCH
------------------------------------
Name: Brian Lynch
Title: Associate Treasurer
57
<PAGE>
GUARANTEE MUTUAL LIFE
COMPANY
By: /s/ DAVID BOMBERGER
------------------------------------
Name: David Bomberger
Title: Senior Vice President-
Investments & Treasurer
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: /s/ JoELLEN J. WATTS
------------------------------------
Name: JoEllen J. Watts
Title: Counsel
By: /s/ JON C. HEINY
------------------------------------
Name: Jon C. Heiny
Title: Counsel
PAN AMERICAN LIFE INSURANCE COMPANY
By: /s/ LUIS INGLES, JR.
------------------------------------
Name: Luis Ingles, Jr., C.F.A
Title: Senior Vice President-
Investment
58
<PAGE>
EXECUTION COPY
REVOLVING CREDIT AGREEMENT
Dated as of December 23, 1993
Among
MERISEL AMERICAS, INC.
and
MERISEL EUROPE, INC.
as Borrowers,
------------
and
MERISEL, INC.
as Guarantor,
------------
THE LENDERS PARTIES HERETO
as Lenders,
----------
CITICORP USA, INC.
as Agent,
--------
NATIONSBANK OF TEXAS, N.A.
as Co-Agent,
-----------
and
CITIBANK, N.A.
as Designated Issuer
--------------------
<PAGE>
MERISEL AMERICAS, INC.
AND
MERISEL EUROPE, INC.
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms.................................. 2
SECTION 1.02. Computation of Time Periods............................ 21
SECTION 1.03. Accounting Terms....................................... 21
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES AND ACCEPTANCES
SECTION 2.01. The Revolving Facility Advances........................ 21
SECTION 2.02. The Swing Line Advances................................ 24
SECTION 2.03. Repayment.............................................. 28
SECTION 2.04. Interest on Revolving Facility Advances
and Swing Line Advances................................ 28
SECTION 2.05. Interest Rate Determination............................ 29
SECTION 2.06. Bankers' Acceptances................................... 30
SECTION 2.07. The Bid Advances....................................... 36
SECTION 2.08. Prepayments............................................ 40
SECTION 2.09. Reduction of Commitments............................... 41
SECTION 2.10. Increased Capital...................................... 42
SECTION 2.11. Increased Costs........................................ 42
SECTION 2.12. Illegality............................................. 42
SECTION 2.13. Removal of a Lender.................................... 43
SECTION 2.14. Use of Proceeds........................................ 44
ARTICLE III
AMOUNTS AND TERMS OF THE LETTERS OF CREDIT
SECTION 3.01. The Letters of Credit.................................. 44
SECTION 3.02. Issuing the Letters of Credit.......................... 45
SECTION 3.03. Participation in Existing Letters of Credit............ 46
SECTION 3.04. Reimbursement Obligations.............................. 48
SECTION 3.05. Indemnification; Nature of Designated Issuer's Duties.. 49
SECTION 3.06. Increased Costs........................................ 51
ARTICLE IV
TERMS OF PAYMENTS AND FEES
SECTION 4.01. Payments and Computations.............................. 52
SECTION 4.02. Evidence of Debt....................................... 55
SECTION 4.03. Taxes.................................................. 55
SECTION 4.04. Sharing of Payments, Etc............................... 57
SECTION 4.05. Fees................................................... 57
i
<PAGE>
Page
----
ARTICLE V
CONDITIONS OF LENDING
SECTION 5.01. Initial Conditions Precedent........................... 59
SECTION 5.02. Conditions Precedent to Each Borrowing, Each Acceptance
and Discounting of Drafts and Each Issuance............ 61
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties......................... 63
SECTION 6.02. Incorporation of Senior Note Purchase
Agreement Representations and Warranties............... 69
ARTICLE VII
COVENANTS OF THE BORROWERS AND MERISEL PARENT
SECTION 7.01. Affirmative Covenants.................................. 69
SECTION 7.02. Negative Covenants..................................... 78
SECTION 7.03. Incorporation of Certain Covenants..................... 85
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default...................................... 86
ARTICLE IX
JOINT OBLIGATIONS AND MERISEL
PARENT GUARANTY
SECTION 9.01. Nature of Obligations of the Borrowers................. 91
SECTION 9.02. Merisel Parent Guaranty of the Borrowers' Obligations.. 93
SECTION 9.03. Certain Undertakings of Lenders
Concerning Merisel Parent Guaranty..................... 96
ARTICLE X
THE AGENT
SECTION 10.01. Powers................................................ 98
SECTION 10.02. Agent in its Capacity as a Lender..................... 98
SECTION 10.03. Independent Credit Analysis........................... 99
SECTION 10.04. General Immunity...................................... 99
SECTION 10.05. Right to Indemnity.................................... 100
SECTION 10.06. Agent's Resignation................................... 100
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments, Etc....................................... 101
SECTION 11.02. No Waiver; Remedies................................... 102
SECTION 11.03. Costs and Expenses.................................... 102
SECTION 11.04. Right of Set-off...................................... 103
SECTION 11.05. Binding Effect; Governing Law......................... 103
SECTION 11.06. Independence of Covenants............................. 104
SECTION 11.07. Severability.......................................... 104
SECTION 11.08. Entire Agreement...................................... 104
SECTION 11.09. Notices............................................... 104
SECTION 11.10. Change in Accounting Principles....................... 104
ii
<PAGE>
Page
----
SECTION 11.11. Assignments and Participations........................ 105
SECTION 11.12. Execution in Counterparts............................. 109
SECTION 11.13. WAIVER OF JURY TRIAL.................................. 109
SECTION 11.14. Judgment.............................................. 110
SECTION 11.15. Submission to Jurisdiction............................ 110
SECTION 11.16. Indemnification....................................... 111
SECTION 11.17. Survival of Warranties and Certain Agreements......... 111
SECTION 11.18. Headings.............................................. 112
iii
<PAGE>
EXHIBITS
EXHIBIT A-1 Form of Revolving Facility Advance Note
EXHIBIT A-2 Form of Swing Line Note
EXHIBIT A-3 Form of Bid Note
EXHIBIT B Form of Notice of Revolving Facility Borrowing
EXHIBIT C Form of Notice of Swing Line Borrowing
EXHIBIT D Form of Notice of Bid Borrowing
EXHIBIT E Form of Transmittal Letter and Power of Attorney (to
complete Drafts)
EXHIBIT F Form of Power of Attorney (Drafts)
EXHIBIT G Form of Request for Acceptance Borrowing
EXHIBIT H Form of Power of Attorney (Letters of Credit)
EXHIBIT I Form of Letter of Credit Application
EXHIBIT J Form of Letter of Credit
EXHIBIT K Form of Compliance Certificate
EXHIBIT L-1 Form of Opinion of Riordan & McKinzie, special counsel for
the Borrowers and Merisel Parent
EXHIBIT L-2 Form of Opinion of McCarthy Tetrault, special counsel for
Merisel Canada
EXHIBIT M Form of Merisel Canada Guaranty
EXHIBIT N Form of Assignment and Acceptance
EXHIBIT O Form of Designation Agreement
EXHIBIT P Form of Financial Condition/Solvency Certificate
EXHIBIT Q Form of Consent Letter
iv
<PAGE>
SCHEDULES
SCHEDULE I Subsidiaries and Jurisdictions of Incorporation (Section
6.01(k)
SCHEDULE II Pending Litigation (Section 6.01(g))
SCHEDULE III Existing Letters of Credit (Section 6.01(p))
SCHEDULE IV Certain Liabilities (Section 6.01(e))
v
<PAGE>
REVOLVING CREDIT AGREEMENT
Dated as of December 23, 1993
This REVOLVING CREDIT AGREEMENT (as it may be amended, restated or
otherwise modified from time to time, this "Agreement") is dated as of December
23, 1993 and is entered into by and among MERISEL AMERICAS, INC., a Delaware
corporation ("Merisel Americas"), and MERISEL EUROPE, INC., a Delaware
corporation ("Merisel Europe") (Merisel Americas and Merisel Europe each
sometimes also being referred to individually as a "Borrower" and collectively
as the "Borrowers"), MERISEL, INC., a Delaware corporation ("Merisel Parent"),
as guarantor, THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF
(the "Financial Institutions"), CITICORP USA, INC. ("CUSA") as agent for the
Lenders (as defined below), and CITIBANK, N.A. as Designated Issuer (as defined
below).
RECITALS
WHEREAS, Merisel Parent, certain banks and CUSA, as agent, are parties to
that certain Revolving Credit Agreement dated as of June 30, 1992 (as amended to
the date hereof, the "Existing Credit Agreement"), the proceeds of which have
been used to meet the working capital and general corporate purposes of Merisel
Parent and its Subsidiaries (including entities which are the direct and
indirect Subsidiaries of the Borrowers after giving effect to the restructuring
described below);
WHEREAS, Merisel Parent and its related group companies have undertaken a
corporate restructuring, as part of which Merisel Parent has become a holding
company and contributed substantially all of its operating assets to the
Borrowers;
WHEREAS, in connection with and to facilitate that restructuring, Merisel
Parent and the Borrowers desire to replace the Existing Credit Agreement and to
have the Borrowers assume the obligations of Merisel Parent with respect to any
undrawn letters of credit issued under the Existing Credit Agreement and to use
indebtedness incurred under this Agreement to refund and/or refinance
indebtedness under the Existing Credit Agreement and to meet the further working
capital and general corporate purposes of the Borrowers and their respective
Subsidiaries;
WHEREAS, (i) it is a condition precedent to the effectiveness of this
Agreement that, as set forth in Article IX in particular of this Agreement, each
Borrower be a co-obligor of the obligations hereunder of the other Borrower and
(ii) in addition, both Merisel Parent and Merisel Canada (which is presently a
guarantor of obligations under the Existing Credit
1
<PAGE>
Agreement and is a direct Subsidiary of Merisel Americas after the
restructuring) desire to guaranty the Obligations; and
WHEREAS, the parties hereto intend that indebtedness and obligations
incurred under this Agreement shall constitute "Designated Senior Debt" under
the Subordinated Notes (as defined below) and shall be at least pari passu in
---- -----
right of payment with indebtedness evidenced by the Senior Notes (as defined
below).
NOW, THEREFORE, in consideration for the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Borrowers, Merisel Parent, the Financial Institutions, CUSA
and the Designated Issuer agree as follows;
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Acceptance Borrowing" means a borrowing consisting of the acceptance and
--------------------
discounting of Drafts on the same day by the Accepting Lenders.
"Acceptance Usage" means, as of any date of determination, the sum of (i)
----------------
the aggregate face amount of outstanding unmatured Drafts plus (ii) the
----
aggregate amount of all matured Drafts not theretofore paid by the Borrowers
pursuant to Section 2.06. For purposes of this definition, any Draft which has
been prepaid in full shall not be deemed to be outstanding.
"Accepting Lenders" means, with respect to Drafts, the Lenders (except
-----------------
CUSA) and the Designated Issuer acting on behalf of CUSA.
"Advance" means a Revolving Facility Advance, a Swing Line Advance or a Bid
-------
Advance.
"Adverse Development" has the meaning specified in Section 7.01(m)(i).
-------------------
"Affiliate" means, as applied to any Person, any other Person controlling,
---------
controlled by or under common control with such Person.
"Agent" means CUSA, in its capacity as agent hereunder and under the other
-----
Loan Documents until a successor is appointed under Section 10.06, and
thereafter shall mean such successor.
2
<PAGE>
"Applicable Lending Office" means, with respect to each Lender, such
-------------------------
Lender's Domestic Lending Office in the case of a Base Rate Advance, Quoted Rate
Advance or Draft and such Lender's Eurodollar Lending Office in the case of a
Eurodollar Rate Advance.
"Applicable Margin" means, for any period set forth below, the percentage
-----------------
set forth under such period in the table below:
<TABLE>
<CAPTION>
Level I Level II Level III
Period Period Period
------- -------- ---------
<S> <C> <C> <C>
Eurodollar Margin .7500 .8750 1.2500
Commitment Fee .2500 .3750 0.5000
Commission .7500 .8750 1.2500
Standby Fee .7500 .8750 1.2500
</TABLE>
"Application" has the meaning specified in Section 3.02.
-----------
"Assignment and Acceptance" means an assignment and acceptance in
-------------------------
substantially the form of Exhibit N hereto, entered into by a Lender and an
assignee and accepted by the Agent pursuant to Section 11.11.
"Base Rate" means, for any period, a fluctuating interest rate per
---------
annum as shall be in effect from time to time which rate per annum shall at all
times be equal to the highest of:
(i) the rate of interest announced publicly by the Reference Bank in
New York, New York, from time to time, as the Reference Bank's base rate; or
(ii) 1/2 of 1% per annum above the latest three- week moving average
of secondary market morning offering rates in the United States for one-month
certificates of deposit of major United States money market banks, such
three-week moving average being determined weekly on each Monday (or, if any
such day is not a Business Day, on the next succeeding Business Day) for the
three-week period ending on the previous Friday by the Reference Bank on the
basis of such rates reported by certificate of deposit dealers to and published
by the Federal Reserve Bank of New York or, if such publication shall be
suspended or terminated, on the basis of quotations for such rates received by
the Reference Bank from three New York certificate of deposit dealers of
recognized standing selected by the Reference Bank, in either case adjusted to
the nearest 1/4 of 1% or, if there is no nearest 1/4 of 1%, to the next higher
1/4 of 1%; or
(iii) for any day, 1/2 of 1% per annum above the Federal Funds Rate.
3
<PAGE>
"Base Rate Advance" means a Revolving Facility Advance or a Swing Line
-----------------
Advance denominated in Dollars which bears interest with reference to the Base
Rate.
"Bid Advance" means an advance by a Lender to a Borrower as part of a
-----------
Bid Borrowing resulting from the auction bidding procedure described in Section
2.07(a).
"Bid Borrowing" means a borrowing consisting of simultaneous Bid
-------------
Advances of the same Type from each of the Lenders whose offer to make one or
more Bid Advances as part of such borrowing has been accepted by the Borrower
under the auction bidding procedure described in Section 2.07(a).
"Bid Fee" has the meaning specified in Section 2.07(j).
-------
"Bid Note" means a promissory note of the Borrowers payable to the
--------
order of a Lender, in substantially the form of Exhibit A-3, evidencing the
indebtedness of the Borrowers to such Lender resulting from the Bid Advances of
such Lender.
"Bid Reduction" has the meaning specified in Section 2.01(a).
-------------
"Borrower" and "Borrowers" each has the meaning specified in the
-------- ---------
Introduction to this Agreement.
"Borrowing" means a Revolving Facility Borrowing, a Swing Line
---------
Borrowing or a Bid Borrowing.
"Business Day" means a day of the year on which banks in New York City
------------
or the City of Los Angeles are not authorized or required to close and, if the
applicable Business Day relates to any Eurodollar Rate Advances, on which
dealings are carried on in the London interbank market.
"Capital Lease" means a lease of property (whether real, personal or
-------------
mixed) which should, in accordance with GAAP, be recorded as a capital lease.
"Cash Equivalents" means readily marketable short term direct
----------------
obligations of the United States of America and certificates of deposit issued
by commercial banks of recognized standing operating in the United States of
America rated A or higher and prime commercial paper.
"Closing Date" means the date on which all of the closing conditions
------------
in Section 5.01 are satisfied, which shall occur on or before December 23, 1993
or such later date as the Borrowers and the Agent may agree in writing.
"Commercial Letter of Credit" means any letter of credit issued for
---------------------------
the account of a Borrower for the purpose of providing
4
<PAGE>
the principal payment mechanism in connection with the purchase of goods by that
Borrower in the ordinary course of business.
"Commission" means, with respect to the acceptance for discounting of
----------
a Draft, the applicable percentage (being a percentage per annum) indicated
beside the reference to "Commission" in the definition of "Applicable Margin".
"Commitment" means, for any Lender, its Revolving Facility Commitment,
----------
and, in the case of the Swing Line Lender, its Swing Line Commitment.
"Commitment Fee" means, with respect to the commitment fee payable
--------------
under clause (A) of Section 4.05(a), the applicable percentage (being a
percentage per annum) indicated beside the reference to "Commitment Fee" in the
definition of "Applicable Margin".
"ComputerLand" means ComputerLand Corporation, a Delaware corporation.
------------
"ComputerLand Acquisition" means the acquisition by Merisel Parent
------------------------
(acting through ComputerLand Acquisition Subsidiary) of the assets comprising
the franchise and distribution division of ComputerLand.
"ComputerLand Acquisition Subsidiary" means Merisel FAB, Inc., a
-----------------------------------
Delaware corporation, a wholly-owned Subsidiary of Merisel Parent created to
hold assets acquired in the ComputerLand Acquisition.
"Consolidated" or "consolidated" shall be a reference to a particular
------------ ------------
Borrower or Merisel Parent, as indicated by the context, and that entity's
Subsidiaries as if, in the case of either Merisel Americas or Merisel Europe, it
were the ultimate parent or holding company for that group.
"Consolidated Debt" means Debt (other than intercompany Debt) of a
-----------------
particular Borrower or Merisel Parent (as indicated by the context) and its
consolidated Subsidiaries.
"Consolidated Debt Equivalents" means, as of any date of
-----------------------------
determination, the aggregate of Consolidated Debt plus, with respect to a
----
particular Borrower or Merisel Parent (as indicated by the context) and its
consolidated Subsidiaries, the aggregate amount of liability assumed or net cash
proceeds received in an accounts receivable securitization, transfer or sale
(without duplication).
"Consolidated EBITDA" means, for any period, with respect to a
-------------------
particular Borrower or Merisel Parent (as indicated by the context) and its
consolidated Subsidiaries, the sum of the amounts for such period of (i)
Consolidated Net Income, (ii)
5
<PAGE>
provisions for taxes based on income, (iii) Consolidated Interest Charges, (iv)
total depreciation expense, (v) total amortization expense and (vi) other non-
cash items reducing Consolidated Net Income less other non-cash items increasing
----
Consolidated Net Income and (without duplication) items described in clauses (a)
through (g) of the proviso to the definition of Consolidated Net Income, all of
the foregoing as determined in accordance with GAAP.
"Consolidated Interest Charges" means, for any period, the sum of (i)
-----------------------------
total interest expense during such period of a particular Borrower or Merisel
Parent (as indicated by the context) and its consolidated Subsidiaries with
respect to all Debt (including, without limitation, the interest component of
Capital Leases), plus (ii) the discount expense on sales of commercial paper and
----
fees associated with the sales of accounts receivable permitted under Section
7.02(f), all determined in accordance with GAAP.
"Consolidated Net Income" means, for any period, the net income of a
-----------------------
particular Borrower or Merisel Parent (as indicated by the context) and its
consolidated Subsidiaries for such period, after (i) eliminating all
intercompany items and (ii) deducting portions of income properly attributable
to minority interests, if any, in the stock and surplus of such Subsidiaries,
provided that there shall be excluded (a) the income of any Person accrued prior
- --------
to the date it became a Subsidiary of that Borrower or Merisel Parent (as the
case may be) or was merged into or consolidated with that Borrower or Merisel
Parent (as the case may be) or any of its Subsidiaries or such Person's assets
were acquired by that Borrower or Merisel Parent (as the case may be) or any of
its Subsidiaries, (b) any gains or losses on the sale or other disposition of
investments permitted by Section 7.02(g) hereof or fixed or capital assets, and
any taxes on such excluded gains and any tax deductions or credits on account of
any such excluded losses, (c) the proceeds of any life insurance policy, (d)
earnings resulting from any reappraisal, revaluation or write-up of assets, (e)
any deferred or other credit representing any excess of the equity in any
Subsidiary of that Borrower or Merisel Parent (as the case may be) at the date
of acquisition thereof over the amount invested in such Subsidiary, (f) any gain
arising from the acquisition of any securities of that Borrower or Merisel
Parent (as the case may be) or any Subsidiary of that Borrower or Merisel Parent
(as the case may be) and (g) any reversal of any contingency reserve, except to
the extent that provisions for such contingency reserve shall have been made
from income arising during the most recently audited fiscal year.
"Consolidated Net Worth" means, as of any date of determination, total
----------------------
consolidated assets of a particular Borrower or Merisel Parent (as indicated by
the context) and its consolidated Subsidiaries minus total consolidated
-----
liabilities of
6
<PAGE>
that Borrower or Merisel Parent and its consolidated Subsidiaries, such assets
and liabilities each to be determined in accordance with GAAP, including in the
---------
determination of total consolidated liabilities Subordinated Debt.
"Consolidated Tangible Net Worth" means, as of any date of
-------------------------------
determination, the Consolidated Net Worth of a particular Borrower (as indicated
by the context) less goodwill, patents, trademarks, organizational expense,
deferred research and development costs, deferred marketing expenses and other
intangible assets of such Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP.
"Contingent Obligation" means, as applied to any Person, any direct or
---------------------
indirect liability, contingent or otherwise, of that Person with respect to any
Debt, lease, dividend, letter of credit or other obligation of another Person,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary
course of business), co-made, or discounted or sold with recourse by that
Person, or in respect of which that Person is otherwise directly or indirectly
liable, including, without limitation, any such obligation for which that Person
is in effect liable through any agreement (contingent or otherwise) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise),
or to maintain the solvency or any balance sheet, income or other financial
condition of the obligor of such obligation, or to make payment for any
products, materials or supplies or for any transportation, services or lease
regardless of the non-delivery or non-furnishing thereof, in any case if the
purpose or intent of such agreement is to provide assurance that such obligation
will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such obligation will be protected (in
whole or in part) against loss in respect thereof. The amount of any Contingent
Obligation shall be equal to the amount of the obligation so guaranteed or
otherwise supported.
"Debt" means (i) indebtedness for borrowed money; (ii) obligations
----
evidenced by bonds, debentures, notes or other similar instruments; (iii)
obligations to pay the deferred purchase price of property or services (it being
understood that Debt shall not include obligations both (a) classified as
accounts payable, accrued liabilities or income taxes payable under GAAP and (b)
incurred in the ordinary course of business); (iv) principal obligations as
lessee under Capital Leases; (v) reimbursement obligations under letters of
credit; (vi) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss
7
<PAGE>
in respect of, indebtedness or obligations of others of the kinds referred to in
clauses (i) through (v) above; (vii) liabilities in respect of unfunded vested
benefits under plans covered by Title IV of ERISA, and (viii) "Debt" as such
term is defined in the Senior Note Purchase Agreement; provided that no
--------
obligation included in Debt shall be included in more than one of clauses (i)
through (viii); provided further, that Debt shall not include any obligation
-------- -------
under or resulting from any agreement for the sale, transfer or securitization
of accounts receivable permitted by Section 7.02(f)(ii) and Section
7.02(a)(vii).
"Default Rate" means, with respect to an Advance, amounts owed after a
------------
draw on a Letter of Credit or after discounting of a Draft, or other fees or
amounts owed under this Agreement, a rate per annum equal at all times to 2% per
annum in excess of the rate otherwise applicable for that particular Advance or
other amount or fee.
"Defaulting Lender" means, at any time, any of the Lenders who (i)
-----------------
fails to pay to the Agent any amount payable by such Lender to the Agent with
respect to its participation in any Existing Letter of Credit or in any Swing
Line Advance, (ii) fails to make any Revolving Facility Advance to a Borrower
required to be made by such Lender hereunder, (iii) fails to accept and discount
any Draft required to be accepted and discounted hereunder, or (iv) fails to
Issue any Letter of Credit required to be Issued hereunder; provided, however,
-------- -------
that a Lender shall not be considered a Defaulting Lender if such Lender's
failure to make funds available under clauses (i) through (iv) of this paragraph
resulted from a good faith dispute regarding whether payment of such funds was
required under this Agreement.
"Designated Bidder" means any affiliate of a Lender which (i) is
-----------------
organized under the laws of the United States or any State thereof and (ii)
shall have become a party hereto pursuant to Section 11.11(d).
"Designated Issuer" means Citibank, N.A. or such other financial
-----------------
institution that has been designated by CUSA for purposes of issuing Letters of
Credit and accepting and discounting Drafts on its behalf.
"Designation Agreement" means a designation agreement entered into by
---------------------
a Lender (other than a Designated Bidder) and a Designated Bidder, and accepted
by the Agent, in substantially the form of Exhibit O hereto.
"Discount Price" has the meaning specified in Section 2.06(b).
--------------
"Discount Rate" has the meaning specified in Section 2.06(b).
-------------
8
<PAGE>
"Dollars" and the sign "$" each means the lawful money of the
-------
United States.
"Domestic Lending Office" means, with respect to any Lender, the
-----------------------
office of such Lender specified as its "Domestic Lending Office" opposite its
name on the signature pages of this Agreement, or such other office of such
Lender as such Lender may from time to time specify to the Borrowers and the
Agent.
"Draft" or "Drafts" means the drafts accepted and discounted by
----- ------
the Accepting Lenders pursuant to Section 2.06.
"Employee Benefit Plan" means any Pension Plan, any employee welfare
---------------------
benefit plan, or any other employee benefit plan which is described in Section
3(3) of ERISA and which is maintained for employees of Merisel Parent or any
ERISA Affiliate of Merisel Parent and that is not exempted from ERISA pursuant
to regulations promulgated thereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time and any successor statute.
"ERISA Affiliate" means, as applied to any Person, any trade or
---------------
business (whether or not incorporated) which is a member of a group of which
that Person is a member and which is under common control within the meaning of
Section 414(b) and (c) of the Internal Revenue Code or Section 4001 of ERISA;
provided, however, that no Foreign Subsidiary shall be considered an ERISA
- -------- -------
Affiliate unless at least one of such Subsidiary's employee benefit plans are
subject to ERISA.
"Eurocurrency Liabilities" has the meaning assigned to that term in
------------------------
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender, the
-------------------------
office of such Lender specified as its "Eurodollar Lending Office" opposite its
name on the signature pages of this Agreement (or, if no such office is
specified, its Domestic Lending Office), or such other office of such Lender as
such Lender may from time to time specify to the Borrowers and the Agent.
"Eurodollar Margin" means, with respect to a Eurodollar Rate Advance
-----------------
comprising part of a Revolving Facility Borrowing, the applicable percentage
(being a percentage per annum) indicated beside the reference to "Eurodollar
Margin" in the definition of "Applicable Margin".
"Eurodollar Rate" means, for any Interest Period for each Eurodollar
---------------
Rate Advance comprising part of the same Revolving Facility Borrowing or the
same Bid Borrowing, as the case may be, an interest rate per annum equal to the
rate obtained by dividing
9
<PAGE>
(i) the rate per annum at which deposits in Dollars are offered by the principal
office of the Reference Bank in London, England to prime banks in the London
interbank market at 11:00 A.M. (London time) in an amount equal to the Reference
Bank's Eurodollar Rate Advance two Business Days before the first day of such
Interest Period by (ii) a percentage equal to 100% minus the Eurodollar Rate
Reserve Percentage for such Interest Period.
"Eurodollar Rate Advance" means a Revolving Facility Advance which
-----------------------
bears interest at a rate per annum determined on the basis of the Eurodollar
Rate, as provided in Section 2.05(b), or a Bid Advance which bears interest at a
rate per annum determined on the basis of the Eurodollar Rate, as provided in
Section 2.07(a).
"Eurodollar Rate Reserve Percentage" for the Interest Period for any
----------------------------------
Eurodollar Rate Advance means the reserve percentage applicable two Business
Days before the first day of such Interest Period under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve requirement)
with respect to liabilities or assets consisting of or including Eurocurrency
Liabilities (or with respect to any other category of liabilities which includes
deposits by reference to which the interest rate on Eurodollar Rate Advances is
determined) having a term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 8.01.
-----------------
"Existing Credit Agreement" has the meaning specified in the
-------------------------
Recitals to this Agreement.
"Existing Letters of Credit" means the letters of credit issued under
--------------------------
the Existing Credit Agreement that have not been drawn upon or expired as of the
Closing Date and are listed on Schedule III hereto.
"Federal Funds Rate" means, for any period, a fluctuating interest
------------------
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Federal Reserve Act" has the meaning specified in Section 2.06.
-------------------
10
<PAGE>
"Fixed Rate" means, for the period for each Fixed Rate Advance
----------
comprising part of the same Bid Borrowing, the fixed interest rate per annum
determined for such Advance, as provided in Section 2.07(a).
"Fixed Rate Advance" means a Bid Advance which bears interest at a
------------------
fixed rate per annum determined as provided in Section 2.07(a).
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"Hazardous Materials" means (i) any oil, flammable substances,
-------------------
explosives, radioactive materials, hazardous wastes or substances, toxic wastes
or substances or any other materials or pollutants which (a) pose a hazard to
any property of Merisel Parent or any of its Subsidiaries or to Persons on or
about such property or (b) cause such property to be in violation of any
Hazardous Materials Laws; (ii) asbestos in any form which is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment
which contain dielectric fluid containing levels of polychlorinated biphenyls in
excess of fifty parts per million; (iii) any chemical, material or substance
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous waste," "restricted
hazardous waste," or "toxic substances" or words of similar import under any
applicable provincial, local, state or federal law or under the regulations
adopted or publications promulgated pursuant thereto, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. Sec. 9601, et seq.; the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. Sec. 1801, et seq.; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Sec. 6901, et seq.; the
Federal Water Pollution Control Act, as amended, 33 U.S.C. Sec. 1251, et seq.;
applicable state statutes and (iv) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated by any governmental
authority or may or could pose a hazard to the health and safety of the
occupants of any of the properties of Merisel Parent or any of its Subsidiaries
or the owners and/or occupants of property adjacent to or surrounding any such
property.
"Hazardous Materials Claims" means any and all enforcement, clean-up,
--------------------------
removal or other governmental or regulatory actions or orders threatened,
instituted or completed pursuant to any Hazardous Materials Laws, together with
all claims made or
11
<PAGE>
threatened by any third party against Merisel Parent or any of its Subsidiaries
or any of their respective properties relating to damage, contribution, cost
recovery compensation, loss or injury resulting from any Hazardous Materials.
"Hazardous Materials Laws" means any federal, state, provincial or
------------------------
local laws, ordinances, regulations, or policies now or hereafter existing or
enacted relating to the environment, health and safety, any Hazardous Materials
(including, without limitation, the use, handling, transportation, production,
disposal, discharge or storage thereof) or to industrial hygiene or the
environmental conditions on, under or about any of the property of Merisel
Parent or any of its Subsidiaries, including, without limitation, soil and
groundwater conditions.
"Incipient Default" means an event which would constitute an Event of
-----------------
Default but for the requirement that notice be given or time elapse or both.
"Interest Period" means, for each Advance comprising part of the same
---------------
Borrowing, the period commencing on the date of such Advance and ending on the
last day of the period selected by a Borrower pursuant to the provisions below
and, thereafter, each subsequent period commencing on the day following the last
day of the immediately preceding Interest Period and ending on the last day of
the period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be: (a) in the case of a Base Rate
Advance, one month; (b) in the case of a Eurodollar Rate Advance, one, two,
three or six months, as the Borrower may select in the applicable Notice of
Revolving Facility Borrowing; (c) in the case of a Bid Advance bearing interest
based on the Eurodollar Rate, a period of one, two, three or six months, as the
Borrower may select in the applicable Notice of Bid Borrowing; (d) in the case
of a Fixed Rate Advance, a period of not less than seven nor more than 180 days
as the Borrower may select in the applicable Notice of Bid Borrowing; and (e) in
the case of a Quoted Rate Advance, a period of not less than one nor more than
thirty days as requested by the Borrower and agreed to by the Agent pursuant to
Section 2.05(c); provided, however, that:
-------- -------
(i) a Borrower may not select any Interest Period which ends
after the Termination Date;
(ii) Interest Periods commencing on the same date for
Revolving Facility Advances comprising part of the same Borrowing shall be
of the same duration; and
(iii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business
Day, provided that, in the case of any Interest Period for a Eurodollar
--------
Rate Advance, if
12
<PAGE>
such extension would cause the last day of such Interest Period to occur in
the next following calendar month, the last day of such Interest Period
shall occur on the next preceding Business Day.
"Interest Rate Agreement" means any interest rate swap agreement,
-----------------------
interest rate cap agreement, interest rate collar agreement or other similar
agreement.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended from time to time, and any successor statute.
"Issue" means, with respect to any Letter of Credit, either issue, or
-----
extend the expiry of, or increase the amount of, such Letter of Credit, and the
terms "Issued" and "Issuance" shall have corresponding meanings.
------ --------
"Issuing Lenders" means, with respect to the Letters of Credit, each
---------------
of the Lenders (except CUSA) and the Designated Issuer acting on behalf of CUSA,
acting severally and not jointly, pursuant to the procedures and on the terms
and conditions described in Article III.
"L/C Liability" means, as of any date of determination, all then
-------------
existing liabilities of the Borrowers to Citibank, N.A., CUSA or any Lender in
respect of the Existing Letters of Credit, and all then existing liabilities of
the Borrowers to the Issuing Lenders in respect of all other Letters of Credit
Issued hereunder, whether or not such liability is contingent, and shall consist
of the sum of (i) the maximum amount available to be drawn under the Letters of
Credit and the Existing Letters of Credit (assuming compliance with all
conditions for drawing) and (ii) the aggregate amount which has been paid by,
and not reimbursed to, Citibank, N.A., CUSA or the other Lenders in respect of
the Existing Letters of Credit or the Issuing Lenders in respect of any other
Letters of Credit, plus all interest and fees thereon.
"Lenders" means the Financial Institutions, each Eligible Assignee
-------
becoming a party hereto pursuant to Section 11.11 and, except when used in
reference to a Revolving Facility Advance, a Revolving Facility Borrowing, a
Revolving Facility Commitment or a related term, each Designated Bidder.
"Level I Period", "Level II Period" or "Level III Period" means a
-------------- --------------- ----------------
period of time during which the corresponding ratio set forth in the table below
is applicable:
13
<PAGE>
Consolidated Debt
Equivalents/Capital Ratio Period
------------------------- ------
<TABLE>
<CAPTION>
<S> <C> <C>
equal to or
less than .55:1.00 Level I
greater than .55:1.00
but equal to
or less than .60:1.00 Level II
greater than .60:1.00 Level III
</TABLE>
For purposes of this definition, (a) the reference to "Consolidated Debt
Equivalents/Capital Ratio" is a reference to the ratio more fully described in
Section 7.01(f) relating to the Borrowers (rather than to such ratio relating to
Merisel Parent), (b) each change in the foregoing ratio shall be deemed to have
occurred as of the date of the most recent financial statements delivered by the
Borrowers pursuant to Section 7.01(m)(ii) or (iii) hereof, and (c) upon delivery
of any financial statements reflecting such a change, any resulting change in
the rate of any interest or fees payable hereunder shall be calculated and
applied prospectively from the first day of the next month following the month
in which such financial statements were delivered.
"Letter of Credit" means (i) each Standby Letter of Credit and
----------------
Commercial Letter of Credit issued by the Issuing Lenders for the account of a
Borrower pursuant to Article III and (ii) the Existing Letters of Credit so long
as they remain outstanding or unreimbursed.
"Lien" means any lien, mortgage, deed of trust, assignment, pledge,
----
security interest or other charge or encumbrance, or any preferential
arrangement which has the practical effect of constituting a lien or security
interest; provided, however, that any restrictions contained in any software
-------- -------
license or any vendor repurchase right, territorial distribution or export
restriction, authorized dealer requirement or any other restriction imposed by
Merisel Parent's or its Subsidiaries' vendors to control the distribution
channel for their products shall not constitute a "Lien" as defined herein.
"Loan Documents" means this Agreement (including, without limitation,
--------------
the guaranty of Merisel Parent in Article IX), the Notes, the Drafts, the
Applications, the Letters of Credit, the Merisel Canada Guaranty and all other
writings relating to this Agreement heretofore, now or hereafter executed by or
on behalf of any Loan Party and delivered to the Agent or any Lender, together
with all agreements, instruments or documents referred to therein or
contemplated thereby.
14
<PAGE>
"Loan Parties" means the Borrowers, Merisel Parent and Merisel Canada.
------------
"Majority Lenders" means, at any time, Lenders whose respective Total
----------------
Outstanding Pro Rata Shares are, in the aggregate, at least 60%; provided that
--------
any Defaulting Lender shall have no right to vote hereunder until all amounts
payable by such Defaulting Lender to the Agent have been paid, all Revolving
Facility Advances required to be made by such Defaulting Lender to the Borrowers
have been made and all Drafts required to be accepted and discounted by such
Defaulting Lender have been accepted and discounted and the Revolving Facility
Pro Rata Shares of the remaining Lenders shall be recalculated for purposes of
any vote taken prior to such time on the basis of the aggregate principal amount
of the Revolving Facility Advances then outstanding to each such Lender as a
percentage of the total Revolving Facility Advances then outstanding to all of
the Lenders other than the Defaulting Lender.
"Merisel Americas" has the meaning specified in the Introduction to
----------------
this Agreement.
"Merisel Canada" means Merisel Canada, Inc., a corporation organized
--------------
under the laws of Ontario, Canada.
"Merisel Canada Guaranty" means a guaranty, substantially in the form
-----------------------
of Exhibit M hereto, executed and delivered by Merisel Canada, as it may
hereafter be amended, restated or otherwise modified from time to time.
"Merisel Europe" has the meaning specified in the Introduction to this
--------------
Agreement.
"Merisel Parent" has the meaning specified in the Introduction to this
--------------
Agreement.
"Multiemployer Plan" means a "multiemployer plan" as defined in
------------------
Section 4001(a)(3) of ERISA and which is maintained for employees of Merisel
Parent or any ERISA Affiliate of Merisel Parent.
"Net Proceeds" means all cash or other proceeds received by a
------------
particular Borrower in connection with the issuance or sale of any common stock
or preferred stock of that Borrower, net of all underwriting and other fees,
including, without limitation, attorneys' and accountants' fees, original issue
discount and all other costs and expenses of issuance.
"Notes" means the Revolving Advance Facility Notes, the Swing Line
-----
Notes and the Bid Notes.
"Notice of Bid Borrowing" has the meaning specified in Section
-----------------------
2.07(a).
15
<PAGE>
"Notice of Borrowing" means a Notice of Revolving Facility Borrowing,
-------------------
Notice of Swing Line Borrowing or a Notice of Bid Borrowing, as the case may be.
"Notice of Revolving Facility Borrowing" has the meaning specified in
--------------------------------------
Section 2.01(b).
"Notice of Swing Line Borrowing" has the meaning specified in Section
------------------------------
2.02(b).
"Obligations" means all loans, advances, debts, liabilities,
-----------
obligations, covenants and duties owing by the Borrowers to any Lender, the
Agent, the Syndication Agent, the Designated Issuer, any Affiliate of any
Lender, the Agent, the Syndication Agent or the Designated Issuer, or any Person
entitled to indemnification pursuant to Section 11.03, of any kind or nature,
present or future, whether or not evidenced by any note, guaranty or other
instrument, arising under this Agreement or under any other Loan Document,
whether or not for the payment of money, whether arising by reason of an
extension of credit, acceptance and discounting of a Draft, issuance or
amendment of a Letter of Credit or payment of any draft drawn thereunder, loan,
guaranty, indemnification, or in any other manner, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising and however acquired. The term
includes, without limitation, all interest, charges, expenses, fees, attorneys'
fees and disbursements and any other sum chargeable to the Borrowers under this
Agreement or any other Loan Document. Subject to the provisions of Section 9.01
but otherwise notwithstanding anything to the contrary in this Agreement or any
other Loan Document, each Borrower shall be jointly and severally liable for the
Obligations of the other Borrower.
"Other Taxes" has the meaning specified in Section 4.05.
-----------
"Payment Office" means the principal office of the Reference Bank in
--------------
New York City, located on the date hereof at 399 Park Avenue, New York, New York
10043 at which office accounts have been opened in the name of the Agent and the
Borrowers.
"Pension Plan" means any employee plan which is subject to Section 412
------------
of the Internal Revenue Code and which is maintained for employees of Merisel
Parent or any ERISA Affiliate of Merisel Parent, other than a Multiemployer
Plan.
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Quoted Rate" means, for any Interest Period for any Quoted Rate
-----------
Advance, the rate per annum offered by the Agent to a
16
<PAGE>
Borrower and agreed to by a Borrower for such Interest Period pursuant to
Section 2.05(c); provided, however, that if no rate per annum shall be agreed by
-------- -------
the Borrower and the Agent prior to 10:00 A.M. (Los Angeles time) on the first
day of such Interest Period as the Quoted Rate for such Interest Period, the
Quoted Rate for such Interest Period shall be equal to the Base Rate; provided
--------
further, that in no event shall the rate be less than the one month Eurodollar
- -------
Rate plus the Eurodollar Margin plus one eighth of one percent (.125%).
---- ----
"Quoted Rate Advance" means an advance by a Lender to a Borrower which
-------------------
bears interest at the Quoted Rate.
"Reference Bank" means Citibank, N.A.
--------------
"Register" has the meaning specified in Section 11.11.
--------
"Restructuring" has the meaning specified in Section 5.01(d).
-------------
"Revolving Facility Advance" means an Advance by a Lender pursuant to
--------------------------
Section 2.01.
"Revolving Facility Advance Note" means a promissory note of the
-------------------------------
Borrowers payable to a Lender, in substantially the form of Exhibit A-1 hereto,
evidencing the indebtedness of the Borrowers to such Lender resulting from the
Revolving Facility Advances owing to such Lender.
"Revolving Facility Borrowing" means a borrowing consisting of
----------------------------
Revolving Facility Advances of the same Type made on the same day by the
Lenders.
"Revolving Facility Commitment" means, as to each of the Financial
-----------------------------
Institutions, the amount set forth opposite its name under the heading
"Revolving Facility Commitment" on the signature pages of this Agreement and as
to each other Lender the amount set forth in the Register as its "Revolving
Facility Commitment", as such amount may be reduced pursuant to Section 2.09.
At the Closing Date, the aggregate of the Revolving Facility Commitments of all
the Lenders is $150,000,000.
"Revolving Facility Pro Rata Share" means, as to each Lender, such
---------------------------------
Lender's Revolving Facility Commitment divided by the aggregate of the Revolving
Facility Commitments of all the Lenders, expressed as a percentage.
"Revolving Facility Total RCA Liability" means, as of any date of
--------------------------------------
determination, the outstanding aggregate amount of all Revolving Facility
Advances, Acceptance Usage and L/C Liability.
"Revolving Lender" means each Lender having a Revolving Facility
----------------
Commitment.
17
<PAGE>
"Senior Account" has the meaning specified in Section 2.01(b).
--------------
"Senior Note Purchase Agreement" means that certain Amended and
------------------------------
Restated Senior Note Purchase Agreement dated as of December 23, 1993 between
Merisel Americas and the purchasers which are signatories thereto, as such Note
Purchase Agreement may be amended, supplemented or otherwise modified from time
to time to the extent permitted by this Agreement.
"Senior Notes" means the 8.58% Notes Due June 30, 1997 in the
------------
aggregate principal amount of $100,000,000 issued by Merisel Americas pursuant
to the Senior Note Purchase Agreement, as such Notes may be amended,
supplemented or otherwise modified from time to time to the extent permitted
under this Agreement.
"Solvent", as applied to any Person, means, as at the date of
-------
determination, that (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including Contingent
Obligations) of such Person and (z) greater than the amount that will be
required to pay the probable liabilities of such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person, (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction and (iii) such Person does not intend to
incur, or does not believe or should not reasonably believe that it will incur,
debts beyond its ability to pay such debts as they become due.
"Standby Fee" means, with respect to a Standby Letter of Credit, the
-----------
applicable percentage (being a percentage per annum) indicated beside the
reference to "Standby Fee" in the definition of "Applicable Margin".
"Standby Letter of Credit" means a letter of credit which is not a
------------------------
Commercial Letter of Credit.
"Subordinated Debt" means the Subordinated Notes and all other Debt of
-----------------
the Borrowers subordinated in right of payment to the Obligations pursuant to
documents containing maturities, amortization schedules, covenants, defaults,
remedies, subordination provisions and other material terms in form and
substance satisfactory to the Majority Lenders (or as set out in Section
7.02(b)).
"Subordinated Note Purchase Agreement" means that certain Amended and
------------------------------------
Restated Subordinated Note Purchase Agreement dated as of December 23, 1993
among Merisel Americas and the purchasers listed on the signature pages thereof,
as such Subordinated Note Purchase Agreement may be amended, supplemented or
otherwise
18
<PAGE>
modified from time to time to the extent permitted under this Agreement.
"Subordinated Notes" means the 11.28% Subordinated Notes Due March 10,
------------------
2000 in the aggregate principal amount of $22,000,000 issued by Merisel Americas
pursuant to the Subordinated Note Purchase Agreement, as such Subordinated Notes
may be amended, supplemented or otherwise modified from time to time to the
extent permitted under this Agreement.
"Subsidiary" means, as applied to any Person, any corporation of which
----------
50% or more of the outstanding voting securities of such corporation shall at
the time be owned or controlled, directly or indirectly, by such Person or by
one or more Subsidiaries of such Person or by such Person and one or more of its
Subsidiaries, or any similar business organization which is so owned or
controlled.
"Swing Line Advance" means an Advance by the Swing Line Lender
------------------
pursuant to Section 2.02.
"Swing Line Borrowing" means a Borrowing consisting of a Swing Line
--------------------
Advance made by the Swing Line Lender.
"Swing Line Commitment" means the amount set forth opposite the Swing
---------------------
Line Lender's name on the signature pages hereof as its "Swing Line Commitment".
"Swing Line Lender" means CUSA, in its individual capacity and not as
-----------------
Agent hereunder.
"Swing Line Note" means a promissory note of the Borrowers payable to
---------------
the order of the Swing Line Lender, in substantially the form of Exhibit A-2
hereto, evidencing the indebtedness of the Borrowers resulting from the Swing
Line Advances.
"Syndication Agent" means Citicorp Securities, Inc. in its capacity as
-----------------
arranger of the syndicate of Lenders.
"Taxes" has the meaning specified in Section 4.05.
-----
"Termination Date" means the earlier of (i) May 31, 1997 or (ii) the
----------------
date of termination in whole of the Revolving Facility Commitments pursuant to
Section 8.01.
"Termination Event" means (i) a "Reportable Event" described in
-----------------
Section 4043 of ERISA and the regulations issued thereunder (other than a
"Reportable Event" not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation under such regulations), or (ii) the withdrawal of
Merisel Parent or any of its ERISA Affiliates from a Pension Plan during a plan
year in which it was a "substantial employer" as defined in Section 4001(a)(2)
or 4068(f) of ERISA, or (iii) the filing of a
19
<PAGE>
notice of intent to terminate a Pension Plan or the treatment of a Pension Plan
amendment as a termination under Section 4041 of ERISA, or (iv) the institution
of proceedings to terminate a Pension Plan by the Pension Benefit Guaranty
Corporation, or (v) any other event or condition which might constitute grounds
under ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan, or (vi) the imposition of a Lien pursuant to
Section 412(n) of the Internal Revenue Code.
"Total Capitalization" means with respect to the Borrowers or either
--------------------
one of them, as the context requires, the aggregate of its or their Consolidated
Debt Equivalents plus minority interests plus its or their Consolidated Net
---- ----
Worth, as set forth in each Borrower's consolidated balance sheet (but
specifically including any letters of credit in the calculation of Consolidated
Debt even if not shown on such balance sheet unless such letters of credit
secure payment of an obligation which is already included in the calculation of
Consolidated Debt), as determined in accordance with GAAP.
"Total Facility Pro Rata Share" means, as to each Lender, the quotient
-----------------------------
obtained by dividing (i) its Revolving Facility Commitment, by (ii) the
aggregate of the Revolving Facility Commitments of the Lenders, expressed as a
percentage.
"Total Outstanding Pro Rata Share" means, as to each Lender, the
--------------------------------
quotient obtained by dividing (i) the sum of the Revolving Facility Advances,
--------
Drafts and L/C Liability then owing to such Lender plus, in the case of a Lender
other than the Swing Line Lender, such Lender's participation in all Swing Line
Advances then outstanding or, in the case of the Swing Line Lender, the Swing
Line Advances then outstanding (net of any participations therein purchased by
other Lenders), by (ii) the sum of the Revolving Facility Advances, Drafts and
--
L/C Liability then owing to all of the Lenders plus the outstanding Swing Line
Advances, expressed as a percentage; provided that at any time when no Revolving
--------
Facility Advances, Swing Line Advances, Drafts or Letters of Credit are
outstanding, the Total Outstanding Pro Rata Share of each Lender shall be equal
to its Total Facility Pro Rata Share.
"Total RCA Liability" means as at any date of determination the sum of
-------------------
(i) the aggregate principal amount of all Revolving Facility Advances
outstanding at such date plus (ii) the aggregate principal amount of all Swing
----
Line Advances outstanding at such date plus (iii) the L/C Liability determined
----
as of such date (it being understood that such L/C Liability shall include the
amount of all Existing Letters of Credit as described in Section 3.03) plus (iv)
----
the Acceptance Usage determined as of such date.
20
<PAGE>
"Type" means, with reference to an Advance, a Base Rate Advance, a
----
Eurodollar Rate Advance, a Quoted Rate Advance or a Fixed Rate Advance.
"UCC" means the Uniform Commercial Code as in effect from time to time
---
in the State of California.
"United States" and "U.S." each means United States of America.
------------- ----
SECTION 1.02. Computation of Time Periods. In this Agreement in the
---------------------------
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
----------------
specifically defined herein shall be construed in accordance with GAAP.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES AND ACCEPTANCES
SECTION 2.01. The Revolving Facility Advances.
-------------------------------
(a) The Revolving Facility Commitments. Each Lender
----------------------------------
severally agrees, on the terms and conditions hereinafter set forth, to make
Revolving Facility Advances to the Borrowers from time to time on any Business
Day during the period from the date hereof until the Termination Date in an
aggregate amount (determined in Dollars) not to exceed at any time outstanding
such Lender's Revolving Facility Commitment less such Lender's Revolving
Facility Pro Rata Share of the aggregate amount of the Total RCA Liability then
outstanding; provided that the aggregate amount of the Revolving Facility
--------
Commitments of the Lenders shall be deemed used from time to time to the extent,
but only to the extent, of the aggregate amount of the Bid Advances outstanding,
and such deemed use of the aggregate amount of the Revolving Facility
Commitments shall be applied to the Lenders ratably according to their
respective Revolving Facility Commitments (such deemed use of the aggregate
amount of the Revolving Facility Commitments resulting from the Bid Advances
being the "Bid Reduction"). Each Revolving Facility Borrowing shall consist of
-------------
Revolving Facility Advances of the same Type made in the same currency on the
same day by the Lenders ratably according to their respective Revolving Facility
Commitments. Each Revolving Facility Borrowing consisting of Base Rate Advances
shall be in an aggregate amount not less than $500,000 and in integral multiples
of $100,000 in excess thereof and each Revolving Facility Borrowing consisting
of Eurodollar Rate Advances or Quoted Rate Advances shall be in an aggregate
amount not less than $1,000,000 and in integral multiples of $100,000 in
21
<PAGE>
excess thereof. Within the limits of each Lender's Revolving Facility
Commitment, the Borrowers may borrow, repay pursuant to Section 2.03, prepay
pursuant to Section 2.08 and reborrow under this Section 2.01.
(b) Notice of Revolving Facility Borrowing. Except as
--------------------------------------
provided in Section 2.01(g), each Revolving Facility Borrowing shall be made on
notice received by the Agent from the Borrowers not later than (i) 9:00 A.M.
(Los Angeles time) on the date of the proposed Borrowing in the case of a Base
Rate Advance or a Quoted Rate Advance, and (ii) 9:00 A.M. (Los Angeles time) on
the third Business Day before the requested date of the proposed Borrowing in
the case of a Eurodollar Rate Advance. Each such notice of such a Borrowing (a
"Notice of Revolving Facility Borrowing") shall be by telex, cable, telecopy or
--------------------------------------
telephone, confirmed immediately in writing, in substantially the form of
Exhibit B hereto, specifying therein (i) the requested date of such Borrowing,
(ii) the Type of Advances comprising such Borrowing, (iii) the aggregate amount
of such Borrowing, (iv) in the case of a proposed Borrowing comprised of
Eurodollar Rate Advances, the initial Interest Period for each such Advance and
(v) in the case of a Quoted Rate Advance, the interest rate per annum and
Interest Period quoted by the Agent and agreed to by the Borrowers for such
Borrowing. The Agent shall give prompt notice of such Notice of Revolving
Facility Borrowing to each Lender and shall notify each Lender of the applicable
interest rate under Section 2.04(a), (b) or (c). Not later than 11:30 A.M. (Los
Angeles time) on the date of each Revolving Facility Borrowing, each Lender
shall make available for the account of its Applicable Lending Office to the
Agent at the Payment Office, such Lender's Revolving Facility Pro Rata Share of
such Borrowing in Dollars and in same day funds. After the Agent's receipt of
such funds and upon fulfillment of the applicable conditions set forth in
Article V, the Agent will make such funds available to the Borrowers at the
aforesaid Payment Office by depositing such funds into the Borrowers' designated
account at the Payment Office (the "Senior Account").
--------------
(c) No Liability of Agent. The Agent shall incur no
---------------------
liability to any Borrower in acting upon any telephonic notice referred to above
that the Agent believes in good faith to have been given by a duly authorized
officer or other Person authorized to act on behalf of a Borrower or for
otherwise acting in good faith under this Section 2.01.
(d) Notice of Revolving Facility Borrowing Irrevocable.
--------------------------------------------------
Each Notice of Revolving Facility Borrowing shall be irrevocable and binding on
the Borrowers. In the case of any Revolving Facility Borrowing which the
related Notice of Borrowing specifies is to be comprised of Eurodollar Rate
Advances, the Borrowers shall indemnify each Lender against any loss, cost or
expense incurred by such Lender as a result of any failure to fulfill on or
before the date specified in such Notice of
22
<PAGE>
Revolving Facility Borrowing for such Revolving Facility Borrowing the
applicable conditions set forth in Article V, including, without limitation, any
loss (including loss of anticipated profits), cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund the Revolving Facility Advance to be made by such Lender as part
of such Revolving Facility Borrowing when such Revolving Facility Advance, as a
result of such failure, is not made on such date.
(e) Reimbursement of Agent. Unless the Agent shall have
----------------------
received notice from a Lender, prior to the date of any Borrowing that such
Lender is obligated to make, that such Lender will not make available to the
Agent such Lender's Revolving Facility Pro Rata Share of such Revolving Facility
Borrowing, the Agent may assume that such Lender has made such portion available
to the Agent on the date of such Borrowing in accordance with Section 2.01(b)
and the Agent may, in reliance upon such assumption, make available on such date
to the Borrowers a corresponding amount. If and to the extent that any Lender
shall not have made available to the Agent, on the date of any Revolving
Facility Borrowing referred to in Section 2.01(a), such Lender's Revolving
Facility Pro Rata Share of such Revolving Facility Borrowing, such Lender and
the Borrowers severally agree to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrowers until the date such amount is
repaid to the Agent, at (i) in the case of the Borrowers, the interest rate
applicable at the time to the Revolving Facility Advances comprising such
Revolving Facility Borrowing and (ii) in the case of such Lender, the Federal
Funds Rate. If such Lender shall repay to the Agent such corresponding amount,
such amount so repaid shall constitute such Lender's Revolving Facility Advance
as part of such Revolving Facility Borrowing for purposes of this Agreement.
(f) No Liability for Other Lenders. The failure of any
------------------------------
Lender to make the Revolving Facility Advance to be made by it as part of any
Revolving Facility Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Revolving Facility Advance on the date
of such Revolving Facility Borrowing, but no Lender shall be responsible for the
failure of any other Lender to make the Revolving Facility Advance to be made by
such other Lender on the date of any Revolving Facility Borrowing.
(g) Roll-Over Revolving Facility Advances. If, on or
-------------------------------------
before the last day of any Interest Period of the Revolving Facility Advances
comprising any Borrowing, the Borrowers shall fail to notify the Agent in
writing that they intend to repay the principal amount of such Revolving
Facility Advances (the "Roll-Over Revolving Facility Advances") on the last day
-------------------------------------
of such Interest Period, the Borrowers shall be deemed to have issued a
23
<PAGE>
Notice of Revolving Facility Borrowing pursuant to Section 2.01(b), which Notice
of Revolving Facility Borrowing shall be deemed to specify (i) that the
requested date of the Borrowing shall be the last day of the Interest Period of
the Roll-Over Revolving Facility Advances, (ii) that such Borrowing shall be
comprised of Base Rate Advances, (iii) that such Borrowing shall be in an
aggregate principal amount equal to the aggregate principal amount of the Roll-
Over Revolving Facility Advances and (iv) that the Interest Period for such
Revolving Facility Advances shall be one month; provided, however, that such
-------- -------
Advances will not be made if the conditions set forth in Section 5.02 are not
satisfied.
SECTION 2.02. The Swing Line Advances.
-----------------------
(a) The Swing Line Commitment. The Swing Line Lender
-------------------------
agrees, on the terms and conditions hereinafter set forth, to make Swing Line
Advances to the Borrowers from time to time on any Business Day during the
period from the date hereof until the Termination Date in an aggregate amount
not to exceed the lesser of (i) its Swing Line Commitment or (ii) the excess of
the aggregate amount of the Revolving Facility Commitments of the Lenders less
----
the aggregate amount of the Total RCA Liability then outstanding and less the
----
aggregate amount of any Bid Reduction then in effect. Each Swing Line Borrowing
shall be of Base Rate Advances and shall be in an aggregate amount not less than
$50,000 or more than $5,000,000 and in integral multiples of $50,000. Within
the limits set forth in this Section 2.02(a), the Borrowers may borrow, repay
pursuant to Section 2.03, prepay pursuant to Section 2.08 and reborrow under
this Section 2.02(a).
Notwithstanding the foregoing, the Swing Line Lender's obligation to
make Swing Line Loans will be subject to the following limitation: for at least
one point in time in each calendar month there shall be no Swing Line Advances
outstanding (with nothing in this sentence preventing the Borrowers from
repaying and reborrowing all outstanding Swing Line Advances on the same day).
(b) Notice of Swing Line Borrowing. Except as provided in
------------------------------
Section 2.01(g), each Swing Line Borrowing shall be made on notice received by
the Agent from the Borrowers not later than 12:00 noon (Los Angeles time) on the
date of the proposed Borrowing. Each such notice of such a Borrowing (a "Notice
------
of Swing Line Borrowing") shall be by telex, cable, telecopy or telephone,
- -----------------------
confirmed immediately in writing, in substantially the form of Exhibit C hereto,
specifying therein the requested date and aggregate amount of such Borrowing.
The Agent shall give prompt notice of such Notice of Swing Line Borrowing to the
Swing Line Lender and shall notify the Swing Line Lender of the applicable
interest rate under Section 2.04(a). Upon fulfillment of the applicable
conditions set forth in Article V, the Swing Line Lender will make the amount of
such Borrowing available to
24
<PAGE>
the Borrowers at the Payment Office by depositing such funds into the Senior
Account.
(c) No Liability of Agent. The Agent shall incur no
---------------------
liability to any Borrower in acting upon any telephonic notice referred to above
that the Agent believes in good faith to have been given by a duly authorized
officer or other Person authorized to act on behalf of a Borrower or for
otherwise acting in good faith under this Section 2.02.
(d) Roll-Over Swing Line Advances. If, on or before the
-----------------------------
last day of any Interest Period for any Swing Line Advance, the Borrowers shall
fail to notify the Agent in writing that they intend to repay the principal
amount of such Swing Line Advance (the "Roll-Over Swing Line Advance") on the
----------------------------
last day of such Interest Period, the Borrowers shall be deemed to have issued a
Notice of Swing Line Borrowing pursuant to Section 2.02(b), which Notice of
Swing Line Borrowing shall be deemed to specify that the requested date of the
Borrowing shall be the last day of the Interest Period of the Roll-Over Swing
Line Advance, and that such Borrowing shall be in a principal amount equal to
the principal amount of the Roll-Over Swing Line Advance; provided, however,
-------- -------
that such Advance will not be made if the conditions set forth in Section 5.02
or the requirements of the second paragraph of Section 2.02(a) are not
satisfied.
(e) Participation in Swing Line Advances. Immediately upon
------------------------------------
the making of each Swing Line Advance, the Swing Line Lender shall be deemed to
have sold and transferred to each Revolving Lender, and each Revolving Lender
shall be deemed to have purchased and received from such Swing Line Lender, in
each case irrevocably and without any further action by any party, an undivided
interest and participation in such Swing Line Advance and the obligations of the
Borrowers with respect thereto in an amount equal to such Revolving Lender's
Revolving Facility Pro Rata Share; provided, however, that (i) no Revolving
-----------------
Lender shall be required to fund its participation in any such Swing Line
Advance until demand therefor is made by the Swing Line Lender pursuant to
Section 2.02(f)(ii) hereof, and (ii) no Revolving Lender shall be entitled to
share in any payments of principal or interest in respect of its participation
in any such Swing Line Advance except to the extent set forth in Section
2.02(f)(ii) hereof with respect to any such participation which has been funded
by such Revolving Lender as provided therein.
(f) Settlement of Swing Line Advances.
---------------------------------
(i) At any time when any Swing Line Advances are outstanding,
upon request by the Swing Line Lender, the Agent may give to the Revolving
Lenders a Notice of Borrowing for Revolving Facility Advances which are Base
Rate Advances on behalf of a Borrower, in each case in an amount equal to the
aggregate amount of Swing Line Advances then outstanding (or such lesser amount
as
25
<PAGE>
the Swing Line Lender shall specify). Upon receipt of any such Notice of
Borrowing, each Revolving Lender shall, on or before the time specified by the
Agent (which in no event shall be earlier than 8:00 A.M. nor later than 1:00
P.M. (Los Angeles time) on the Business Day following the date on which such
Notice of Borrowing is given), make available to the Agent for the account of
its Applicable Lending Office such Revolving Lender's ratable portion of such
Borrowing by depositing same day funds in the Payment Account. The proceeds of
any such Borrowing shall be distributed by the Agent to the Swing Line Lender
(subject to the provisions of Section 2.02(f)(iv) below) as a prepayment of all
or a portion of the Swing Line Advances then outstanding.
(ii) In addition to the right of the Swing Line Lender to
require a Borrowing under Section 2.02(f)(i), the Swing Line Lender may at any
time and from time to time make demand on each Revolving Lender for payment of
its participation in each Swing Line Advance then outstanding, and upon receipt
of any such demand each Revolving Lender shall (subject to Section 2.02 (f) (iv)
below) promptly fund such participation by paying to the Agent at the Payment
Account, for the account of the Swing Line Lender, the amount of such
participation in same day funds. With respect to each such participation in any
Swing Line Advance which is funded by any Revolving Lender, the Swing Line
Lender shall promptly pay to the Agent, and the Agent shall promptly pay to such
Revolving Lender, in lawful money of the United States and in the kind of funds
so received, an amount equal to such Revolving Lender's ratable share of all
payments received by the Swing Line Lender in respect of (A) the principal of
such Swing Line Advance, and (B) interest on such Swing Line Advance for the
period from and after the date on which such participation was funded. If any
payment received by the Swing Line Lender on account of any Swing Line Advance
and distributed to any Revolving Lender as a participant under the preceding
sentence is thereafter recovered from the Swing Line Lender in connection with
any bankruptcy or insolvency proceeding relating to a Borrower or otherwise,
each Revolving Lender which received such distribution shall, upon demand by the
Swing Line Lender through the Agent, repay to the Swing Line Lender such
Revolving Lender's ratable share of the amount so recovered together with such
Revolving Lender's ratable share (according to the proportion of (l) the amount
of such Revolving Lender's required prepayment to (2) the total amount so
recovered) of any interest or other amount paid or payable by the Swing Line
Lender in respect of the total amount so recovered. Each Borrower agrees that
any Revolving Lender purchasing a participation in any Swing Line Advance
hereunder may, to the fullest extent permitted by law, exercise all its rights
of payment with respect to such participation as fully as if such Lender were
the direct creditor of that Borrower or any other Borrower in the amount of such
participation.
26
<PAGE>
(iii) Anything contained herein to the contrary notwithstanding
(but subject to Section 2.02(f)(iv) below), the obligation of each Revolving
Lender to make any Revolving Advance pursuant to Section 2.02(f)(i) or to fund
its participation in any Swing Line Advances pursuant to Section 2.02(f)(ii)
shall be absolute and unconditional and shall not be subject to any conditions
set forth in Article V hereof or otherwise affected by any circumstance
including, without limitation, (A) any set-off, counterclaim, recoupment,
defense or other right which such Lender may have against the Swing Line Lender
or any Loan Party; (B) the occurrence or continuance of an Incipient Default or
Event of Default; (C) any adverse change in the business, condition (financial
or otherwise), operations, performance, properties or prospects of any Loan
Party; (D) any breach of this Agreement by any Borrower, Merisel Parent or any
other Lender; or (E) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
(iv) Notwithstanding Section 2.02(f)(iii) above, if at the
time that any Revolving Lender is required to make any Revolving Advance or fund
any participation pursuant to Section 2.02(f)(i) or (ii) above, a Borrower would
not otherwise be entitled to obtain a Borrowing as a result of the failure of
any of the conditions set forth in Article V hereof, the obligation of each
Revolving Lender to make any such Revolving Advance or to fund any such
participation with respect to any Swing Line Advance shall be subject to the
condition that at least one of the following is true: (A) the Swing Line Lender
shall have believed in good faith that all conditions under Article V to the
making of such Swing Line Advance were satisfied at the time such Swing Line
Advance was made, or (B) such Revolving Lender shall have had actual knowledge,
by receipt of the statements required pursuant to Section 7.01 or otherwise,
that any such condition had not been satisfied and failed to notify the Agent in
writing that such Revolving Lender had no obligation to make Revolving Advances
until such condition was satisfied (which notice shall be effective as of the
date of receipt by the Agent), or (C) the satisfaction of any such condition not
satisfied shall have been waived by all Lenders prior to or at the time such
Swing Line Advance was made. Anything contained in this Section 2.02(f) to the
contrary notwithstanding, the amount to be distributed by the Agent to the Swing
Line Lender under this Section 2.02(f) shall be reduced to the extent that any
Revolving Lender shall refuse to fund its portion of any Revolving Advance or
participation with respect to the Swing Line Lender as a result of the failure
of the conditions set forth above.
(v) Each Borrower irrevocably authorizes (A) the Swing Line
Lender to request and the Agent to give any Notice of Borrowing pursuant to
Section 2.02(f)(i), (B) the Revolving Lenders to make the Revolving Advances
pursuant to such Notice of Borrowing, and (C) the Agent to distribute the
proceeds thereof as provided herein.
27
<PAGE>
(vi) If and to the extent that any Revolving Lender shall not
have funded any Revolving Advance or its participation in any Swing Line Advance
when required pursuant to Section 2.02(f)(i) or (ii), such Revolving Lender
agrees to pay to the Agent forthwith on demand, for the account of the Swing
Line Lender, in addition to the amount required to fund such Revolving Advance
or participation, as the case may be, an amount equal to interest thereon at the
Federal Funds Rate for each day from the date such amount became due until paid
in full.
SECTION 2.03. Repayment. Subject to Section 2.01(g) and 2.02(d),
---------
each Borrower shall, in accordance with Article IV, repay to each Lender the
principal amount of each Revolving Facility Advance and each Swing Line Advance
made to it by such Lender on the last day of the Interest Period for such
Advance. All Revolving Facility Advances, all Swing Line Advances and all other
amounts then owed hereunder shall be paid in full no later than the Termination
Date.
SECTION 2.04. Interest on Revolving Facility Advances and Swing Line
------------------------------------------------------
Advances. The Borrowers shall pay interest on the unpaid principal amount of
- --------
each Revolving Facility Advance and each Swing Line Advance made by each Lender
from the date of such Advance until such principal amount shall be paid in full,
at the following rates per annum:
(a) If a Base Rate Advance, then at a rate per annum equal
at all times during the Interest Period for such Revolving Facility Advance or
Swing Line Advance to the Base Rate in effect from time to time, payable in
arrears on the fifth day after the end of each calendar quarter for the
immediately preceding quarter and on the date such Base Rate Advance shall be
paid in full and on the Termination Date;
(b) If a Eurodollar Rate Advance, then at a rate per annum
equal at all times during the Interest Period for such Revolving Facility
Advance to the sum of the Eurodollar Rate for such Interest Period plus the
----
Eurodollar Margin, payable (i) in arrears on the last day of such Interest
Period in the event the Interest Period for such Eurodollar Rate Advance is
three months or less, (ii) in arrears on the fifth day following the end of each
three-month period for such three-month period and on the date such Eurodollar
Rate Advance shall be paid in full in the event the Interest Period for such
Eurodollar Rate Advance is longer than three months and (iii) in any case, on
the Termination Date; and
(c) If a Quoted Rate Advance, then at a rate per annum
equal at all times during such Interest Period for such Revolving Facility
Advance to the Quoted Rate for such Interest Period, payable in arrears on the
last day of such Interest Period and on the Termination Date;
28
<PAGE>
provided, however, that after the occurrence and during the continuation of any
- -------- -------
Event of Default, the Revolving Facility Advances or the Swing Line Advances
shall, to the extent permitted by law, bear interest (including post-petition
interest in any proceeding under applicable bankruptcy laws), from the date on
which such Event of Default shall have occurred until such amount is paid in
full, payable on demand, at the Default Rate. For the purpose of the Interest
Act (Canada), the interest rate applicable to Eurodollar Rate Advances expressed
as an annual rate is equivalent to the rate specified herein multiplied by the
actual number of days in the calendar year in which the same is to be
ascertained and divided by 360. Notwithstanding the payment of such late charge
or additional interest or the obligation to pay such late charge or additional
interest, the failure of any Borrower to pay any interest due on the unpaid
principal amount of any Revolving Facility Advance or any Swing Line Advance on
the date due shall be, subject to the grace periods provided in Article VIII, an
Event of Default.
SECTION 2.05. Interest Rate Determination.
---------------------------
(a) The Agent shall give prompt notice to the relevant
Borrower and the Lenders of the applicable interest rate determined by the Agent
for purposes of Section 2.04(a) or (c) and the applicable rate furnished by the
Reference Bank for the purpose of determining the applicable interest rate under
Section 2.04(b).
(b) If, with respect to any Eurodollar Rate Advances, the
Agent or the Majority Lenders shall determine, each in their respective sole
discretion, that the Eurodollar Rate, for any Interest Period for such Revolving
Facility Advances, will not adequately reflect the cost to the Lenders of
making, funding or maintaining their Eurodollar Rate Advances for such Interest
Period, the Agent shall forthwith so notify the Borrowers and the Lenders,
whereupon the obligation of the Lenders to make Eurodollar Rate Advances shall
be suspended until the Agent shall notify the Borrowers and the Lenders that the
circumstances causing such suspension no longer exist.
(c) A Borrower may, by notice given to the Agent not later
than 9.00 A.M. (Los Angeles time) on the day of any proposed Quoted Rate
Borrowing and specifying the date, aggregate amount and Interest Period for such
proposed Quoted Rate Borrowing, request a quotation of the rate per annum which
would apply to such a Quoted Rate Borrowing. The Agent may, if it elects to do
so, quote such rate per annum for such proposed Borrowing as it deems
appropriate in its sole discretion, provided that such rate shall not be less
--------
than the rate set forth in the final proviso of the definition of "Quoted Rate".
In the event that the Borrower agrees to the rate quoted by the Agent, the
Borrower may request a Quoted Rate Borrowing on such Business Day by delivering
to the Agent a Notice of Revolving Facility Borrowing containing such
29
<PAGE>
rate and the other terms of such Borrowing. Promptly after its receipt of such
Notice of Revolving Facility Borrowing, the Agent shall send to the Borrower a
written confirmation of such Quoted Rate and Interest Period and the aggregate
principal amount of Revolving Facility Advances subject thereto and, unless the
Borrower shall object thereto within one Business Day after receiving such
confirmation, such confirmation shall be conclusive and binding for all
purposes, provided, that if the Borrower shall make a timely objection as to the
--------
rate or term set forth in such confirmation, such Advances shall bear interest
at the Base Rate for an Interest Period beginning on the date of such Borrowing.
SECTION 2.06. Bankers' Acceptances.
--------------------
(a) Bankers' Acceptances. Subject to the terms and
--------------------
conditions of this Agreement and in reliance upon the representations and
warranties of the Borrowers and Merisel Parent set forth herein, each Accepting
Lender severally agrees, in accordance with the provisions of Section 2.06(b),
to accept and discount Drafts in Dollars drawn by the Borrowers on such
Accepting Lender in an aggregate amount not to exceed at any time outstanding
such Lender's Revolving Facility Commitment less such Lender's Revolving
----
Facility Pro Rata Share of the aggregate amount of the Total RCA Liability then
outstanding and less such Lender's Revolving Facility Pro Rata Share of any Bid
----
Reduction then in effect; provided that (i) the maturity date of each Draft
--------
drawn as part of the same Acceptance Borrowing shall be the same and shall not
be later than the Termination Date, and (ii) the Accepting Lenders shall have no
obligation to accept and discount Drafts that are not eligible for acceptance
under the provisions of the Federal Reserve Act (12 U.S.C. (S) 372, the "Federal
-------
Reserve Act"). Each Acceptance Borrowing shall consist of Drafts drawn on and
- -----------
accepted and discounted by the Accepting Lenders ratably according to their
respective Revolving Facility Commitments. Each Acceptance Borrowing shall be
for Drafts denominated in Dollars and in an aggregate face amount of not less
than $5,000,000 and in integral multiples of $500,000 in excess thereof. Each
such Acceptance Borrowing shall be given effect in the calculation of the
Acceptance Usage and shall require the satisfaction of each condition relating
to Drafts set forth in Sections 5.01 and 5.02.
The obligation of the Accepting Lenders to accept and discount Drafts
shall be several and not joint and the failure of any Accepting Lender to accept
and discount Drafts on any date shall not relieve any other Accepting Lender of
its obligation hereunder to accept and discount Drafts on such date but no
Accepting Lender shall be responsible for the failure of any other Accepting
Lender to accept and discount the Drafts to be accepted and discounted by such
other Accepting Lender on such date.
30
<PAGE>
(b) Provisions Relating to Acceptance of Drafts. In order
-------------------------------------------
to facilitate the acceptance financing herein described, the Borrowers will from
time to time deliver to each Accepting Lender, under cover of a letter in the
form of Exhibit E hereto, a supply of Drafts executed on behalf of the
Borrowers, but with the date, the face amount and the maturity thereof left
blank, and each Accepting Lender agrees to hold such Drafts pursuant to the
terms hereof and in so doing to give such Drafts the same physical care and to
provide the same safeguards as are afforded similar property of such Accepting
Lender. As an alternative to the procedure described in the preceding sentence,
any Accepting Lender may agree, at the request of the Borrowers and subject to
delivery to such Accepting Lender (with a copy to the Agent) of a power of
attorney executed by the Borrowers in substantially the form of Exhibit F
hereto, to sign Drafts in the name of the Borrowers for completion in accordance
with this Section. On each occasion on which a Borrower desires to utilize this
acceptance financing facility, it shall request an Acceptance Borrowing by
telephone to the Agent (which request shall be made not later than 9:00 A.M.
(Los Angeles time) one Business Day prior to the day on which the Borrower
desires the Accepting Lenders to accept and discount any Drafts followed by
prompt confirmation in writing by delivering to the Agent a letter in the form
of Exhibit G hereto) specifying (i) the aggregate face amount at maturity (which
shall be 30, 60 or 90 days sight) of Drafts to be accepted for the Borrower
(which aggregate face amount shall be equal to $5,000,000 or an integral
multiple of $500,000 in excess of that amount), (ii) the date (which shall be a
Business Day) on which the acceptance and discount is to occur and (iii) if
applicable, the type and location of shipment and of destination of goods the
purchase of which is being financed. The Agent shall give prompt notice of the
Borrower's request to each of the Accepting Lenders and shall notify each
Accepting Lender of the face amount at maturity of the Draft to be accepted and
discounted by such Accepting Lender based upon such Accepting Lender's Revolving
Facility Pro Rata Share of the face amount of Drafts specified in such request.
Not later than 11:30 A.M. (Los Angeles time) on the date of discount, each
Accepting Lender shall, subject to the right of the Borrower to withdraw its
request for acceptance of such Draft as provided in the last paragraph of this
Section 2.06(b), (i) fill in the date, the face amount at maturity of its Draft
(which face amount shall be such Accepting Lender's Revolving Facility Pro Rata
Share of the amount of the financing requested) and the date of maturity
thereof; (ii) accept and discount such Draft drawn on it, and (iii) make
available for the account of its Applicable Lending Office to the Agent, at such
account maintained at the Payment Office for Dollars, in same day funds, the
discount price (the "Discount Price"), being an amount equal to the face amount
--------------
of such Draft to be accepted less the sum of (x) the Discount Rate (as
hereinafter defined) applied to such face amount for the period from the date of
acceptance to maturity plus (y) the Commission applied to such face amount for
----
such period. After
31
<PAGE>
the Agent's receipt of such funds and upon fulfillment of the applicable
conditions set forth in Article V, the Agent will make such funds available to
the Borrowers at the aforesaid Payment Office by depositing such funds into the
Senior Account.
Unless the Agent shall have received notice from an Accepting Lender,
prior to the date of any Acceptance Borrowing, that such Accepting Lender will
not make available to the Agent the Discount Price of the Draft evidencing such
Accepting Lender's share of such Acceptance Borrowing, the Agent may assume that
such Accepting Lender has made such amount available to the Agent on the date of
such Acceptance Borrowing in accordance with this Section and the Agent may, in
reliance upon such assumption, make available on such date to the Borrowers a
corresponding amount. If and to the extent that any Accepting Lender shall not
have made available to the Agent, on the date of any Acceptance Borrowing, the
Discount Price of such Accepting Lender's Draft, such Accepting Lender and the
Borrowers severally agree to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrowers until the date such amount is
repaid to the Agent, at (i) in the case of the Borrowers the Discount Rate (as
hereinafter defined) and (ii) in the case of such Accepting Lender, the Federal
Funds Rate. If such Accepting Lender shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute the amount of such
Accepting Lender's Draft for purposes of this Agreement.
As used herein, the "Discount Rate" in respect of any Draft or Drafts
-------------
being discounted shall mean a rate per annum equal to the applicable discount
rate of the Designated Issuer determined by the Designated Issuer one Business
Day prior to the date of discount prior to 10:00 A.M. (Los Angeles time) for
bankers' acceptances eligible for discounting having maturities comparable to
the maturities of such Drafts and with a face amount equal to the aggregate
amount thereof and denominated in Dollars. The Agent shall notify the Borrowers
and each Accepting Lender by telephone of the Discount Rate applicable to such
Drafts no later than 11:00 A.M. (Los Angeles time) one Business Day prior to the
date of discount thereof. The Borrowers shall have the right not to accept such
Discount Rate concurrently upon being so notified, and any such refusal or
failure by the Borrowers to accept such Discount Rate shall be deemed to be a
withdrawal by the Borrowers of their request for acceptance of such Drafts. The
Discount Rate and the Commission in respect of any Draft shall be calculated on
the basis of a 360-day year and the actual number of days elapsed.
(c) The Borrowers' Representations and Warranties. Each
---------------------------------------------
Borrower represents and warrants, with respect to each Draft accepted and
discounted at its request, that prior to any request that the Accepting Lenders
accept and discount Drafts under Section 2.06(b) the Borrowers shall have
entered into one or more
32
<PAGE>
bona fide contracts specifically providing for the transactions to which such
Drafts relate having an aggregate value not less than the face amount of such
Drafts; that completion of such transactions is anticipated to occur on or
before the maturity date of such Drafts; that the maturity of such Drafts will
be consistent with the period usually and reasonably necessary to finance
transactions of such kind; and that the Borrowers will not have outstanding any
other financing of such transactions. In the event that the Accepting Lenders
shall notify the Borrowers in writing as to the addition or modification of any
requirements for eligibility for discount of Drafts under the Federal Reserve
Act, each Borrower shall represent and warrant, with respect to each Draft
accepted and discounted at its request, that such Drafts satisfy such additional
or modified requirements for eligibility for discount under the Federal Reserve
Act.
(d) Indemnification; Increased Costs. In the event that
--------------------------------
any Draft for any reason whatsoever is deemed by any Accepting Lender not to be
eligible for discount under the Federal Reserve Act, the Borrowers agree to
indemnify such Accepting Lender, on demand, for any and all additional costs,
expenses or damages incurred by it, directly or indirectly, arising out of such
ineligibility, including, without limitation, any costs of maintaining reserves
in respect of any such Draft and any costs or expenses arising in any manner
from the illiquidity of the market for ineligible bankers' acceptances. A
certificate as to such additional amounts submitted to the Borrowers by such
Accepting Lender shall be final, conclusive and binding, absent manifest error.
If at any time after the date hereof the introduction of or any change
in any applicable law, rule or regulation or in the interpretation or the
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or the compliance by any Accepting
Lender with any requests made after the date hereof directed by any such
authority (whether or not having the force of law) shall, with respect to any
Draft accepted and discounted by any Accepting Lender hereunder, subject such
Accepting Lender to any tax, duty or other charge or impose, modify or deem
applicable any reserve, special deposit or similar requirements against assets
of, deposits with or for the account of, or credit extended by such Accepting
Lender, or shall impose on such Accepting Lender any other conditions affecting
Drafts accepted hereunder, and the result of any of the foregoing is to increase
the cost to such Accepting Lender of accepting and discounting Drafts or to
reduce the amount of any sum received or receivable by such Accepting Lender
hereunder with respect to Drafts by an amount deemed by such Accepting Lender to
be material, then, upon demand by such Accepting Lender, the Borrowers shall pay
to such Accepting Lender such additional amount or amounts as will compensate
such Accepting Lender for such increased cost or reduction with
33
<PAGE>
respect to Drafts discounted and accepted at the request of the Borrowers. A
certificate submitted to the Borrowers by such Accepting Lender setting forth
the basis for the determination of such additional amount or amounts necessary
to compensate such Accepting Lender as aforesaid shall be final, conclusive and
binding, absent manifest error.
In consideration of the Accepting Lenders' accepting and discounting
Drafts hereunder, the Borrowers agree to indemnify and hold the Accepting
Lenders harmless from and against any and all (i) stamp taxes, recording taxes
and fees, and filing taxes and other fees payable in connection with Drafts
accepted and discounted at the request of the Borrowers or the provisions of
this Agreement relating to the acceptance and discounting of Drafts, and (ii)
actions, claims (groundless or otherwise), damages, losses, liabilities, fines,
penalties, costs and expenses of every nature, including reasonable fees and
disbursements of counsel, (x) suffered or incurred by an Accepting Lender by
reason of its having accepted and discounted Drafts at the request of the
Borrowers as provided herein, or (y) suffered or incurred by an Accepting Lender
in exercising or preserving any of its respective rights hereunder, or (z)
otherwise arising out of or relating to this Section 2.06 or any Drafts accepted
and discounted by an Accepting Lender at the request of the Borrowers; provided,
--------
however, that said indemnification of an Accepting Lender shall not apply to the
- -------
extent that any such action, claim, damage, loss, liability, fine, penalty, cost
or expense arises out of or is based upon the willful misconduct or gross
negligence of such Accepting Lender. In no event, however, shall an Accepting
Lender be liable to any Borrower except for its willful misconduct or gross
negligence.
The Agent shall incur no liability to the Borrowers by relying upon
any telephonic instructions with respect to any Draft received from any Person
that the Agent believes in good faith to have been given by a duly authorized
officer or other Person authorized to give such instructions on behalf of any
Borrower or for otherwise acting in good faith under this Section 2.06 and the
Agent shall not be liable for any errors, omissions, delays or interruptions in
the transmission of such instructions.
(e) Increased Capital. If any Accepting Lender determines
-----------------
that the introduction of or any change, at any time after the date hereof, in or
in the interpretation of any law or regulation or any guideline or any request
from any central bank or other governmental authority (whether or not having the
force of law) affects or would affect the amount of capital required or expected
to be maintained by such Accepting Lender or any corporation controlling such
Accepting Lender and that the amount of such capital is increased by or based
upon the existence of such Accepting Lender's commitment to accept and discount
Drafts, then, upon demand by such Accepting Lender (with a copy of such demand
to the Agent), the Borrowers shall immediately pay to the
34
<PAGE>
Agent for the account of such Accepting Lender, from time to time as specified
by such Accepting Lender, additional amounts sufficient to compensate such
Accepting Lender in the light of such circumstances, to the extent that such
Accepting Lender reasonably determines such increase in capital to be allocable
to the existence of such Accepting Lender's commitment to accept and discount
Drafts. A certificate as to such amounts, showing in reasonable detail the
basis for calculation thereof, submitted to the Borrowers by such Accepting
Lender, shall be conclusive and binding for all purposes, absent manifest error.
Such Accepting Lender may use any reasonable basis and may make any reasonable
assumptions (including, without limitation, assumptions regarding the method of
accepting and discounting Drafts) for the calculation of such amounts.
(f) Payment of Drafts by the Borrowers. The Borrowers
----------------------------------
agree to pay to the Agent the face amount of each Draft accepted and discounted
at the Borrowers' request by each Accepting Lender, in same day funds on or
before such Draft's maturity date; provided that, in the event the maturity of
--------
the Obligations is accelerated pursuant to Section 8.01, the face amount of such
Draft shall thereupon become immediately due and payable. Thereafter, the Agent
will promptly cause to be distributed to such Accepting Lender for the account
of its Applicable Lending Office like funds relating to the payment by the
Borrowers of the amount of such Draft. Each Borrower's obligation under this
clause (f) shall be unconditional and irrevocable and not subject to any
qualification or exception whatsoever. In the event that the Borrowers fail to
pay the face amount of any Draft accepted and discounted by the Designated
Issuer at its maturity, CUSA shall promptly pay to the Designated Issuer the
face amount of such Draft, and thereafter, the Borrowers shall be obligated to
pay the face amount of such Draft to CUSA. In addition, in the event that the
Borrowers fail to pay the face amount of any Draft, the Borrowers agree to pay
to the Agent for the benefit of the applicable Accepting Lender on demand
interest, to the extent permitted by law, at the sum of the Base Rate plus 2%
----
per annum on the face amount of such Draft from the maturity date of such Draft
(or such earlier date as the face amount of such Draft may become due and
payable as provided above) until payment in full by the Borrowers of the face
amount of such Draft, such interest to be computed on the basis of a 365-day
year and the actual number of days elapsed. Promptly following the receipt
thereof, the Agent will cause to be distributed to the applicable Accepting
Lender for the account of its Applicable Lending Office like funds relating to
the payment by the Borrowers of the amount of such Draft and the interest
thereon.
(g) Designated Issuer. The Designated Issuer shall be
-----------------
fully protected for its actions under this Section 2.06 and shall have all of
the benefits and immunities provided to an Accepting Lender hereunder.
35
<PAGE>
SECTION 2.07. The Bid Advances.
----------------
(a) Each Lender (including each Designated Bidder that
becomes a Lender) severally agrees that the Borrowers may make Bid Borrowings
under this Section 2.07 from time to time on any Business Day during the period
from the date hereof until the date occurring one month prior to the Termination
Date, in the case of a Bid Borrowing consisting of Eurodollar Rate Advances, or
30 days prior to the Termination Date, in the case of a Bid Borrowing consisting
of Fixed Rate Advances, in the manner set forth below; provided that, after
--------
giving effect to the making of each Bid Borrowing, the Total RCA Liability plus
----
the aggregate amount of the Bid Advances of all Lenders then outstanding shall
not exceed the aggregate Revolving Facility Commitments then in effect.
(i) The Borrowers may request a Bid Borrowing under this
Section 2.07 by delivering to the Agent, by telecopier, telex or cable,
confirmed immediately in writing, a notice of a Bid Borrowing (a "Notice of Bid
-------------
Borrowing"), in substantially the form of Exhibit D hereto, specifying the date
- ---------
and aggregate amount of the proposed Bid Borrowing, the maturity date for
repayment of each Bid Advance to be made as part of such Bid Borrowing (which
maturity date may not be (A) earlier than the date occurring one month after the
date of such Bid Borrowing in the case of Eurodollar Rate Advances, or seven
days after the date of such Bid Borrowing in the case of Fixed Rate Advances, or
(B) later than the date occurring six months after the date of such Bid
Borrowing in the case of Eurodollar Rate Advances, or 180 days after the date of
such Bid Borrowing in the case of Fixed Rate Advances, or in any case later than
the Termination Date), whether the Lenders should offer to make Fixed Rate
Advances or Eurodollar Rate Advances, if such proposed Bid Borrowing is to be
comprised of Eurodollar Rate Advances the interest payment date or dates
relating thereto, and any other terms to be applicable to such Bid Borrowing,
not later than 10:00 A.M. (New York City time) (A) at least two Business Days
prior to the date of a proposed Bid Borrowing consisting of Fixed Rate Advances,
and (B) at least four Business Days prior to the date of a proposed Bid
Borrowing consisting of Eurodollar Rate Advances. The Agent shall in turn
promptly notify each Lender of each request for a Bid Borrowing received by it
from the Borrowers by sending such Lender a copy of the related Notice of Bid
Borrowing.
(ii) Each Lender may, if, in its sole discretion, it elects to
do so, irrevocably offer to make one or more Bid Advances to the Borrowers as
part of such proposed Bid Borrowing at a Fixed Rate or Rates or a margin or
margins relative to the Eurodollar Rate, as requested by the Borrowers. Each
Lender electing to make such an offer shall do so by notifying the Agent (which
shall give prompt notice thereof to the Borrowers), before 10:00 A.M. (New York
City time) (A) one Business Day before the
36
<PAGE>
date of such proposed Bid Borrowing, in the case of a Notice of Bid Borrowing
delivered pursuant to the second clause (A) of paragraph (i) above, and (B)
three Business Days before the date of such proposed Bid Borrowing, in the case
of a Notice of Bid Borrowing delivered pursuant to the second clause (B) of
paragraph (i) above, of the amount of each Bid Advance which such Lender would
be willing to make as part of such proposed Bid Borrowing (which amount may,
subject to the proviso to the first sentence of this Section 2.03(a), exceed
such Lender's Revolving Facility Commitment, if any), the Fixed Rate or Rates or
margin or margins relative to the Eurodollar Rate, as requested by the
Borrowers, which such Lender would be willing to accept for such Bid Advance and
such Lender's Applicable Lending Office with respect to such Bid Advance;
provided that if the Agent in its capacity as a Lender, or any affiliate of the
- --------
Agent in its capacity as a Lender, shall, in its sole discretion, elect to make
any such offer, it shall notify the Borrowers of such offer before 9:00 A.M.
(New York City time) on the date on which notice of such election is to be given
to the Agent by the other Lenders.
(iii) The Borrowers shall, in turn, (A) before 12:00 Noon (New
York City time) one Business Day before the date of such proposed Bid Borrowing,
in the case of a Notice of Bid Borrowing delivered pursuant to the second clause
(A) of paragraph (i) above, and (B) before 12:00 Noon (New York City time) three
Business Days before the date of such proposed Bid Borrowing, in the case of a
Notice of Bid Borrowing delivered pursuant to the second clause (B) of paragraph
(i) above, either (x) cancel such Bid Borrowing by giving the Agent notice to
that effect, or (y) accept one or more of the offers made by any Lender or
Lenders pursuant to paragraph (ii) above, in their respective sole discretions,
by giving notice to the Agent of the amount and currency of each Bid Advance to
be made by each Lender as part of such Bid Borrowing, and reject any remaining
offers made by Lenders pursuant to paragraph (ii) above by giving the Agent
notice to that effect; provided that acceptance of offers may only be made on
--------
the basis of ascending rates, such that no offer of a Fixed Rate Advance or a
Eurodollar Advance may be accepted by the Borrowers unless all offers of
Eurodollar Advances or Fixed Rate Advances to be made as part of such proposed
Bid Borrowing at a lower Fixed Rate or a lower margin over the Eurodollar Rate,
as the case may be, have been accepted.
(iv) If the Borrowers notify the Agent that such Bid Borrowing
is canceled pursuant to paragraph (iii)(x) above, the Agent shall give prompt
notice thereof to the Lenders and such Bid Borrowing shall not be made.
(v) If the Borrowers accept one or more of the offers made by
any Lender or Lenders pursuant to paragraph (iii)(y) above, the Agent shall in
turn promptly notify (A) each Lender that has made an offer as described in
paragraph (ii) above, of
37
<PAGE>
the date and aggregate amount of such Bid Borrowing and whether or not any offer
or offers made by such Lender pursuant to paragraph (ii) above have been
accepted by the Borrowers, (B) each Lender that is to make a Bid Advance as part
of such Bid Borrowing, of the amount of each Bid Advance to be made by such
Lender as part of such Bid Borrowing, and (C) each Lender that is to make a Bid
Advance as part of such Bid Borrowing, upon receipt, that the Agent has received
forms of documents appearing to fulfill the applicable conditions set forth in
Article V.
(b) Each Lender that is to make a Bid Advance as part of a
Bid Borrowing shall, before 12:00 Noon (New York City time) on the date of such
Bid Borrowing specified in the Notice of Bid Borrowing relating thereto, make
available for the account of its Applicable Lending Office to the Agent at the
Payment Office and in same day funds, such Lender's portion of such Bid
Borrowing in the currency of such Bid Borrowing. Upon fulfillment of the
applicable conditions set forth in Article V and after receipt by the Agent of
such funds, the Agent will make such funds available to the Borrowers at such
Payment Office. Promptly after each Bid Borrowing the Agent will notify each
Lender of the amount of the Bid Borrowing, the consequent Bid Reduction and the
dates upon which such Bid Reduction commenced and will terminate.
(c) Each Bid Borrowing shall be in an aggregate principal
amount of not less than $10,000,000 and in integral multiples of $1,000,000 in
excess thereof and, following the making of each Bid Borrowing, the Borrowers
and each Lender shall be in compliance with the limitations set forth in the
proviso to the first sentence of subsection (a) above.
(d) Within the limits and on the conditions set forth in
this Section 2.07, the Borrowers may from time to time borrow under this Section
2.07, repay or prepay pursuant to subsection (e) below, and reborrow under this
Section 2.07, provided that a Notice of Bid Borrowing shall not be given within
--------
ten Business Days of the date of any other Notice of Bid Borrowing.
(e) The Borrowers shall repay to the Agent for the account
of each Lender which has made, or holds the right to repayment of, a Bid Advance
on the maturity date of each Bid Advance (such maturity date being that
specified by the Borrowers for repayment of such Bid Advance in the related
Notice of Bid Borrowing delivered pursuant to subsection (a)(i) above) the then
unpaid principal amount of such Bid Advance. The Borrowers shall have no right
to prepay any principal amount of any Bid Advance unless, and then only on the
terms, specified by the Borrowers for such Bid Advance in the related Notice of
Bid Borrowing delivered pursuant to subsection (a)(i) above.
(f) The Borrowers shall pay interest on the unpaid
principal amount of each Bid Advance from the date of such Bid Advance to the
date the principal amount of such Bid Advance is
38
<PAGE>
repaid in full, at the rate of interest for such Bid Advance specified by the
Lender making such Bid Advance in its notice with respect thereto delivered
pursuant to subsection (a)(ii) above, payable on the interest payment date or
dates specified by the Borrowers for such Bid Advance in the related Notice of
Bid Borrowing delivered pursuant to subsection (a)(i) above; provided, however,
-------- -------
after the occurrence and during the continuation of any Event of Default, any
Bid Advance shall, to the extent permitted by law, bear interest (including
post-petition interest in any proceeding under applicable bankruptcy laws), from
the date on which such Event of Default shall have occurred until such amount is
paid in full, payable on demand, at the Default Rate. For the purpose of the
Interest Act (Canada), the interest rate applicable to Eurodollar Rate Advances
expressed as an annual rate is equivalent to the rate specified herein
multiplied by the actual number of days in the calendar year in which the same
is to be ascertained and divided by 360. Notwithstanding the payment of such
late charge or additional interest or the obligation to pay such late charge or
additional interest, the failure of the Borrowers to pay any interest due on the
unpaid principal amount of any Bid Advance on the date due shall be, subject to
the grace periods provided in Article VIII, an Event of Default.
(g) Each acceptance of an offer under Section 2.07(a)(iii)
shall be irrevocable and binding on the Borrowers. The Borrowers shall
indemnify each Lender against any loss, cost or expense incurred by such Lender
as a result of any failure to fulfill on or before the date specified in the
related Notice of Bid Borrowing for such Bid Borrowing the applicable conditions
set forth in Article V, including, without limitation, any loss (including loss
of anticipated profits), cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such Lender to fund the
Bid Advance to be made by such Lender as part of such Bid Borrowing when such
Bid Advance, as a result of such failure, is not made on such date.
(h) Unless the Agent shall have received notice from a
Lender, prior to the date of any Bid Advance that such Lender has agreed to
make, that such Lender will not make available to the Agent the amount of such
Bid Advance, the Agent may assume that such Lender has made such portion
available to the Agent on the date of such Bid Advance in accordance with
Section 2.07(b) and the Agent may, in reliance upon such assumption, make
available on such date to the Borrowers a corresponding amount. If and to the
extent that any Lender shall not have made available to the Agent, on the date
of any Bid Borrowing, the amount of any Bid Advance to be made by such Lender as
part of such Bid Borrowing, such Lender and the Borrowers severally agree to
repay to the Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrowers until the date such amount is repaid to the Agent, at (i) in the
case of the Borrowers, the interest
39
<PAGE>
rate applicable at the time to such Bid Advance and (ii) in the case of such
Lender, the Federal Funds Rate. If such Lender shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such Lender's Bid
Advance as part of such Bid Borrowing for purposes of this Agreement.
(i) The failure of any Lender to make any Bid Advance to be
made by it as part of any Bid Borrowing shall not relieve any other Lender of
its obligation, if any, hereunder to make any Bid Advance on the date of such
Bid Borrowing, but no Lender shall be responsible for the failure of any other
Lender to make the Bid Advance to be made by such other Lender on the date of
any Bid Borrowing.
(j) The Borrowers agree to pay the Agent for its own
account a handling fee of $1,500 (the "Bid Fee") in connection with each request
-------
for a Bid Borrowing pursuant to this Section 2.07.
SECTION 2.08. Prepayments.
-----------
(a) Mandatory Prepayments.
---------------------
(i) The Borrowers shall prepay the outstanding aggregate
principal amount of the Revolving Facility Advances in accordance with the
provisions of Sections 7.02(f)(ii) and 7.02(f)(iii);
(ii) if any Revolving Lender shall for any reason fail to pay
any amount payable by it for the account of the Swing Line Lender (including the
funding of any participation in any Swing Line Advance) or shall fail to make
any Revolving Advance to be made by it pursuant to Section 2.02(f), the
Borrowers shall, on demand by the Swing Line Lender through the Agent, prepay
the outstanding Swing Line Advances in an amount equal to the amount not paid by
such Revolving Lender; and
(iii) the Borrowers shall prepay Advances at such times and in
such amount as necessary to give effect to the limitations set forth in Sections
2.01(a), 2.02(a), 2.07(a) and 2.09(a).
(b) Voluntary Prepayments. The Borrowers may, upon notice
---------------------
to the Agent stating the proposed date (which, in the case of Eurodollar Rate
Advances, shall be at least three Business Days after the date of the notice,
but in any other case may be the date of the proposed prepayment) and aggregate
principal amount of the prepayment, and if such notice is given the Borrowers
shall, prepay the outstanding principal amount of any Revolving Facility
Advances or Swing Line Advances comprising part of the same Borrowing in whole
or in part, and with accrued interest to the date of such prepayment on the
principal amount prepaid (except in the case of Base Rate Advances, when accrued
interest shall be paid on the dates specified in Section 2.04(a) unless
40
<PAGE>
the Agent elects to have such accrued interest paid on the date of such
prepayment); provided, however, that if any such prepayment would result in
-------- -------
payment of principal of a Eurodollar Rate Advance other than on the last day of
the Interest Period for such Advance, the Borrowers shall be deemed to have
received a demand under Section 11.03(b) for the costs and expenses described
therein, and they shall be paid together with the prepayment of the Advance;
provided, further, that (i) each partial prepayment of Swing Line Advances shall
- -------- -------
be in an aggregate principal amount of not less than $50,000 and (ii) each
partial prepayment of Revolving Facility Advances shall be in an aggregate
principal amount of not less than $500,000 in the case of Base Rate Advances or
Quoted Rate Advances (or if the outstanding principal is less than $500,000, the
Borrowers may prepay in full such amount) or $1,000,000 in the case of
Eurodollar Rate Advances (or if the outstanding principal is less than
$1,000,000, the Borrowers may prepay in full such amount), and shall be applied
in accordance with Section 4.01. The Borrowers shall have no right to prepay
Bid Advances except as specified in the Notice of Bid Borrowing relating
thereto.
(c) The Borrowers may reborrow any amounts prepaid under
this Section 2.08, provided that such borrowing is otherwise in accordance with
Article II hereof.
SECTION 2.09. Reduction of Commitments.
------------------------
(a) With the consent of the Agent, which consent shall not
be unreasonably withheld, the Borrowers shall have the right, upon at least
three Business Days' notice to the Agent, to reduce ratably in part or in full
the unused portion of the Revolving Facility Commitments of the Lenders;
provided, however, that (i) each partial reduction shall be in the aggregate
- -------- -------
amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof,
(ii) the aggregate of the Revolving Facility Commitments (after giving effect to
any Bid Reduction) shall not be reduced to an amount which is less than the
Total RCA Liability, and (iii) any reduction of the aggregate of the Revolving
Facility Commitments to an amount which is less than the amount of the Swing
Line Commitment then in effect shall result in an automatic corresponding
reduction of the amount of the Swing Line Commitment to the aggregate amount of
the Revolving Facility Commitments as so reduced.
(b) With the consent of the Agent, which consent shall not
be unreasonably withheld, the Borrowers shall have the right, upon at least
three Business Days' notice to the Agent, to reduce ratably in part or in full
the unused portion of the Swing Line Commitment; provided, however, that each
-------- -------
partial reduction shall be in the aggregate amount of $500,000 or an integral
multiple of $500,000 in excess thereof.
41
<PAGE>
SECTION 2.10. Increased Capital. If any Lender (other than a
-----------------
Designated Bidder) determines that the introduction of or any change, at any
time after the date hereof, in or in the interpretation of any law or regulation
or any guideline or any request made after the date hereof from any central bank
or other governmental authority (whether or not having the force of law) affects
or would affect the amount of capital required or expected to be maintained by
such Lender or any corporation controlling such Lender and that the amount of
such capital is increased by or based upon the existence of such Lender's
Commitments hereunder and other commitments of this type, then, upon demand by
such Lender (with a copy of such demand to the Agent), the Borrowers shall
immediately pay to the Agent for the account of such Lender, from time to time
as specified by such Lender, additional amounts sufficient to compensate such
Lender in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's Commitments. A certificate as to such amounts, showing in
reasonable detail the basis for the calculation thereof, submitted to the
Borrowers by such Lender, shall be conclusive and binding for all purposes,
absent manifest error. Such Lender may use any reasonable basis and may make
any reasonable assumptions (including, without limitation, assumptions regarding
the method of funding of any Advances) for the calculation of such amounts.
SECTION 2.11. Increased Costs. If, due to either (a) the
---------------
introduction of or any change (other than any change by way of imposition or
increase of reserve requirements, in the case of Eurodollar Rate Advances,
included in the Eurodollar Rate Reserve Percentage), at any time after the date
hereof, in or in the interpretation of any law or regulation or (b) the
compliance with any guideline or request issued after the date hereof from any
central bank or other governmental authority (whether or not having the force of
law), there shall be any increase in the cost to any Lender of agreeing to make
or making, funding or maintaining Eurodollar Rate Advances, then the Borrowers
shall from time to time, upon demand by such Lender (with a copy of such demand
to the Agent), pay to the Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost. A
certificate as to the amount of such increased cost, showing in reasonable
detail the basis for calculation thereof, submitted to the Borrowers and the
Agent by such Lender, shall be conclusive and binding for all purposes, absent
manifest error. Such Lender may use any reasonable basis and may make any
reasonable assumptions (including, without limitation, assumptions regarding the
method of funding of Revolving Facility Advances) for the calculation of such
amounts.
SECTION 2.12. Illegality. Notwithstanding any other provision of
----------
this Agreement, if any Lender shall notify the Agent that the introduction of or
any change, at any time after the date hereof, in or in the interpretation of
any law or regulation
42
<PAGE>
makes it unlawful, or, at any time after the date hereof, any central bank or
other governmental authority asserts that it is unlawful, for any Lender or its
Eurodollar Lending Office to perform its obligations hereunder to make
Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances, (a)
the obligation of the Lenders to make Eurodollar Rate Advances shall be
suspended until the Agent shall notify the Borrowers and the Lenders that the
circumstances causing such suspension no longer exist and (b) the Borrowers
shall forthwith prepay in full all Eurodollar Rate Advances of all Lenders then
outstanding, together with interest accrued thereon.
SECTION 2.13. Removal of a Lender. In the event that any Lender (an
-------------------
"Affected Lender") shall give notice to the Borrowers that such Lender is
---------------
entitled to compensation under the second paragraph of Section 2.06(d) or under
Section 2.06(e), Section 2.10, Section 2.11 or Section 3.06 and unless the
change or circumstance giving rise to such compensation is no longer in effect,
the Borrowers may elect (upon 30 days' prior written notice to the Agent and
such Affected Lender, but, in any event such election shall be made no more than
90 days after receipt by the Borrowers of the notice from the Affected Lender)
either:
(a) to terminate the Commitment of such Affected Lender and prepay on
the date of such termination (i) any outstanding Revolving Facility Advances
made by such Affected Lender, together with accrued interest on any such
Revolving Facility Advances, (ii) a portion of any outstanding Swing Line
Advances equal to such Affected Lender's participation interest therein, (iii)
any Drafts accepted and discounted by such Affected Lender outstanding at the
time of termination and (iv) any amounts payable pursuant to Article II or
Section 3.06 or otherwise hereunder; provided that (A) if there are Advances of
--------
such Affected Lender or Letters of Credit Issued, or Drafts accepted and
discounted by such Affected Lender outstanding at the time of such termination,
the written consent of the Agent, the Designated Issuer and the Majority
Lenders, which consent shall not be unreasonably withheld, shall be required in
order for the Borrowers to make the foregoing election and (B) no Bid Advances
of such Affected Lender shall be outstanding and unpaid at the time of
termination; or
(b) to cause such Affected Lender to assign its Advances and
Commitment in full to an assignee bank (so long as such Lender receives payment
in full of the principal amount of all of its Advances outstanding, together
with all interest on such Advances and other amounts payable to such Affected
Lender hereunder to the date of such assignment (including, without limitation,
any amounts owed under Article II or Section 3.06), and such assignee bank
agrees pursuant to Section 11.11 to assume all of the obligations of such
Affected Lender hereunder and to release such Affected Lender from all such
obligations); provided, that (i) the assignee bank shall be either a Lender or
--------
reasonably
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satisfactory to the Majority Lenders, the Agent and the Designated Issuer; (ii)
all Bid Advances of such Affected Lender shall have matured and been paid in
full; (ii) all Drafts accepted and discounted by the Affected Lender hereunder
have matured and been repaid in full, and (iii) all Letters of Credit Issued by
the Affected Lender shall have expired or been terminated.
SECTION 2.14. Use of Proceeds.
---------------
(a) The proceeds of any Borrowing of Advances made to the
Borrowers shall be used by the Borrowers solely to refund and/or refinance
indebtedness under the Existing Credit Agreement and for their own respective
working capital and general corporate purposes.
(b) The proceeds of any Drafts shall be used by the
Borrowers solely for financing transactions of the type described in Section
2.06(c).
(c) The Letters of Credit shall be issued to the Borrowers
solely for the purposes specified in the definition of Commercial Letter of
Credit and/or in Section 3.01(a)(ii) with respect to a Standby Letter of Credit.
(d) No portion of the proceeds of any Borrowing under this
Agreement shall be used by any Borrower in any manner which might cause the
Borrowing or the application of such proceeds to violate Regulation G,
Regulation U, Regulation T, or Regulation X of the Board of Governors of the
Federal Reserve System (the "Board) or any other regulation of the Board or to
violate the Securities Exchange Act of 1934, as amended, in each case as in
effect on the date or dates of such Borrowing and such use of proceeds.
ARTICLE III
AMOUNTS AND TERMS OF THE LETTERS OF CREDIT
SECTION 3.01. The Letters of Credit.
---------------------
(a) The Issuing Lenders agree, on the terms and conditions
hereinafter set forth and subject to the satisfaction of such policy standards
and conditions as may be generally established by any Issuing Lender from time
to time, to Issue for the account of the Borrowers from time to time on any
Business Day during the period from the date hereof until the date which occurs
30 days before the Termination Date either Commercial Letters of Credit or
Standby Letters of Credit (each a "Letter of Credit") in an aggregate face
----------------
amount not to exceed $15,000,000 at any one time outstanding, each such Letter
of Credit to expire on or before the earlier of (i) the date which occurs one
year from its Issuance and (ii) the date which occurs 30 days before the
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Termination Date; provided, however, that no Issuing Lender shall have any
-------- -------
obligation:
(i) to Issue any Letter of Credit if after giving effect to
the Issuance of such Letter of Credit, such Lender's Revolving Facility Pro Rata
Share of the aggregate amount of the Total RCA Liability then outstanding would
exceed its Revolving Facility Commitment less such Lender's Revolving Facility
----
Pro Rata Share of any Bid Reduction then in effect; or
(ii) to Issue any Standby Letter of Credit if such Standby
Letter of Credit is not issued for the purpose of (A) supporting a trade related
transaction, (B) obtaining bonds in the ordinary course of business, or (C)
maintaining credit of the Borrowers or their Subsidiaries with local lenders; or
(iii) to Issue any Letter of Credit if giving effect to the
Issuance of such Letter of Credit the L/C Liability in respect of all Letters of
Credit in the aggregate shall exceed $15,000,000.
Within the limits of the obligations of the Issuing Lenders set forth above, the
Borrowers may request the Issuing Lenders to Issue one or more Letters of
Credit, reimburse the Issuing Lenders for payments made thereunder pursuant to
Section 3.04, and request the Issuing Lenders to Issue one or more other Letters
of Credit under this Section 3.01.
(b) The obligation of the Issuing Lenders to issue each
Letter of Credit shall be several and not joint and the failure by any Issuing
Lender to issue such Letter of Credit shall not relieve the other Issuing
Lenders from their obligations to issue such letters of Credit.
(c) In order to facilitate the prompt issuance of all
Letters of Credit, each Issuing Lender shall deliver to the Agent on the Closing
Date a power of attorney in substantially the form of Exhibit H hereto
irrevocably appointing the Agent and its Designated Issuer as attorney-in-fact
for such Issuing Lender with power to execute Letters of Credit as provided
Section 3.02 in accordance with this Agreement in the name and on behalf of such
Lender.
SECTION 3.02. Issuing the Letters of Credit.
-----------------------------
(a) Each Letter of Credit shall be Issued on notice
received by the Agent from the Borrowers not later than 10:00 A.M. (Los Angeles
time) on the second Business Day prior to the date of the proposed Issuance.
Each such notice of a requested Letter of Credit shall be in writing and consist
of an application (an "Application") for Issuance in substantially the form
-----------
attached hereto as Exhibit I or such other standard form as may hereafter be in
use by the Designated Issuer; provided,
--------
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however, that the Majority Lenders shall have approved any material change to
- -------
such standard form. The Agent shall promptly notify the Issuing Lenders of the
Borrowers' request. The form of each such Letter of Credit shall be as
specified in such Application, provided that (i) such form shall be in form and
substance satisfactory to the Agent in its sole and absolute discretion and (ii)
unless otherwise agreed by the Agent and the Designated Issuer, such Letter of
Credit shall contain the terms set forth in Exhibit J hereto.
(b) Upon receipt by the Agent of such notice and such other
documents from the Borrowers requesting the issuance of a Letter of Credit, if
the request for the Letters of Credit satisfy the requirements set forth above,
the Agent shall authorize the Issuing Lenders to issue the Letters of Credit.
If any of the Issuing Lenders, in its sole discretion, elects not to issue such
Letter of Credit because issuance of such Letter of Credit may violate any
applicable laws or any applicable policies of the Issuing Lender relating to the
issuance of Letters of Credit, such Issuing Lender shall promptly, and in any
event within one Business Day after its receipt of the request for a Letter of
Credit, so notify the Borrowers and the Agent and no Letter of Credit will be
issued. If no Issuing Lender notifies the Agent of its inability to issue the
Letter of Credit, the Agent shall cause the Designated Issuer to prepare the
requested Letter of Credit with signature pages prepared for the Designated
Issuer to execute the Letter of Credit as attorney-in-fact for each Issuing
Lender. Following such authorization, but subject in any event to the terms and
conditions of this Article III and the applicable conditions of Article V, the
requested Letter of Credit shall be executed by the Designated Issuer on behalf
of the Issuing Lenders and shall be delivered to the Borrowers (or their
designee) by the Designated Issuer on the date of issuance specified by the
Borrowers, which Letter of Credit shall have been issued by each Issuing Lender,
severally and ratably, in accordance with its Revolving Facility Pro Rata Share.
SECTION 3.03. Participation in Existing Letters of Credit.
-------------------------------------------
(a) Notwithstanding anything to the contrary in this
Agreement, subject to the terms and conditions of this Agreement and in reliance
on the representations and warranties of the Borrowers and Merisel Parent set
forth herein, as of the Closing Date all Existing Letters of Credit shall be
continued as Letters of Credit under this Agreement and shall be deemed for all
purposes (other than as described below) to have been issued under and pursuant
to the terms of this Agreement and the Borrowers shall assume all obligations
previously owed by Merisel Parent in connection therewith.
(b) On the Closing Date, the issuers of the Existing
Letters of Credit shall be deemed to have sold and transferred irrevocably and
unconditionally to each Lender, without recourse
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<PAGE>
or warranty, and each Lender shall be deemed to have purchased and received
irrevocably and unconditionally, an undivided interest and participation to the
extent of such Lender's Revolving Facility Pro Rata Share in each Existing
Letter of Credit and all L/C Liability in respect of such Existing Letter of
Credit; and the issuers of the Existing Letters of Credit under the Existing
Credit Agreement, shall be deemed to have sold and transferred irrevocably and
unconditionally to each Lender, without recourse or warranty, and each Lender
shall be deemed to have purchased and received irrevocably and unconditionally,
an undivided interest and participation to the extent of such Lender's Revolving
Facility Pro Rata Share in each Existing Letter of Credit and all L/C Liability
in respect of such Existing Letter of Credit. In the event any reimbursement
obligation in respect of an Existing Letter of Credit is not paid by the
Borrowers to the issuers thereof when due, such issuers shall promptly notify
the Agent to that effect, and the Agent shall promptly pay to such issuers the
amount of such unpaid Existing Letter of Credit, and, thereafter, the Borrowers
shall be obligated to reimburse the Agent in respect of such Letter of Credit.
The Agent shall also promptly notify the Lenders of the amount of such
reimbursement obligation and each such Lender shall promptly pay to the Agent,
in same day funds, an amount equal to such Lender's Revolving Facility Pro Rata
Share of the amount of such unpaid reimbursement obligation.
(c) Promptly after the issuers thereof or the Agent, as the
case may be, receives a payment from the Borrowers on account of a reimbursement
obligation in respect of an Existing Letter of Credit as to which the issuer or
the Agent, as the case may be, has received all payments from any Lender
pursuant to this Section 3.03, the issuer shall promptly pay to the Agent, and
the Agent shall promptly pay to those Lenders which paid funds to the issuer or
the Agent pursuant to the reimbursement obligations of this Section, in same day
funds, an amount equal to such Lender's Revolving Facility Pro Rata Share
thereof.
(d) The obligations of each Lender to fund its
participation interest under this Section 3.03 shall be unconditional and
irrevocable and not subject to any qualification or exception whatsoever and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances, including without limitation any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or other
right which a Borrower may have at any time against a beneficiary named in a
Letter of Credit or any transferee of any Letter of Credit (or any Person for
whom any such transferee may be acting), the Agent, the Designated Issuer, any
issuer of an
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<PAGE>
Existing Letter of Credit, any Lender or any other Person, whether in connection
with this Agreement, any Letter of Credit, the transactions contemplated herein
or any unrelated transactions;
(iii) any draft, certificate or any other document presented
under the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect;
(iv) the surrender or impairment of any collateral for the
performance or observance of any of the terms of any of the Loan Documents;
(v) the occurrence of any Event of Default or Incipient
Default; or
(vi) payment against any draft, document or other demand for
payment that does not comply with the terms of the Letter of Credit, provided
that such payment does not constitute gross negligence or willful misconduct on
the part of the issuer of that Letter of Credit.
(e) If any payment received on account of any reimbursement
obligation in respect of an Existing Letter of Credit and distributed to a
Lender as a participant under this Section 3.03 is thereafter set aside, avoided
or recovered from an issuer or the Agent, as the case may be, in connection with
any receivership, liquidation, reorganization or bankruptcy proceeding relating
to a Borrower, each Lender which received a distribution in respect of such
payment shall, upon demand by the Agent, pay to the issuer or the Agent, as the
case may be, the amount of such distribution received by such Lender.
(f) Subject to the provisions of Section 10.04, no Lender
shall have any right to look to or rely upon the Agent or the Designated Issuer
or any other Lender for any determination or verification as to whether any
condition set forth in Article III or V has been met.
SECTION 3.04. Reimbursement Obligations.
-------------------------
In the event of any request for drawing under any Letter of Credit by
the beneficiary thereof, the Agent shall immediately notify the Borrowers and
the Issuing Lenders, and the Borrowers shall pay to the Agent, for account of
the Issuing Lenders, an amount equal to the amount necessary to reimburse the
Issuing Lenders on the earlier of (i) the time specified therefore on any letter
of credit reimbursement agreement applicable to such Letter of Credit or (ii)
the date which occurs two Business Days after written demand (which may be by
telecopy) for reimbursement by the Designated Issuer in an amount in same day
funds equal to the amount which the Issuing Lenders paid as a result of such
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<PAGE>
drawing. If the Borrowers shall fail to reimburse the Issuing Lenders on the
date of any drawing under a Letter of Credit in an amount equal to the amount of
such drawing paid by such Issuing Lenders, (i) the Borrowers shall be deemed to
have given a Notice of Borrowing to the Agent requesting the Lenders to make
Revolving Facility Advances that are Base Rate Advances on the date on which
such drawing is honored in an amount equal to the amount of such drawing, and
(ii) subject to satisfaction or waiver of the applicable conditions specified in
Article V, the Lenders shall, on the Business Day next following the date of
such drawing, make Revolving Facility Advances that are Base Rate Advances in
the amount of such drawing together with accrued interest thereon at the Base
Rate from the date of drawing to the date of such Advances, the proceeds of
which shall be applied directly by the Agent to reimburse the Issuing Lenders
for the amount of such drawing together with such accrued interest thereon;
provided, that, if for any reason (other than the wrongful failure of the
- --------
Lenders to make Advances) proceeds of Advances are not received by any Issuing
Lender on such date in an amount equal to the amount of such drawing paid by
such Issuing Lender, together with accrued interest thereon, the Borrowers shall
reimburse such Issuing Lender, within three Business Days of the date of such
drawing, in an amount in same day funds equal to the excess of the amount of
such drawing over the amount of such Advances, if any, that are so received,
plus accrued interest thereon. Interest on all amounts not reimbursed to the
- ----
Issuing Lenders on the date of such drawing shall accrue at the Default Rate.
SECTION 3.05. Indemnification; Nature of Designated Issuer's Duties.
-----------------------------------------------------
(a) The Borrowers agree to protect, indemnify, pay and save
harmless the Designated Issuer, the Issuing Lenders, the Agent and each Lender
from and against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable attorneys' fees) which the
Designated Issuer, the Issuing Lenders, the Agent or such Lender may incur or be
subject to as a consequence, direct or indirect, of (i) the Issuance of any
Letter of Credit, other than as a result of the gross negligence or willful
misconduct of such Person as determined in a final determination by a court of
competent jurisdiction or (ii) the failure of the Designated Issuer or any
Issuing Lender to honor a drawing under such Letter of Credit as a result of any
act or omission of any present or future de jure or de facto government or
governmental authority, whether rightful or wrongful.
(b) As between the Borrowers on the one hand, and the
Designated Issuer and the Issuing Lenders on the other, the Borrowers assume all
risks of the acts and omissions of, or misuse of the Letters of Credit by, the
respective beneficiaries of the Letters of Credit. In furtherance and not in
limitation
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of the foregoing, the Designated Issuer and the Issuing Lenders shall not be
responsible for, and the obligations of the Borrowers under this Agreement shall
be paid strictly in accordance with the terms of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
(i) any circumstance referred to in clauses (i) through (vi)
of Section 3.03(d);
(ii) any lack of validity, effectiveness, or sufficiency of
any instrument transferring or assigning or purporting to transfer or assign any
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part;
(iii) any failure of the beneficiary of a Letter of Credit to
comply with the conditions required in order to draw upon any Letter of Credit;
(iv) any error, omission, interruption or delay in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not it is in cipher;
(v) any error in interpretation of technical terms;
(vi) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter of Credit or of
the proceeds thereof;
(vii) any misapplication by the beneficiary of any Letter of
Credit of the proceeds of any drawing under such Letter of Credit; or
(viii) any other circumstance or happening whatsoever, whether
or not similar to the foregoing;
provided that neither the Designated Issuer nor any Issuing Lender shall be
- --------
relieved of any liability it may otherwise have as a result of its gross
negligence or willful misconduct.
(c) In furtherance and extension and not in limitation of
the specific provisions hereinabove set forth, any action taken or omitted by
the Designated Issuer or any Issuing Lender under or in connection with the
Letters of Credit or the related Applications, agreements or certificates, if
taken or omitted in good faith, shall not put the Designated Issuer under any
resulting liability to the Borrowers, unless such action constitutes gross
negligence or willful misconduct.
(d) The Designated Issuer, on behalf of the Issuing
Lenders, shall be responsible only to determine that the documents and
certificates required to be delivered under each
50
<PAGE>
Letter of Credit have been delivered and that they comply on their face with the
requirements of that Letter of Credit. The Designated Issuer shall be fully
protected for its actions hereunder to the same extent as the Issuing Lenders
and shall have all of the benefits and immunities provided to an Issuing Lender
hereunder and to the Agent in Article X with respect to any acts taken or
omissions suffered in connection with this Article III, and for such purposes
the Designated Issuer shall be deemed to be the "Agent" in Article X.
SECTION 3.06. Increased Costs.
---------------
(a) Change in Law Generally. If, at any time after the
-----------------------
date hereof, any change in any law or regulation or in the interpretation
thereof by any court or administrative or governmental authority charged with
the administration thereof shall either (i) impose, modify or deem applicable
any reserve, special deposit or similar requirement against letters of credit
Issued by, or assets held by, or deposits in or for the account of, the
Designated Issuer, any Issuing Lender or any Lender or (ii) impose on the
Designated Issuer, any Issuing Lender or any Lender any other condition
regarding this Agreement or Letters of Credit or, in the case of any Lender, its
participation hereunder in Letters of Credit, and the result of any event
referred to in the preceding clause (i) or (ii) shall be to increase the cost to
the Designated Issuer or any Issuing Lender of Issuing or maintaining or, in the
case of any Lender, having a participation in, Letters of Credit (which increase
in cost shall be determined by the Designated Issuer's or such Issuing Lender's
or Lender's reasonable allocation of the aggregate of such cost increases
resulting from such event), then, upon demand by the Designated Issuer, such
Issuing Lender or such Lender (with a copy to the Agent), the Borrowers shall
immediately pay to the Designated Issuer, such Issuing Lender or such Lender
from time to time as specified by the Designated Issuer, such Issuing Lender or
such Lender (with a copy to the Agent), additional amounts which shall be
sufficient to compensate the Designated Issuer, such Issuing Lender or such
Lender for such increased cost. A certificate as to such increased cost, and
amount thereof, incurred by the Designated Issuer, such Issuing Lender or any
Lender as a result of any event mentioned in clause (i) or (ii) above, showing
in reasonable detail the basis for the calculation thereof, submitted by the
Designated Issuer, such Issuing Lender or such Lender to the Borrowers, shall,
in the absence of manifest error, be conclusive and binding for all purposes.
The Designated Issuer, such Issuing Lender or such Lender may use any reasonable
basis and may make any reasonable assumptions (including, without limitation,
assumptions regarding the method of funding of Revolving Facility Advances) for
the calculation of such amounts.
(b) Capital Requirements. If the Designated Issuer, any
--------------------
Issuing Lender or any Lender determines that the introduction of or any change,
at any time after the date hereof, in or in the
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<PAGE>
interpretation of any law or regulation or any guideline or any request made
after the date hereof from any central bank or other governmental authority
(whether or not having the force of law) affects or would affect the amount of
capital required or expected to be maintained by the Designated Issuer, such
Issuing Lender or such Lender or any corporation controlling the Designated
Issuer, such Issuing Lender or such Lender and that the amount of such capital
is increased by or based upon the existence of letters of credit (or similar
contingent obligations), then, upon demand by the Designated Issuer, such
Issuing Lender or such Lender, the Borrowers shall immediately pay to the
Designated Issuer, such Issuing Lender or such Lender, from time to time as
specified by the Designated Issuer, such Issuing Lender or such Lender,
additional amounts sufficient to compensate the Designated Issuer, such Issuing
Lender or such Lender in the light of such circumstances, to the extent that the
Designated Issuer, such Issuing Lender or such Lender reasonably determines such
increase in capital to be allocable to the issuance or maintenance of the
Letters of Credit or, in the case of such Lender, its participation therein. A
certificate as to such amounts, showing in reasonable detail the basis for
calculation thereof, submitted to the Borrowers by the Designated Issuer, such
Issuing Lender or such Lender, shall, in the absence of manifest error, be
conclusive and binding for all purposes. The Designated Issuer, such Issuing
Lender or such Lender may use any reasonable basis and may make any reasonable
assumptions (including, without limitation, assumptions regarding the method of
funding of Revolving Facility Advances) for the calculation of such amounts.
ARTICLE IV
TERMS OF PAYMENTS AND FEES
SECTION 4.01. Payments and Computations.
-------------------------
(a) The Borrowers shall make each payment hereunder and
under each other Loan Document not later than 12:00 Noon (Los Angeles time) on
the day when due in Dollars to the Agent in same day funds by deposit of such
funds to the Agent's account maintained at the Payment Office for Dollars in New
York City. The Agent will promptly thereafter cause to be distributed like
funds relating to the payment of principal of any Advances, the face amount of
any Drafts, reimbursement obligations under Section 3.04, interest, including
interest payable at the Default Rate and interest on interest payable under
Section 2.04, or fees (other than amounts payable under Sections 2.06(d),
2.06(e), 2.10, 2.11, 2.13, 3.06, the processing fee referred to in 4.05(b)(ii),
4.05(c) and 11.03) ratably to the Lenders, for the account of their respective
Applicable Lending Offices, and like funds relating to the payment of any other
amount payable to any Lender to such Lender for the account of its Applicable
Lending
52
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Office, with such payments being apportioned as set forth in Sections 4.01(f)
and 4.01(g).
(b) If and to the extent payment owed to any Lender is not
made when due under any Loan Document (after giving effect to any applicable
grace period), the Borrowers hereby authorize such Lender or any bank affiliate
of such Lender to charge from time to time against any account of any Borrower
with such Lender or such affiliate any amount so due. The Borrowers hereby
authorize the Agent or any bank affiliate of the Agent to charge against the
account of any Borrower with the Agent or such affiliate all interest payments
when due hereunder (after giving effect to any applicable grace period), and the
Agent shall notify the Borrowers of such charge by written confirmation thereof.
(c) All computations of interest based on the Base Rate
shall be made by the Agent on the basis of a year of 365 or 366 days, as the
case may be, and all computations of interest based on the Eurodollar Rate, the
Fixed Rate or the Quoted Rate and of the Discount Rate, commitment fees and the
Standby Fee shall be made by the Agent on the basis of a year of 360 days, in
each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest or commitment fees
are payable. Each determination by the Agent of an interest rate hereunder
shall be conclusive and binding for all purposes, absent manifest error.
(d) Whenever any payment hereunder or under any of the
other Loan Documents shall be stated to be due on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment
of interest or commitment fees, as the case may be; provided, however, if such
-------- -------
extension would cause payment of interest on or principal of Eurodollar Rate
Advances to be made in the next following calendar month, such payment shall be
made on the next preceding Business Day.
(e) Except as otherwise provided in Sections 2.01(g) and
2.02(d) hereof, unless the Agent shall have received notice from the Borrowers
prior to the date on which any payment is due to any of the Lenders, the
Accepting Lenders or the Issuing Lenders (each a "Receiving Lender") hereunder
----------------
that the Borrowers will not make such payment in full, the Agent may assume that
the Borrower has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each
Receiving Lender on such due date an amount equal to the amount then due such
Receiving Lender. If and to the extent the Borrowers shall not have so made
such payment in full to the Agent, each Receiving Lender shall repay to the
Agent forthwith on demand such amount distributed to such Receiving Lender
together with interest thereon, for each day from the date such amount is
distributed to such Receiving Lender until the
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date such Receiving Lender repays such amount to the Agent, at the Federal Funds
Rate.
(f) (i) Subject to Section 4.01(f)(ii), (y) all principal
and interest payments in respect of any Bid Advances shall be apportioned
ratably among the Lenders making such Advances in accordance with their
respective outstanding principal amount of such Advances, and (z) any amount
received by the Agent for application to the principal of any Revolving Facility
Advances or Swing Line Advances shall be applied, first to the payment of the
-----
outstanding Swing Line Advances, second to the ratable payment of the
------
outstanding Revolving Facility Advances which are Base Rate Advances, third to
-----
the ratable payment of the outstanding Revolving Facility Advances which are
Quoted Rate Advances, and fourth to the ratable payment of the outstanding
------
Revolving Facility Advances which are Eurodollar Rate Advances, together with,
in the case of any payment of Quoted Rate Advances or Eurodollar Rate Advances,
any additional amount for which the Borrowers shall be obligated in respect of
the payment of such Advances pursuant to Section 11.03(b). Payments relating to
interest on the Revolving Facility Advances or the Swing Line Advances shall be
applied, first to interest owing to the Swing Line Lender in respect of Swing
-----
Line Advances and second to interest owing to the Revolving Lenders on a ratable
------
basis. Notwithstanding the foregoing, the Agent may, in its discretion, apply
any amounts received for application to the payment of the principal of the
Revolving Facility Advances to the ratable payment of the outstanding Revolving
Facility Advances (in the order set forth above) prior to the ratable payment of
the Swing Line Advances.
(ii) Anything contained in this Agreement to the
contrary notwithstanding (other than as set forth in Section 4.01(g)), upon the
occurrence and during the continuance of any Event of Default specified in
Section 8.01 or after the acceleration of the maturity of the Advances and the
other amounts referred to in Article VIII or termination of the Commitments, all
payments relating to the Advances and the other Obligations shall be made to the
Agent for the account of the Lenders and all amounts received by the Agent which
are to be applied to the payment of the Obligations shall be distributed first
-----
to payment of outstanding Swing Line Advances and thereafter to the Lenders in
----------
such a manner that each Lender receives its proportionate share of such amounts
based on the outstanding principal amounts of all other Advances then
outstanding and the amount of all other Obligations then payable.
(g) Notwithstanding anything to the contrary herein, any
Defaulting Lender's Revolving Facility Pro Rata Share of any payments of
principal by the Borrowers and any other funds distributed to the Lenders with
respect to principal shall be applied (i) first, to all Lenders other than the
-----
Defaulting Lender in accordance with their respective Revolving Facility Pro
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Rata Shares until the aggregate principal amount of all Revolving Facility
Advances then outstanding to each Lender, all outstanding Drafts accepted and
discounted by each Accepting Lender and all Letters of Credit Issued by each
Issuing Lender as a percentage of the Total RCA Liability is, in each case,
equal to such Lender's Revolving Facility Pro Rata Share and (ii) second, to
------
such Defaulting Lender.
SECTION 4.02. Evidence of Debt.
----------------
(a) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrowers to
such Lender resulting from each Advance owing to such Lender from time to time,
including the amounts of principal and interest payable and paid to such Lender
from time to time hereunder.
(b) The Register maintained by the Agent pursuant to
Section 11.11 shall include a control account, and a subsidiary account for each
Lender, in which accounts (taken together) shall be recorded (i) the date and
amount of each Borrowing made hereunder, the Advances comprising each Borrowing
and any Interest Period applicable thereto, (ii) the Letters of Credit Issued by
each Issuing Lender, (iii) the participation of each Lender in any Existing
Letters of Credit, (iv) the amount of unmatured Drafts owing to each Accepting
Lender, (v) the terms of each Assignment and Acceptance delivered to and
accepted by it, (vi) the amount of any principal or interest due and payable or
to become due and payable from the Borrowers to each Lender hereunder, and (vii)
the amount of any sum received by the Agent from the Borrowers hereunder and
each Lender's share thereof. The entries made in the Register shall be
conclusive and binding for all purposes, absent manifest error.
(c) The Borrowers agree that if, in the opinion of any
Lender, a promissory note or other evidence of debt is required, appropriate or
desirable to reflect or enforce the indebtedness of the Borrowers resulting from
the Revolving Facility Advances, Swing Line Advances or Bid Advances made, or to
be made, by such Lender, then upon request of such Lender the Borrowers shall
promptly execute and deliver to such Lender a promissory note substantially in
the form of Exhibit A-1 for Revolving Facility Advances, Exhibit A-2 for Swing
Line Advances and Exhibit A-3 for Bid Advances, each payable to the order of
such Lender in an amount equal to the maximum amount of Revolving Facility
Advances, Swing Line Advances or Bid Advances, as the case may be, payable or to
be payable to such Lender from time to time hereunder.
SECTION 4.03. Taxes.
-----
(a) Any and all payments by the Borrowers hereunder shall
be made, in accordance with Section 4.01, free and clear of and
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without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender, Accepting Lenders, the Issuing Lenders,
- ---------
the Designated Issuer and the Agent (each a "Taxpayer"), taxes imposed on its
--------
income, and franchise taxes imposed on it, by the jurisdiction under the laws of
which such Taxpayer is organized or any political subdivision thereof and, in
the case of each Taxpayer other than the Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction of such Taxpayer's Applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrowers shall be required by law
-----
to deduct any Taxes from or in respect of any sum payable hereunder to any
Taxpayer, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 4.03) such Taxpayer receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrowers shall make such deductions and (iii) the Borrowers shall pay
the full amount deducted to the relevant taxation authority or other authority
in accordance with applicable law.
(b) In addition, the Borrowers agree to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made by the Borrowers hereunder
or under any of the other Loan Documents or from the execution or delivery by
the Borrowers of, or the registration of, or otherwise with respect to, this
Agreement or the other Loan Documents (hereinafter referred to as "Other
-----
Taxes").
(c) The Borrowers will indemnify each Lender, each Issuing
Lender, each Accepting Lender, the Designated Issuer and the Agent for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
4.03) paid by such Person (as the case may be) that relate to any payment made
by the Borrowers, the execution or delivery of this Agreement by the Borrowers
or the registration of or otherwise with respect to this Agreement or the other
Loan Documents and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. This indemnification shall be made
within 30 days from the date such Person (as the case may be) makes written
demand therefor.
(d) Within 30 days after the date of any payment of Taxes,
the Borrowers will furnish to the Agent, at its address set forth under its name
on the signature pages hereof, the original or a certified copy of a receipt
evidencing payment thereof. The Agent shall, upon request of the Designated
Issuer or any Lender,
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Issuing Lender or Accepting Lender, promptly deliver a copy of such receipt to
such Person. If no Taxes are payable in respect of any payment hereunder or
under the other Loan Documents, the Borrowers will furnish to the Agent, at such
address, a certificate from each appropriate taxing authority, or an opinion of
counsel acceptable to the Agent, in either case stating that such payment is
exempt from or not subject to Taxes.
(e) Without prejudice to the survival of any other
agreement of any Borrower hereunder, the agreements and obligations of the
Borrowers contained in this Section 4.03 shall survive the payment in full of
principal and interest hereunder and under the other Loan Documents.
SECTION 4.04. Sharing of Payments, Etc. If any Lender, Issuing
------------------------
Lender or Accepting Lender (a "Benefitted Lender") shall obtain any payment
-----------------
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of any Revolving Facility Advances made by it, Drafts
accepted and discounted by it, Letters of Credit Issued by it (including
Existing Letters of Credit) or its participation in any Existing Letter of
Credit or Swing Line Advance, in each case in excess of its Revolving Facility
Pro Rata Share of payments on account of such Advances, Drafts or Letters of
Credit obtained by all the Lenders, Issuing Lenders or Accepting Lenders, as the
case may be, such Benefitted Lender shall forthwith purchase from the other
Lenders such participations in the Obligations as shall be necessary to cause
such Benefitted Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
- -------- -------
thereafter recovered from such Benefitted Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the Benefitted Lender the
purchase price to the extent of such recovery together with an amount equal to
such Lender's Revolving Facility Pro Rata Share (according to the proportion of
(i) the amount of such Lender's required repayment to (ii) the total amount so
recovered from the Benefitted Lender) of any interest or other amount paid or
payable by the Benefitted Lender in respect of the total amount so recovered.
The Borrowers agree that any Lender so purchasing a participation from another
Lender pursuant to this Section 4.04 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of any Borrower in the amount of such participation.
SECTION 4.05. Fees.
----
(a) Revolving Facility Commitment Fee and Closing Fee. The
-------------------------------------------------
Borrowers agree to pay to the Agent for the account of each Lender (other than
the Designated Bidders) (A) a commitment fee on the average daily portion of
such Lender's Revolving Facility Commitment (after giving effect to any Bid
Reduction) minus the
-----
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sum of (i) all outstanding Advances (other than Bid Advances) owing to such
Lender plus (ii) the L/C Liability owing to such Lender (or, in the case of the
----
Existing Letters of Credit, to the issuers thereof for the account of such
Lender) plus (iii) the liability of the Borrowers in respect of Drafts owing to
----
such Lender, at a rate per annum equal to the Commitment Fee, payable, from the
date hereof until the Termination Date, on the fifth day after the end of each
calendar quarter during the term of such Lender's Revolving Facility Commitment,
commencing with the first fiscal quarter of fiscal year 1994 and ending on the
Termination Date, and on the Termination Date; and (B) a one-time only closing
fee on such Lender's allocated Revolving Facility Commitment on the Closing Date
(and as shown on the signature pages hereof) in an amount equal to 0.20% of that
allocated amount in the case of Revolving Facility Commitments of less than
$25,000,000 or 0.25% of that allocated amount in the case of Revolving Facility
Commitments of $25,000,000 or more, payable in each case, on the Closing Date.
In the event that any Lender assigns all or a portion of its rights
and obligations under this Agreement, it shall pay to the assignee thereof a pro
rata portion of any commitment, amendment, waiver or other fee received by such
Lender in respect of any period during which such Lender will not have a
Revolving Facility Commitment under this Agreement as a result of the
assignment.
(b) Letter of Credit Fees.
---------------------
(i) The Borrowers agree to pay to the Agent for the account of
each Issuing Lender (and allocated between the Issuing Lenders based on their
respective Total Facility Pro Rata Shares) the following fees with respect to
each Commercial Letter of Credit issued or increased in amount pursuant to
Article III: (A) a nonrefundable issuance fee in an aggregate amount equal to
0.125% (but, in any event, a minimum amount equal to at least $1,000) of the
face amount of such Letter of Credit (in the case of an issuance) or of the
increase in such face amount (in the case of an increase), payable on or before
the date of such issuance or increase and (B) a nonrefundable negotiation fee in
an aggregate amount equal to 0.125% of each amount drawn under such Letter of
Credit, payable on the date of presentation of the applicable draft for payment
of such amount under such Letter of Credit.
(ii) The Borrowers agree to pay to the Agent for the account
of each Issuing Lender (and allocated between the Issuing Lenders based on their
respective Total Facility Pro Rata Shares) a nonrefundable fee equal to, for
each Issuance of each Standby Letter of Credit, an aggregate amount equal to the
Standby Fee on the face amount of such Standby Letter of Credit for the period
from such Issuance to its expiration date, plus a processing fee
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of $100 (which shall be for the account of the Agent only), payable quarterly in
advance.
(c) Agency Fees. The Borrowers agree to pay to the Agent,
-----------
for its sole account and benefit, agency and documentation fees as separately
agreed between the Borrowers or Merisel Parent and the Agent.
ARTICLE V
CONDITIONS OF LENDING
SECTION 5.01. Initial Conditions Precedent. The obligation of each
----------------------------
Lender (other than any Designated Bidder) to make its initial Advance, Issue its
initial Letter of Credit, or accept its initial Draft is subject to the
conditions precedent that:
(a) the Borrowers shall have paid, or simultaneously with
and with the proceeds of the initial Advance of any Lender shall pay, all fees
and other amounts payable by the Borrowers on the Closing Date (including,
without limitation, the fees referred to in clause (B) of Section 4.05(a) and
those referred to in Section 4.05(c));
(b) the Agent shall have received the following, each dated
the Closing Date, in form and substance satisfactory to the Agent, and in
sufficient copies for each Lender:
(i) Executed originals of this Agreement (executed by each
Borrower and Merisel Parent);
(ii) For each Borrower and Merisel Parent, certified copies of
the Certificate of Incorporation of that Borrower and Merisel Parent, good
standing certificates from the Secretary of State of the States of Delaware
and California, and copies of that Borrower's and Merisel Parent's bylaws
certified by its respective Secretary or an Assistant Secretary;
(iii) For each Borrower and Merisel Parent, copies of the
resolutions of the Board of Directors of that Borrower and Merisel Parent
approving each Loan Document executed by that Borrower or Merisel Parent,
as the case may be, and of all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to each
such Loan Document, in each case certified by its respective Secretary or
an Assistant Secretary;
(iv) For each Borrower and Merisel Parent, a certificate of
the Secretary or an Assistant Secretary of that Borrower and Merisel Parent
certifying the names and true signatures of the officers of that Borrower
or Merisel Parent, as the case may be, authorized to sign each Loan
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<PAGE>
Document executed by that Borrower or Merisel Parent and the other
documents to be delivered by it hereunder;
(v) A favorable opinion of Riordan & McKinzie, special counsel
for the Borrowers and Merisel Parent, in substantially the form of Exhibit
L-1 hereto and as to such other matters as any Lender through the Agent may
reasonably request;
(vi) Executed originals of the Merisel Canada Guaranty;
(vii) For Merisel Canada, certified copies of its charter
documents;
(viii) For Merisel Canada, copies of the resolutions of its
Board of Directors approving each Loan Document executed by it, and of all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to each such Loan Document, in each case
certified by its Secretary or an Assistant Secretary; and
(ix) For Merisel Canada, a certificate of its Secretary or an
Assistant Secretary certifying the names and true signatures of its
officers authorized to sign each Loan Document executed by it and the other
documents to be delivered by it hereunder;
(c) the commitments of the lenders under the Existing Credit Agreement
shall have been terminated, and all obligations of Merisel Parent under the
Existing Credit Agreement (including all commitment fees accrued through the
date of such termination) shall have been paid in full, but nothing in this
Section 5.01(c) will require the termination of the Existing Letters of Credit
(which will continue as provided in Section 3.03);
(d) (i) Merisel Parent and its related group companies shall have
completed the corporate restructuring (the "Restructuring") pursuant to which
-------------
Merisel Parent will have contributed substantially all of its operating assets
(including, without limitation, all vendor distribution agreements) to the
Borrowers in accordance with the terms of those certain Assignment and
Assumption Agreements between Merisel Parent and Merisel Americas and Merisel
Europe, respectively; (ii) the Restructuring shall have been carried out in
compliance with all applicable laws; (iii) the Borrowers and Merisel Parent
shall have received all material consents required from any Persons in
connection with the Restructuring and the execution, delivery and performance of
this Agreement and any of the other Loan Documents (including, without
limitation, any consents required from the holders of the Senior Notes or any
other Debt of any of the Borrowers, Merisel Parent, ComputerLand Acquisition
Subsidiary or Merisel Canada or any of their respective Subsidiaries); (iv) the
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Agent shall have received a certificate of an officer of Merisel Parent to the
effect of the foregoing, together with copies of any of such consents which the
Agent might reasonably request; and (v) all of the foregoing shall be in form
and substance satisfactory to the Agent;
(e) (i) the Agent shall have received, in sufficient copies for the
Lenders (y) such information as the Agent may have reasonably requested in
connection with either the Restructuring or the ComputerLand Acquisition,
including, without limitation, pro forma financial statements giving effect to
the foregoing and the effectiveness of this Agreement, and all of the foregoing
shall be in form and substance satisfactory to the Agent and the Lenders, and
(z) certificates of appropriate officers of each of the Borrowers (in
substantially the form of Exhibit P hereto) to the effect that each such entity
is or will be Solvent after giving effect to the Restructuring, the ComputerLand
Acquisition and the transactions contemplated by this Agreement and (ii) the
material terms, conditions and documentation for the "Acquisition Debt" (as
defined in Section 9.03) for the ComputerLand Acquisition shall be in form and
substance satisfactory to the Lenders; and
(f) all of the representations and warranties of Merisel Parent contained
in Section 6.01 of this Agreement shall be true and correct.
SECTION 5.02. Conditions Precedent to Each Borrowing, Each Acceptance and
-----------------------------------------------------------
Discounting of Drafts and Each Issuance. The obligation of each Lender to make
- ---------------------------------------
a Revolving Facility Advance, Swing Line Advance or Bid Advance on the occasion
of each Borrowing (including the initial Borrowing), each Accepting Lender to
accept and discount any Draft or any Issuing Lender to Issue any Letter of
Credit shall be subject to the further conditions precedent that:
(a) on the date of such Borrowing, such acceptance and discounting or
such Issuance, the following statements shall be true (and the giving of a
Notice of Revolving Facility Borrowing, Notice of Swing Line Borrowing or Notice
of Bid Borrowing and a Borrower's acceptance of the proceeds of such Borrowing,
the giving of a request for acceptance and discounting of a Draft or the
delivery to the Agent of an Application or other request for Issuance of a
Letter of Credit and the Issuing Lenders' Issuance thereof (as the case may be)
shall constitute a representation and warranty by the Borrowers and Merisel
Parent that on the date of such Borrowing, such acceptance and discounting or
such Issuance such statements are true):
(i) the representations and warranties of the Borrowers contained in
Article VI of this Agreement, the representations and warranties of Merisel
Parent contained in Sections 6.01(a)-(f), (j), (m), (q)-(s), (u) and (x),
and
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the representations and warranties in the Merisel Canada Guaranty are
correct on and as of the date of such Borrowing, such acceptance and
discounting or such Issuance before and after giving effect to such
Borrowing, such acceptance and discounting or such Issuance as though made
on and as of such date; provided, however, that the representations and
-------- -------
warranties which by their terms speak as of an earlier date shall be
correct on and as of such earlier date;
(ii) no event has occurred and is continuing, or would result from
such Borrowing or the application of the proceeds therefrom, such
acceptance and discounting or the application of the proceeds therefrom or
such Issuance, which constitutes an Event of Default or an Incipient
Default;
(iii) no event has occurred and is continuing, or would result from
such Borrowing or the application of the proceeds therefrom, such
acceptance and discounting or the application of the proceeds therefrom or
such Issuance, which constitutes a default under the Subordinated Note
Purchase Agreement or the Senior Note Purchase Agreement; and
(iv) such Borrowing does, the Obligations arising in connection with
such acceptance and discounting do or will or the Obligations arising in
connection with such Issuance do or will, constitute Senior Debt (as
defined in the Subordinated Note Purchase Agreement) under the Subordinated
Note Purchase Agreement;
(b) in the case of a Bid Borrowing, the Agent shall have received, by
telecopier, telex or cable, the written Notice of Bid Borrowing with respect
thereto and the Agent shall have received payment of the Bid Fee for such Bid
Borrowing;
(c) in the case of Drafts, each of the conditions to the acceptance and
discounting of such Draft set forth in Section 2.06 shall have been satisfied;
(d) in the case of Letters of Credit, (i) no order, judgment or decree of
any court, arbitrator or governmental authority shall purport by its terms to
enjoin or restrain any Issuing Lender from issuing such Letter of Credit or any
law, rule or regulation applicable to any Issuing Lender or any request or
directive (whether or not having the force of law) from any governmental
authority with jurisdiction over any Issuing Lender shall prohibit or request
that such Issuing Lender refrain from the issuance of letters of credit
generally or such Letter of Credit and (ii) each of the conditions to Issuance
of such Letter of Credit set forth in Section 3.02 shall have been satisfied;
and
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(e) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties. Each Borrower and Merisel
------------------------------
Parent represents and warrants as follows (which representations and warranties
made by a Borrower shall be limited to such Borrower and its Subsidiaries and
other facts and circumstances known to such Borrower and such Subsidiaries):
(a) Each Borrower and Merisel Parent and each of their respective
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted and is duly licensed or qualified and in good standing as
a foreign corporation in each other jurisdiction in which its properties are
located or the nature of its activities makes such qualification necessary,
except in jurisdictions where the failure to obtain such authority or to qualify
could not have a material adverse impact on the business or financial condition
of that Borrower, Merisel Parent or any such Subsidiary, as the case may be.
(b) The execution, delivery and performance by each Borrower and Merisel
Parent and each of their respective Subsidiaries of the Loan Documents are
within their respective corporate powers, have been duly authorized by all
necessary corporate action, do not (i) violate any provision of their respective
charters or by-laws, (ii) violate any provision of any law or any order,
judgment or decree of any court or other governmental agency binding on or
affecting any Borrower or Merisel Parent or any of their respective
Subsidiaries, (iii) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any contractual obligation of
any Borrower or Merisel Parent or any of their respective Subsidiaries where
such conflict, breach or default could have a material adverse impact on any
Borrower, Merisel Parent or any such Subsidiary or on the ability of any
Borrower or Merisel Parent to perform its Obligations hereunder or on the
ability of any of their respective Subsidiaries to perform its obligations under
any Loan Document to which it is a party, (iv) result in or require the creation
of any Lien upon or with respect to any of the properties of any Borrower or
Merisel Parent or any of their respective Subsidiaries or (v) require any
approval of stockholders or any approval or consent of any Person under any
contractual obligation of any Borrower or Merisel Parent or any of their
respective Subsidiaries or of any trustee or creditor of or any investor in any
Borrower or Merisel Parent
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or any of their respective Subsidiaries, other than approvals or consents that
have been previously obtained and disclosed in writing to the Agent.
(c) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by any Borrower or Merisel Parent or any
of their respective Subsidiaries of any Loan Document to which it is or will be
a party.
(d) This Agreement is, and each other Loan Document when delivered
hereunder to which the Borrower or Merisel Parent or any of their respective
Subsidiaries is a party, will be, legal, valid and binding obligations of that
Borrower or Merisel Parent or that Subsidiary, enforceable against that Borrower
or Merisel Parent or that Subsidiary, in accordance with their respective terms.
(e) The consolidated balance sheet of Merisel Parent and its consolidated
Subsidiaries as at January 2, 1993, and the related consolidated statement of
income and retained earnings of Merisel Parent and its consolidated Subsidiaries
for the fiscal year then ended certified by Deloitte & Touche, independent
certified public accountants, and the consolidated balance sheet of Merisel
Parent and its consolidated Subsidiaries as at October 2, 1993, and the related
consolidated statement of income and retained earnings for the nine months then
ended, copies of which have been furnished to each Lender, fairly present the
financial condition of Merisel Parent and its consolidated Subsidiaries as at
such dates and the results of the operations of Merisel Parent and its
consolidated Subsidiaries for the periods ended on such dates, all in accordance
with generally accepted accounting principles consistently applied. Except as
set forth in Schedule IV, on the date hereof, neither Borrower or Merisel Parent
nor any of their respective Subsidiaries has any material contingent obligation,
contingent liability or liability for any lease, long-term lease or forward or
long-term commitment out of the ordinary course of business that is not
reflected in the foregoing statements or the notes thereto.
(f) Since January 2, 1993, there has been no material adverse change in
the business, earnings, prospects, properties, condition (financial or
otherwise) or operations of any Borrower or Merisel Parent or any of their
respective Subsidiaries.
(g) Other than as set forth on Schedule II hereto, there is no pending or,
to the knowledge of any of the officers of any Borrower or Merisel Parent or any
of their respective Subsidiaries, threatened action or proceeding affecting any
Borrower or Merisel Parent or any such Subsidiary before any court, governmental
agency or arbitrator, which may materially adversely affect the financial
condition or operations of any
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Borrower or Merisel Parent or any of their respective Subsidiaries or the
ability of any Borrower to make payment of or perform the Obligations or the
ability of Merisel Parent or any such Subsidiary to perform its obligations
under any Loan Document to which it is a party. None of the Borrower or Merisel
Parent or any of their respective Subsidiaries is in default with respect to any
order, writ, injunction, judgment or decree of any court or other governmental
or public authority or agency or arbitration or arbitration panel binding on
such Person.
(h) No proceeds of any Advance will be used to acquire any security in any
transaction which is subject to Sections 13 and 14 of the Securities Exchange
Act of 1934.
(i) None of the Borrowers or their respective Subsidiaries is principally
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System), and none of the Borrowers or their
respective Subsidiaries owns any margin stock. Margin stock owned by Merisel
Parent represents less than 25% in value of the total value of all assets owned
by Merisel Parent.
(j) Each Borrower and Merisel Parent and their respective Subsidiaries
have filed all United States federal tax returns and all other tax returns which
are required to be filed and have paid all taxes due pursuant to said returns or
pursuant to any assessment received by that Borrower, Merisel Parent or any such
Subsidiary, except such taxes, if any, as are being contested in good faith and
as to which reasonably adequate reserves have been provided. The charges,
accruals and reserves on the books of each Borrower and Merisel Parent and their
respective Subsidiaries in respect of any taxes or other governmental charges
are reasonably adequate.
(k) Set forth on Schedule I hereto is a complete and accurate list of all
of Merisel Parent's and each Borrower's Subsidiaries, showing as of the date
hereof (as to each Subsidiary) the jurisdiction of its incorporation, the number
of shares of each class of capital stock authorized, and the number outstanding,
and the percentage of each class of capital stock owned by Merisel Parent, that
Borrower or any other Subsidiary, which capital stock is owned free and clear of
all Liens; all of the issued and outstanding shares of capital stock of the
Borrowers and such Subsidiaries have been duly authorized and validly issued and
are fully paid and non-assessable.
(l) None of the Borrowers or Merisel Parent or any of their respective
Subsidiaries is a party to or is subject to any contracts, long term
commitments, or other agreements or any charter or other restriction that
materially and adversely affects the business, earnings, prospects, properties,
financial condition or operations of any Borrower or Merisel Parent or any
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of their respective Subsidiaries and no event of default or any event that with
notice or the passage of time could become an event of default has occurred and
is continuing under any agreement to which any Borrower or Merisel Parent or any
of their respective Subsidiaries is subject or is a party or by which any of
their respective assets are bound where such default could have a material
adverse impact on any Borrower or Merisel Parent or any such Subsidiary or on
the ability of any Borrower to perform its Obligations hereunder or the ability
of Merisel Parent or any such Subsidiary to perform its obligations under any
Loan Document to which it is a party.
(m) No information, exhibit or report furnished by any Borrower or Merisel
Parent or any of their respective Subsidiaries to the Agent or to any Lender in
connection with the negotiation of the Loan Documents contained as of the time
delivered any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statements contained therein not misleading.
With respect to all projections furnished by or on behalf of any Borrower or
Merisel Parent or any of their respective Subsidiaries and made available to the
Agent or any Lender relating to the business, prospects, properties, financial
condition or operations of any Borrower or Merisel Parent or any of their
respective Subsidiaries: (i) all facts stated as such therein were true and
complete in all material respects as of the date of such projections, (ii) all
facts upon which the projections therein contained are based were true and
complete in all material respects as of the date of such projections and no
material fact was omitted from that basis, and (iii) all estimates and
assumptions made on that basis are made in good faith and believed to be
reasonable at the time made, it being recognized by the Lenders that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered thereby may differ from such
projections.
(n) Each Borrower and Merisel Parent and each of their respective
Subsidiaries has good and marketable title to their respective properties and
all property reflected in the most recent balance sheet referred to in Section
6.01(e) (other than assets disposed of in the ordinary course of business since
the date of such balance sheet) or, in the case of property in which any
Borrower or Merisel Parent or any such Subsidiary has a right pursuant to a
license or other agreement, the Borrower and Merisel Parent or any such
Subsidiary has the ability to distribute such property, subject only to
customary restrictions, and in each case the same are not subject to any Liens
(including Liens of conditional vendors) of any nature whatsoever other than the
Liens as permitted by this Agreement. Each Borrower and Merisel Parent and each
of their respective Subsidiaries has the right to, and does, enjoy peaceful and
undisturbed possession under all material leases under which it is leasing
property. All such material leases are valid, subsisting and in full force
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and effect. None of the Borrower or Merisel Parent or any such Subsidiary has
personal property stored in a self-service storage facility.
(o) Each Borrower and Merisel Parent and each of their respective
Subsidiaries possess all necessary trademarks, tradenames, service marks,
franchises copyrights, patents, patent rights, permits and licenses to conduct
their respective businesses as now operated, without any burdensome restrictions
or any known conflict with the rights of others.
(p) At the date of this Agreement, there are no outstanding letters of
credit for which any Borrower or any of its Subsidiaries is the account party
other than the Existing Letters of Credit.
(q) (i) Merisel Parent and each of its ERISA Affiliates is in compliance
in all material respects with any applicable provisions of ERISA and the
regulations and published interpretations thereunder with respect to all
Employee Benefit Plans.
(ii) No Termination Event has occurred or is reasonably expected to
occur with respect to any Pension Plan.
(iii) The excess of the actuarial present value of all benefit
liabilities under all Pension Plans (excluding in such computation Pension Plans
with assets greater than benefit liabilities) over the fair market value of the
assets allocable to such benefit liabilities are not greater than $250,000. For
purposes of the preceding sentence, the terms "actuarial present value" and
"benefit liabilities" shall have the meanings specified in Section 4001 of
ERISA.
(r) Each Borrower and Merisel Parent each of their respective Subsidiaries
is in compliance with all statutes, laws and ordinances and governmental rules
and regulations to which it is subject, the violation of which, either
individually or in the aggregate, could materially adversely affect the
business, earnings, prospects, properties or condition (financial or otherwise)
of any Borrower, Merisel Parent or any such Subsidiary.
(s) Each Borrower and Merisel Parent and each of their respective
Subsidiaries has insurance, with financially sound and reputable insurers,
against such casualties and contingencies of such types and in such amounts as
is customary in the case of corporations engaged in the same or a similar
business or having similar properties similarly situated.
(t) None of the Borrowers or Merisel Parent or any of their respective
Subsidiaries has received any written notice from any governmental authority or
any third party regarding the violation
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of any Hazardous Materials Laws which could reasonably be expected to have a
material adverse effect on the business, earnings, prospects, properties or
condition (financial or otherwise) of any Borrower, Merisel Parent or any such
Subsidiary. To the best of each Borrower's and Merisel Parent's respective
knowledge, none of the properties of any Borrower or Merisel Parent or any of
their respective Subsidiaries is in violation of any Hazardous Materials Laws,
where such violation could reasonably be expected to have a material adverse
effect on the business, earnings, prospects, properties or condition (financial
or otherwise) of any Borrower, Merisel Parent or any such Subsidiary. To the
best of each Borrower's and Merisel Parent's respective knowledge, there is no
emission, discharge, release or threatened release, generation, storage,
transportation, disposal, or presence of Hazardous Materials on any property
owned or leased by any Borrower, Merisel Parent or any such Subsidiary which is
reasonably likely to materially adversely affect the business or credit of any
Borrower or its ability to perform under the Loan Documents or the ability of
Merisel Parent or any such Subsidiary to perform its obligations under any Loan
Document to which it is a party.
(u) None of the Borrowers or Merisel Parent or any of their respective
Subsidiaries is a "public utility company" or a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended; or a
"public utility" within the meaning of the Federal Power Act, as amended. None
of the Borrowers or Merisel Parent or any of their respective Subsidiaries is an
"investment company" or an "affiliated person" of an "investment company" or a
company "controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended. None of the Borrowers or Merisel
Parent or any of their respective Subsidiaries is an "investment adviser" or an
"affiliated person" of an "investment adviser" as such terms are defined in the
Investment Advisers Act of 1940, as amended. None of the Borrowers or Merisel
Parent or any of their respective Subsidiaries is subject to any statute, law or
ordinance or governmental rule or regulation which prohibits or otherwise limits
its ability to incur Debt or guarantee the payment of Debt incurred by other
Persons.
(v) All amounts outstanding under this Agreement constitute "Designated
Senior Debt" for purposes of the Subordinated Note Purchase Agreement.
(w) Each Borrower and each of their respective Subsidiaries is Solvent.
(x) As a result of the Restructuring, substantially all of the operating
assets (including, without limitation, all vendor
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distribution agreements) and related rights of Merisel Parent shall have been
effectively transferred to the Borrowers with all material consents required
from any Persons in connection with the Restructuring having been obtained.
SECTION 6.02. Incorporation of Senior Note Purchase Agreement
-----------------------------------------------
Representations and Warranties. The representations and warranties set forth in
- ------------------------------
Section 4 of the Senior Note Purchase Agreement are hereby incorporated by
reference into this Agreement as if set forth herein in full. For purposes of
this Section 6.02, all definitions set forth in Section 2.1 of the Senior Note
Purchase Agreement are also herein incorporated by reference.
ARTICLE VII
COVENANTS OF THE BORROWERS AND MERISEL PARENT
SECTION 7.01. Affirmative Covenants. So long as any Advance, Acceptance
---------------------
Usage or L/C Liability shall remain unpaid or any Lender shall have any
Commitment hereunder, each of the Borrowers and Merisel Parent will (in the case
of the Borrowers, so far as such covenants are within the control and discretion
of or apply to that particular Borrower), unless the Majority Lenders shall
otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries
-------------------------
to comply with all applicable laws, rules, regulations and orders (including,
without limitation, any Hazardous Materials Laws) noncompliance with which could
materially adversely affect the business or credit of any Borrower or Merisel
Parent or its ability to perform under the Loan Documents or the ability of any
of such Subsidiaries to perform its obligations under any Loan Document to which
it is a party.
(b) Corporate Existence. Take and fulfill, and cause each of its
-------------------
Subsidiaries to take and fulfill, all actions and conditions necessary to
preserve and keep in full force and effect its existence, rights and privileges
as a corporation and will not liquidate or dissolve (except as permitted in
Section 7.02(e)), and will take and fulfill, and cause each of its Subsidiaries
to take and fulfill, all actions and conditions necessary to qualify to do
business as a foreign corporation in each jurisdiction in which the conduct of
its business or the ownership or leasing of its properties requires such
qualification except where failure to do so could not have a material adverse
effect on any Borrower or Merisel Parent or any such Subsidiary or on any
Borrower's, Merisel Parent's or any such Subsidiary's ability to perform its
obligations under any Loan Document to which it is a party.
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(c) General Maintenance of Properties and Business, etc. Maintain and
----------------------------------------------------
cause each of its Subsidiaries to maintain its property in good condition
(ordinary wear and tear excepted) and make all reasonable and necessary
renewals, replacements, additions and improvements thereof and thereto, so that
the business carried on in connection therewith may be conducted properly at all
times; and maintain and cause each of its Subsidiaries to maintain, with
financially sound insurers of nationally recognized stature and responsibility,
insurance with respect to its property and business of such a nature, with such
terms and in such amounts, as is customary in the case of corporations engaged
in the same or similar businesses similarly situated against loss or damage of
the kinds and in the amounts customarily insured against and for by such
corporations, and carry or cause to be carried, with such insurers in customary
amounts, such other insurance, including public liability insurance, as is
usually carried by such corporations.
(d) Inspection. Permit any Lender, by its representatives, agents or
----------
attorneys, (i) to examine books of account, records, reports and other papers of
any Borrower or Merisel Parent or their respective Subsidiaries, to make copies
and take extracts from any thereof, (ii) with the consent of, in the case of the
Borrowers or their Subsidiaries, the Borrowers and, in the case of Merisel
Parent and any of its Subsidiaries other than the Borrowers and their
Subsidiaries, Merisel Parent, not to be unreasonably withheld, to discuss the
affairs, finances and accounts of the Borrowers and Merisel Parent and their
respective Subsidiaries with its independent certified public accountants (and
by this provision the Borrowers and Merisel Parent each hereby authorizes said
accountants to discuss with any such Lender the finances and accounts of the
Borrowers and Merisel Parent and their respective Subsidiaries) and (iii) to
visit and inspect, all upon reasonable notice, at reasonable times during normal
business hours the properties of the Borrowers and Merisel Parent or any
Subsidiary. Each such inspection shall be at the expense of the Person making
the inspection, unless such inspection shall be made during the continuance of
an Event of Default (in which event, the expense of such inspection shall be
borne by the Borrowers). Notwithstanding the foregoing sentence, it is
understood and agreed by the Borrowers that all expenses incurred by any
Borrower or Merisel Parent or any of their respective Subsidiaries, any officers
and employees thereof and the independent certified public accountants thereof
in connection with any such inspection shall be expenses payable by the
Borrowers and shall not be expenses of the Person making the inspection.
(e) Keeping of Books, Separate Records, etc. (i) Keep, and cause each of
----------------------------------------
its Subsidiaries to keep, proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of each Borrower or Merisel Parent and each of its respective
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Subsidiaries in accordance with generally accepted accounting principles
consistently applied and consistent with prudent business practices; provided,
--------
however, that (y) each Borrower and its respective Subsidiaries shall maintain
- -------
its assets and transactions separately from those of both Merisel Parent and its
other Subsidiaries (including, without limitation, ComputerLand Acquisition
Subsidiary) and the other Borrower and its Subsidiaries (collectively, the
"Other Corporations") and shall reflect such assets and transactions in
financial statements separate and distinct from those of the Other Corporations
and shall evidence such assets and transactions by appropriate entries in books
and records separate and distinct from those of the Other Corporations; and (z)
except as otherwise expressly permitted by this Agreement, each Borrower and its
respective Subsidiaries shall at all times provide for their own operating
expenses and liabilities from their own funds other than certain expenses and
liabilities relating to basic corporate overhead which may be allocated between
the Borrowers and their Subsidiaries and the Other Corporations; and (ii) except
as permitted by Section 7.02(f), collect its accounts receivable and sell its
inventory only in the ordinary course of its business.
(f) Maintenance of Borrowers' Debt Equivalents/Capital Ratio. Maintain a
--------------------------------------------------------
ratio of (i) the aggregate Consolidated Debt Equivalents of both of the
Borrowers to (ii) the sum of (y) the aggregate Consolidated Debt Equivalents of
both of the Borrowers plus (z) the aggregate Consolidated Net Worth of both of
----
the Borrowers at any time, of not more than 0.625 to 1.0.
(g) Maintenance of Merisel Parent's Debt Equivalents/Capital Ratio.
--------------------------------------------------------------
Maintain a ratio of (i) Consolidated Debt Equivalents of Merisel Parent to (ii)
the sum of (y) Consolidated Debt Equivalents of Merisel Parent plus (z)
----
Consolidated Net Worth of Merisel Parent, of not more than 0.70 to 1.00 at any
time to and including July 1, 1994 and of not more than 0.625 to 1.00 at any
time thereafter.
(h) Maintenance of Merisel Americas' Consolidated Tangible Net Worth.
----------------------------------------------------------------
Maintain Consolidated Tangible Net Worth of Merisel Americas at all times of not
less than (i) $140,000,000 plus (ii) 75% of Consolidated Net Income for Merisel
----
Americas for each fiscal quarter commencing after the quarter ending December
31, 1993; provided, however, that in the event that on or after the Closing Date
-------- -------
Merisel Americas issues common stock or preferred stock, the Consolidated
Tangible Net Worth required to be maintained following any such issuance shall
be increased by an amount equal to 75% of the Net Proceeds of such issuance.
For the purposes of this calculation, in the event Consolidated Net Income for
any period is less than zero, Consolidated Net Income for such period will be
deemed to be zero.
(i) Maintenance of Merisel Europe's Consolidated Tangible Net Worth.
---------------------------------------------------------------
Maintain Consolidated Tangible Net Worth of Merisel
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Europe at all times of not less than (i) $10,000,000 plus (ii) 75% of
----
Consolidated Net Income for Merisel Europe for each fiscal quarter commencing
after the quarter ending December 31, 1993; provided, however, that in the event
-------- -------
that on or after the Closing Date Merisel Europe issues common stock or
preferred stock, the Consolidated Tangible Net Worth required to be maintained
following any such issuance shall be increased by an amount equal to 75% of the
Net Proceeds of such issuance except only to the extent that such issuance was
made and its proceeds were used to cure any shortfall in the level of
Consolidated Tangible Net Worth required by this Section 7.01(i). For the
purposes of this calculation, in the event Consolidated Net Income for any
period is less than zero, Consolidated Net Income for such period will be deemed
to be zero.
(j) Maintenance of Borrowers' Interest Coverage Ratio. Maintain, for each
-------------------------------------------------
period of four consecutive fiscal quarters, a ratio of the aggregate
Consolidated EBITDA of both of the Borrowers to the aggregate Consolidated
Interest Charges (excluding, in the case of Merisel Europe only, such portion of
Consolidated Interest Charges as represents interest on intercompany Debt) of
both of the Borrowers, of not less than 2.60 to 1.0.
(k) Maintenance of Merisel Parent's Interest Coverage Ratio. Maintain,
-------------------------------------------------------
for each period of four consecutive fiscal quarters, a ratio of Consolidated
EBIDTA of Merisel Parent to Consolidated Interest Charges of Merisel Parent, of
not less than 2.60 to 1.00.
(l) Maintenance of Inventory Turnover Ratio. (A) Maintain, in each case
---------------------------------------
for each fiscal quarter as determined at the end of that particular fiscal
quarter: (i) with respect to Merisel Americas and its consolidated Subsidiaries,
a ratio of (y) their aggregate cost of sales multiplied by four to (z) their
average consolidated net inventory, of not less than 6.00:1.00, and (ii) with
respect to Merisel Europe and its consolidated Subsidiaries, a ratio of (y)
their aggregate cost of sales multiplied by four to (z) their average
consolidated net inventory, of not less than 6:00:1.00, and (B) continue to use
the method of valuing inventory used at the Closing Date.
(m) Reporting Requirements. Furnish to each Lender the following:
----------------------
(i) promptly after (Y) the occurrence of each Event of Default or
Incipient Default or any development (an "Adverse Development"), financial or
-------------------
otherwise, including, without limitation, litigation, arbitration proceedings
and regulatory proceedings, which could reasonably be expected to materially
adversely affect the business, properties or affairs of any Borrower and its
Subsidiaries taken as a whole or Merisel Parent and its Subsidiaries taken as a
whole or the ability of any
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Borrower or Merisel Parent or any of their respective Subsidiaries to make
payment of or perform its obligations under the Loan Documents, or (Z) any
change by any rating agency (including any insurance rating agency) in the
rating of any publicly-held long-term Debt of Merisel Parent or either Borrower,
a statement of the Treasurer(s) of Merisel Parent and the Borrowers setting
forth details of such Event of Default or Incipient Default or Adverse
Development and, in the case of clause (Y), the action which the Borrowers or
Merisel Parent proposes to take with respect thereto;
(ii) as soon as available and in any event within 50 days after the
end of each of the first three fiscal quarters in each fiscal year, (Y)
consolidated and consolidating balance sheets of Merisel Parent and its
consolidated Subsidiaries as of the end of such fiscal quarter and consolidated
and consolidating statements of income and retained earnings of Merisel Parent
and its consolidated Subsidiaries for the period commencing at the end of the
previous fiscal year and ending with the end of such fiscal quarter, and (Z)
consolidated balance sheets of each Borrower and its respective Subsidiaries as
of the end of such fiscal quarter and consolidated statements of income and
retained earnings of that Borrower and its Subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the end of
such fiscal quarter, in the case of clauses (Y) and (Z), all in reasonable
detail and duly certified (subject to year-end audit adjustments) by the
Treasurer(s) of Merisel Parent and the Borrowers as having been prepared in
accordance with generally accepted accounting principles consistently applied
(other than the absence of footnotes), together with (A) a certificate of each
such officer stating that no Event of Default or Incipient Default or Adverse
Development has occurred and is continuing or, if an Event of Default or
Incipient Default or Adverse Development has occurred and is continuing, a
statement as to the nature thereof and the action which Merisel Parent or the
Borrowers propose to take with respect thereto; and (B) a schedule in form and
substance satisfactory to the Agent, substantially in the form of Exhibit K
hereto, of the computations used in determining, as of the end of such fiscal
quarter, compliance with the covenants contained in Sections 7.01(f), (g), (h),
(i), (j), (k) and (l) and Sections 7.02(c), (d), (f) (after utilization of the
3% basket contained therein exceeds $5,000,000)) and (g) of this Agreement and
Sections 9.10, 9.11, 9.12, 9.13 and 9.14 of the Subordinated Note Purchase
Agreement and Sections 6.6, 6.7, 6.9, 6.10, 6.11, 6.12, 6.13, 6.14, and 6.15 of
the Senior Note Purchase Agreement;
(iii) as soon as available and in any event within 95 days after
the end of each fiscal year of Merisel Parent, a copy of the annual audit report
for such year for Merisel Parent and its consolidated Subsidiaries, including
therein consolidated balance sheets of Merisel Parent and its consolidated
Subsidiaries as of the end of such fiscal year and consolidated
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statements of income and retained earnings and of source and application of
funds of Merisel Parent and its consolidated Subsidiaries for such fiscal year,
together with a consolidating balance sheet of Merisel Parent and its
Subsidiaries as of the end of such fiscal year and consolidating statements of
income and retained earnings and of source and application of funds of Merisel
Parent and its Subsidiaries for such fiscal year, which consolidated balance
sheets and financial statements are certified in a manner acceptable to the
Majority Lenders by independent public accountants of recognized standing
acceptable to the Majority Lenders and which consolidating balance sheets and
financial statements are certified in a manner acceptable to the Majority
Lenders by the Treasurer of Merisel Parent, together with (A) a certificate of
such accounting firm to the Agent stating that in the course of the regular
audit of the business of Merisel Parent and its consolidated Subsidiaries, which
audit was conducted by such accounting firm in accordance with generally
accepted auditing standards, such accounting firm has obtained no knowledge that
an Event of Default or Incipient Default, has occurred and is continuing, or if,
in the opinion of such accounting firm, an Event of Default or Incipient Default
has occurred and is continuing, a statement as to the nature thereof, and (B) a
schedule in form and substance satisfactory to the Agent, substantially in the
form of Exhibit K hereto, of the computations used in determining, as of the end
of such fiscal quarter, compliance with the covenants contained in Sections
7.01(f), (g), (h), (i), (j), (k) and (l) and Sections 7.02(c), (d), (f) (after
utilization of the 3% basket contained therein exceeds $5,000,000) and (g) of
this Agreement and Sections 9.10, 9.11, 9.12, 9.13 and 9.14 of the Subordinated
Note Purchase Agreement and Sections 6.6, 6.7, 6.9, 6.10, 6.11, 6.12, 6.13,
6.14, and 6.15 of the Senior Note Purchase Agreement;
(iv) as soon as available and in any event within 95 days after the
end of each fiscal year of each Borrower, consolidated balance sheets of that
Borrower and its respective Subsidiaries as of the end of such fiscal year and
consolidated statements of income and retained earnings and of source and
application of funds of that Borrower and its Subsidiaries for such fiscal year,
which consolidated balance sheets and financial statements are certified in a
manner acceptable to the Majority Lenders by the Treasurer of that Borrower;
provided, however, that if any of the foregoing have been the subject of an
- -------- -------
audit separate to the audit described in Section 7.01(m)(iii)) by independent
public accountants (provided that such accountants shall be the same accounting
--------
firm as referred to in Section 7.01(m)(iii), unless otherwise agreed by the
Majority Lenders), then the same shall be delivered with a certification of such
accountants in a manner acceptable to the Majority Lenders;
(v) within 180 days after the close of each fiscal year, a statement
of the unfunded liabilities of each Pension
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Plan, if any, certified as correct by an actuary enrolled under ERISA;
(vi) promptly after the filing or receiving thereof, copies of all
reports and notices with respect to any "Reportable Event" as defined in Title
IV of ERISA which Merisel Parent or any of its Subsidiaries files under ERISA
with the Internal Revenue Service or the Pension Benefit Guaranty Corporation or
the U.S. Department of Labor or which Merisel Parent or any of its Subsidiaries
receives from such Corporation;
(vii) as soon as practicable, copies of all financial statements,
reports, notices and proxy statements sent or made available generally by any
Borrower or Merisel Parent to its security holders or by any Subsidiary of any
Borrower or Merisel Parent to its security holders (other than the Borrowers),
of all regular and periodic reports and all registration statements, proxy
statements and prospectuses, if any, filed by any Borrower or Merisel Parent or
any of their respective Subsidiaries with any securities exchange or with the
Securities and Exchange Commission or any governmental authority succeeding to
any of its functions; and of all press releases and other statements made
available generally by any Borrower or Merisel Parent or any such Subsidiary to
the public concerning material developments in the business of any Borrower or
Merisel Parent or any such Subsidiary;
(viii) promptly upon becoming aware of the occurrence of or
forthcoming occurrence of any (a) Termination Event, or (b) "prohibited
transaction," as such term is defined in Section 4975 of the Internal Revenue
Code or Section 406 of ERISA, in connection with any Employee Benefit Plan or
any trust created thereunder, a written notice specifying the nature thereof,
what action Merisel Parent or any Borrower has taken, is taking or proposes to
take with respect thereto, and, when known, any action taken or threatened by
the Internal Revenue Service, the Department of Labor, or the Pension Benefit
Guaranty Corporation with respect thereto;
(ix) with reasonable promptness copies of (a) all notices received by
Merisel Parent or any of its ERISA Affiliates of the Pension Benefit Guaranty
Corporation's intent to terminate any Pension Plan or to have a trustee
appointed to administer any Pension Plan; (b) each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) filed by Merisel Parent or
any of its ERISA Affiliates with the Internal Revenue Service with respect to
each Pension Plan; and (c) all notices received by Merisel Parent or any of its
ERISA Affiliates from a Multiemployer Plan sponsor concerning the imposition or
amount of withdrawal liability pursuant to Section 4202 of ERISA;
(x) with reasonable promptness, notice to the Agent in writing of (a)
any release, spill, discharge or emission by any
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Borrower or Merisel Parent or any of their respective Subsidiaries or on or from
its properties of any Hazardous Materials into the environment that must be
reported to any federal, state, provincial or local government or regulatory
agency under any applicable Hazardous Materials Laws, (b) any remedial action
taken by any Borrower or Merisel Parent or their respective Subsidiaries in
response to (x) the presence of Hazardous Materials on, under or about any of
its properties that could be reasonably likely to materially adversely affect
the business or credit of any Borrower or Merisel Parent or the ability of any
Borrower or Merisel Parent or any of their respective Subsidiaries to perform
under the Loan Documents or (y) Hazardous Materials Claims, and (c) the
discovery by any Borrower or Merisel Parent or any of their respective
Subsidiaries of any occurrence or condition on any real property adjoining or in
the vicinity of property owned or leased by any Borrower or Merisel Parent or
such Subsidiaries that could reasonably be expected to cause such property or
any part thereof to be classified as "border zone property", or to otherwise be
subject to any restrictions on the ownership, occupancy, transferability or use
thereof under any Hazardous Materials Laws;
(xi) with reasonable promptness, copies of all communications to or
from any Borrower or Merisel Parent or any of their respective Subsidiaries with
federal, state and local governments or agencies relating to Hazardous Materials
Laws and all communications to or from any Borrower or Merisel Parent or any of
their respective Subsidiaries relating to Hazardous Materials Claims;
(xii) within 60 days after the beginning of each fiscal year,
commencing with the fiscal year commencing in January 1995, projected
consolidated balance sheets, consolidated statements of income and consolidated
cash flows from operations for each Borrower and its respective Subsidiaries,
for such fiscal year on a fiscal quarter by fiscal quarter basis;
(xiii) promptly upon any officer of any Borrower or Merisel Parent
obtaining knowledge that any Person has given any notice to any Borrower or
Merisel Parent or any of their respective Subsidiaries or taken any other action
with respect to a claimed default or event or condition of the type referred to
in Section 8.01(d), a written notice specifying the notice given or action taken
by such Person and the nature and period of existence of such claimed default,
event or condition, and what action the Borrower or Merisel Parent has taken, is
taking and proposes to take with respect thereto;
(xiv) not less than three Business Days prior to the delivery to
any holder of a Subordinated Note by Merisel Americas or any of its Subsidiaries
of any notice, communication or other information pursuant to Section 7.03, 10
or 11.03 of the
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Subordinated Note Purchase Agreement or of any other material notice or
communication under the Subordinated Note Purchase Agreement, copies of such
notice, communication or other information, and contemporaneously with the
delivery to any holder of a Senior Note by Merisel Americas or any of its
Subsidiaries of any notice, communication or other information pursuant to
Sections 6.17 or 7.2 of the Senior Note Purchase Agreement, or any other
material notice of communication made under the Senior Note Purchase Agreement,
copies of such notice, communication or other information;
(xv) immediately upon receipt by Merisel Americas or any of its
Subsidiaries of any notice or communication from any holder of a Subordinated
Note pursuant to Section 7.01(b), 11.01 or 11.04 of the Subordinated Note
Purchase Agreement or from any holder of a Senior Note pursuant to Sections 7.3
or 7.4 of the Senior Note Purchase Agreement, or of any other material notice or
communication from any holder of a Subordinated Note or from any holder of
Senior Note or any trustee therefor, copies of such notice or communication, or
if such notice or communication was made orally, a written notice describing
such oral notice or communication;
(xvi) immediately upon delivery by any Borrower or Merisel Parent
or any of their respective Subsidiaries of any notice or communication to any
holder of a Subordinated Note, or to any holder of a Senior Note, copies of such
communication, or if such notice or communication was made orally, a written
notice describing such oral notice or communication;
(xvii) immediately upon receipt by any Borrower or Merisel Parent or
any of their respective Subsidiaries of any notice or communication relating to
a default or termination of any real property lease with respect to which the
landlord has not agreed in writing to provide the Agent with notice of any such
default or termination, copies of such communication, or if such notice or
communication was made orally, a written notice describing such oral notice or
communication; and
(xviii) such other information respecting the business, properties or
the condition or operations, financial or otherwise, of any Borrower or Merisel
Parent or any of their respective Subsidiaries as any Lender through the Agent
may from time to time reasonably request.
(n) Payment of Taxes. Pay and discharge, and cause its respective
----------------
Subsidiaries to pay and discharge, promptly when due all taxes, assessments and
governmental charges and levies payable by it which are imposed upon it, its
income or profits or any of its properties, before the same shall become
delinquent; provided, however, that none of the foregoing need be paid while the
-------- -------
same is being contested in good faith by appropriate proceedings diligently
conducted so long as adequate reserves
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shall have been established in accordance with generally accepted accounting
principles with respect thereto, title of the Borrower or Merisel Parent or its
Subsidiary, as the case may be, to the particular property shall not be divested
thereby and its right to use the particular property shall not be materially
adversely affected thereby.
(o) Further Assurances. (i) On or before January 14, 1994, deliver to the
------------------
Agent, in form and substance satisfactory to the Agent, and in sufficient copies
for each Lender, a favorable opinion of McCarthy Tetrault, counsel to Merisel
Canada, in substantially the form of Exhibit L-2 hereto and as to such other
matters as any Lender through the Agent may reasonably request.
(ii) If the ComputerLand Acquisition takes place after the Closing
Date then, in addition to the condition precedent described in Section 5.01(e),
deliver to the Agent such additional information as the Agent may reasonably
request in connection with the ComputerLand Acquisition including, without
limitation, details as to any changes to the documentation for the "Acquisition
Debt" (as defined in Section 9.03), and any changes to the material terms,
conditions and documentation for the Acquisition Debt shall be in form and
substance satisfactory to the Lenders and any other changes related to the
ComputerLand Acquisition which might have a material adverse impact on the
Lenders shall be satisfactory to the Lenders.
(iii) In addition, at any time or from time to time upon the request
of the Agent, execute and deliver such further documents and do such other acts
and things as the Agent may reasonably request in order to effect fully the
purposes of this Agreement and the other Loan Documents and to provide for
payment of the Revolving Facility Advances made hereunder and other Obligations
and interest thereon in accordance with the terms of this Agreement.
SECTION 7.02. Negative Covenants. So long as any Advance, Acceptance
------------------
Usage or L/C Liability shall remain unpaid or any Lender shall have any
Commitment hereunder, each of the Borrowers will not (so far as such covenants
are within the control and discretion of or apply to that particular Borrower)
and, in the case of Sections 7.02(d), (e), (g), (j), (k), (m), (o) and (p) only,
Merisel Parent will not, without the written consent of the Majority Lenders:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any
-----------
of its Subsidiaries to create, incur, assume or suffer to exist, any Lien
(including the Lien of a conditional vendor) of any kind upon or with respect to
any of its properties of any character whether now owned or hereafter acquired,
or sign or file, or permit any of its Subsidiaries to sign or file, under the
Uniform Commercial Code or similar law of any jurisdiction a financing statement
or other registration which names either
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Borrower or any of its Subsidiaries as debtor, or sign, or permit any of its
Subsidiaries to sign, any security agreement authorizing any secured party
thereunder to file such financing statement or other registration, or assign, or
permit any Subsidiary to assign, any accounts receivable, or enter into or
permit any of its Subsidiaries to enter into any agreement prohibiting the
creation or assumption of any Lien upon its respective properties or assets,
whether now owned or hereafter acquired, excluding, however, from the operation
--------- -------
of the foregoing restrictions the following:
(i) Liens for taxes, assessments or governmental charges or levies to
the extent not required to be paid by Section 7.01(n);
(ii) Liens imposed by law such as materialmen's, mechanics',
carriers', workmen's, and repairmen's liens and other similar liens arising
in the ordinary course of business securing obligations which are not
overdue for a period of more than 60 days;
(iii) pledges or deposits to secure obligations under workmen's
compensation laws or similar legislation or to secure public or statutory
obligations of the Borrowers or any of their respective Subsidiaries;
(iv) utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not
in any material way affect the marketability of the same or interfere with
the use thereof in the business of the Borrowers or Merisel Parent or any
of their respective Subsidiaries;
(v) Liens caused by any judgment if such judgment has not resulted in
an Event of Default pursuant to Section 8.01(g);
(vi) Liens in connection with Debt of the Borrowers incurred
hereunder and Liens consisting of security interests in accounts receivable
(and in property securing or otherwise supporting accounts receivable) in
connection with agreements for sales, transfers or securitizations of
accounts receivable (or interests therein) referred to in Section
7.02(f)(ii);
(vii) Liens in favor of a Borrower on the assets of any of the
Borrowers' respective Subsidiaries; and
(viii) Liens in favor of customs and revenue authorities arising by
operation of law to secure payment of customs duties in connection with the
importation of goods which are not overdue for a period of more than 60
days.
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(b) Debt. Create or suffer to exist, or permit any of its Subsidiaries to
----
create or suffer to exist, any Debt except Debt incurred for the corporate
------
purposes of the particular Borrower or its Subsidiary incurring such Debt;
provided that in the case of any intercompany Debt, the same shall be
- --------
subordinated (both as to payment and remedies) to the Obligations in form and
substance satisfactory to the Agent.
(c) Contingent Obligations. Create, incur, assume or suffer to exist, or
----------------------
permit any of its Subsidiaries to create incur, assume or suffer to exist, any
Contingent Obligations, except:
------
(i) by reason of indorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(ii) the Merisel Canada Guaranty and guaranties by Merisel Canada and
Merisel Europe of obligations arising under the Senior Notes;
(iii) guaranties by the Borrowers, in an aggregate amount not
exceeding at any time 15% of the aggregate Total Capitalization of the
Borrowers, in connection with credit extended to any of the Borrowers'
respective Subsidiaries;
(iv) guaranties by the Borrowers of accounts payable incurred in the
ordinary course of business of any of their respective Subsidiaries or of
leases entered into by such Subsidiaries in each case in the ordinary
course of business, in each case consistent with Merisel Parent's past
practice;
(v) obligations of the Borrowers or their respective Subsidiaries
under flooring arrangements, under their return policies, or under
arrangements providing for rebates to purchasers of inventory or other
arrangements of a similar nature, in each case in the ordinary course of
business and consistent with Merisel Parent's past practice; and
(vi) Contingent Obligations relating to letters of credit issued for
the account of the Borrowers or their respective Subsidiaries.
(d) Dividends, Etc. Declare or pay any dividends, purchase, redeem,
---------------
retire, or otherwise acquire for value any of its capital stock now or hereafter
outstanding, return any capital to its stockholders as such, or make any
distribution of assets to its stockholders as such, or permit any of its
Subsidiaries to purchase, redeem, retire or otherwise acquire for value any
stock of the Borrower, except that:
------
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(i) any Borrower may declare and deliver dividends and distributions
payable only in common stock of that Borrower;
(ii) wholly-owned Subsidiaries of the Borrowers may declare and
deliver dividends and distributions payable in cash, common stock or other
assets to their respective parent Borrower;
(iii) the Borrowers may declare and deliver dividends and other
distributions payable in cash, common stock or other assets to Merisel
Parent, provided that (w) the cumulative aggregate amount of such dividends
--------
and distributions by the Borrowers from and including December 23, 1993 to
and including any date of determination shall not exceed an amount equal to
25% of the Consolidated Net Income of Merisel Americas plus 25% of the
----
Consolidated Net Income of Merisel Europe for that same period of time, (x)
the cumulative aggregate amount of such dividends and distributions made
during any fiscal quarter shall not exceed the aggregate Consolidated Net
Income of both of the Borrowers for that fiscal quarter, (y) such dividends
and distributions shall be paid only from net income of the Borrowers and
(z) immediately after giving effect to any such declaration or deliverance,
no event shall occur and be continuing which constitutes an Event of
Default or an Incipient Default; and
(iv) ComputerLand Acquisition Subsidiary may declare and deliver
dividends and other distributions payable in cash, common stock or other
assets to Merisel Parent.
(e) Mergers, Etc. Merge with or into or consolidate with or into, or
-------------
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to, or acquire all or substantially all of the
assets of, any Person, or permit any Subsidiary to do so, except that (i) any
------
Subsidiary of a Borrower may merge or amalgamate or consolidate with, or
transfer all or substantially all of its assets to, any other Subsidiary of that
Borrower; (ii) any Subsidiary of a Borrower may merge into, amalgamate with, or
transfer all or substantially all of its assets to, that Borrower (so long as
that Borrower is the surviving entity); (iii) any Borrower may merge with any
other Person other than Merisel Parent or any Subsidiary of Merisel Parent which
is not also a subsidiary of either Borrower, so long as that Borrower is the
surviving entity and (iv) the Borrowers and their Subsidiaries may acquire all
or substantially all of the assets of any Person which is in the same line of
business of that Borrower or Subsidiary; provided in each case in this Section
--------
7.02(e) that, immediately after giving effect thereto, no event shall occur and
be continuing which constitutes an Event of Default or an Incipient Default.
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(f) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose of,
---------------------
or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose
of any of its assets other than the sale of: (i) inventory to customers in the
ordinary course of its business provided the consideration therefor adequately
reflects the fair value of the property disposed of; (ii) accounts receivable
(or interests therein), and including transfers or securitizations thereof,
provided that (y) the consideration received therefor shall be cash and (z) an
- --------
amount equal to the aggregate amount paid for such accounts receivable (or
interests therein) to be recovered from such accounts receivable (or interests
therein) shall be used to prepay the then outstanding Revolving Facility
Advances or Swing Line Advances, to the extent of such Advances then
outstanding; (iii) other assets having an aggregate net book value of not more
than 3% of aggregate consolidated total assets of the Borrowers and their
Subsidiaries in any calendar year, provided that the net cash proceeds from such
--------
sale, lease, transfer or disposition, as and when received, shall be used to
prepay the then outstanding Revolving Facility Advances or Swing Line Advances,
to the extent of such Advances then outstanding, or (iv) transfers of assets
permitted under Section 7.02(e).
(g) Investments in Other Persons. Make, or permit any of its Subsidiaries
----------------------------
to make, any loan or advance to any Person or purchase or otherwise acquire, or
permit any of its Subsidiaries to purchase or otherwise acquire, any capital
stock, obligations or other securities of, make any capital contribution to, or
otherwise invest in, any Person, except:
------
(i) Cash Equivalents;
(ii) loans and advances by Merisel Americas to its wholly-owned
Subsidiaries not exceeding in the aggregate at any time 15% of the Total
Capitalization of Merisel Americas;
(iii) loans, advances and investments not exceeding in the aggregate
at any time one percent of the aggregate consolidated total assets of the
Borrowers;
(iv) with the consent of the Majority Lenders pursuant to a waiver
and consent letter substantially in the form of Exhibit Q hereto,
investments in a wholly-owned Subsidiary of a Borrower in connection with
the recapitalization of such Subsidiary;
(v) loans and advances by Merisel Americas, provided that, at any
--------
date of determination, (A) the aggregate amount of such loans and advances
plus (B) the aggregate amount of all Debt incurred by Merisel Europe and
----
its Subsidiaries which is guaranteed by Merisel Americas (including so much
of the Obligations as have been allocated to Merisel Europe
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as indicated on compliance certificates delivered under Sections
7.01(m)(ii) and (iii)) plus (C) the aggregate amount of intercompany loans
----
and advances made by Merisel Americas or its Subsidiaries to Merisel Europe
or its Subsidiaries, shall not exceed an amount equal to 35% of the sum of
(y) the Consolidated Debt Equivalents of Merisel Americas plus (z) the
----
Consolidated Tangible Net Worth of Merisel Americas at that date of
determination;
(vi) loans and advances by Merisel Europe to its wholly-owned
Subsidiaries so long as no violation of Section 7.02(g)(v) exists or would
exist before or after the making of such loan or advance;
(vii) investments consisting of mergers, consolidations and
acquisitions permitted by Section 7.02(e); and
(viii) both Merisel Parent and ComputerLand Acquisition Subsidiary
may make loans, advances and investments to or in each other without
restriction;
provided, however, that even if otherwise permitted by this Section 7.02(g), no
- -------- -------
loan, advance or other investment shall be made by any Borrower or any of its
Subsidiaries to or in Merisel Parent or any Subsidiary of Merisel Parent which
is not also a Subsidiary of either Borrower (including, without limitation,
ComputerLand Acquisition Subsidiary or otherwise in connection with the
ComputerLand Acquisition or the operation of the business or assets so
acquired).
(h) Subordinated Note Payments. Order, pay, make or set apart, or
--- --------------------------
permit any Subsidiary to, directly or indirectly, order, pay, make or set apart,
any sum for any payment or prepayment of principal of, premium, if any, or
interest on, or redemption, purchase, retirement, defeasance, sinking fund or
similar payment with respect to any Subordinated Note, except that Merisel
Americas may make scheduled interest and principal payments in respect of the
Subordinated Notes in accordance with the terms of, and only to the extent
required by, and subject to the subordination provisions contained in, the
Subordinated Note Purchase Agreement; provided that no Event of Default or
--------
Incipient Default has occurred and is continuing or would occur as a result of
such payment; provided further that no prepayment of the principal amount of the
-------- -------
Subordinated Notes (other than the regularly scheduled payments sometimes
described as "prepayments" in Section 7.1(a) of the Subordinated Note Purchase
Agreement which are otherwise permitted by this Section 7.02(h)) or any
redemption, purchase, retirement, defeasance, sinking fund or similar payment
with respect to the Subordinated Notes shall be permitted at any time prior to
the indefeasible payment in full of the Obligations and the termination of the
Revolving Facility Commitments.
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(i) Amendments or Waivers of Certain Documents; Prepayments of Certain
------------------------------------------------------------------
Debt. (i) Amend, waive or otherwise change the terms of, or permit any
- ----
Subsidiary to amend, waive or otherwise change the terms of, any Subordinated
Debt or of the Senior Notes or the Senior Note Purchase Agreement, or make any
payment consistent with an amendment or change thereto, if the effect of such
amendment or change is to increase the interest rate on such Debt, change the
dates upon which payments of principal or interest are due thereon, change any
event of default or condition to an event of default with respect to such Debt,
change the redemption provisions thereof or change the subordination provisions
thereof (or any guaranty thereof) or which, together with all other amendments
or changes made, increase materially the obligations of the obligor or confer
additional rights on the holder of such Debt which could be adverse to any
Borrower or the Lenders; or (ii) defease, or make any payments the effect of
which is to defease, or permit any Subsidiary to, directly or indirectly,
defease, or make any payments the effect of which is to defease, any
Subordinated Debt or Senior Notes in whole or in part (whether pursuant to the
defeasance provisions of such Subordinated Debt or otherwise) or (iii) designate
any Person other than the holders of the Senior Notes as being a holder of
Designated Senior Debt (as defined in the Subordinated Note Purchase Agreement)
under the Subordinated Note Purchase Agreement.
(j) Compliance with Law, etc. (i) Violate any laws, ordinances,
------------------------
governmental rules or regulations to which it is or may become subject or (ii)
fail to obtain or maintain any patents, trademarks, service marks, trade names,
copyrights, design patents, licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its property or the conduct of its
business, in either case where such failure would have a material adverse effect
on any Borrower or Merisel Parent or any of their respective Subsidiaries or on
the ability of any Borrower or Merisel Parent or any such Subsidiaries to
perform its obligations under any of the Loan Documents.
(k) Transactions with Shareholders and Affiliates. (i) In the case of
---------------------------------------------
Merisel Parent, enter into or permit to exist any transaction (including,
without limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any holder of 5% or more of any class of equity
securities of Merisel Parent, or with any Affiliate of Merisel Parent (excluding
the Borrowers and any other Subsidiaries of Merisel Parent) or any such holder,
on terms that are not fair and reasonable in the circumstances or that are less
favorable to Merisel Parent than those which might be obtained at the time from
Persons who are not such a holder or Affiliate; and
(ii) in the case of the Borrowers, enter into or permit to exist any
transaction (including, without limitation, the
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purchase, sale, lease or exchange of any property or the rendering of any
service), with Merisel Parent or any other holder of 5% or more of any class of
equity securities of any Borrower, or with any Affiliate of any Borrower
(excluding any Subsidiaries of any Borrower, but not excluding ComputerLand
---
Acquisition Subsidiary or any other Subsidiary of Merisel Parent which is not
also a Subsidiary of a Borrower) or any such holder, on terms that are not fair
and reasonable in the circumstances or that are less favorable to that Borrower
or that Subsidiary, as the case may be, than those which might be obtained at
the time from Persons who are not such a holder or Affiliate.
(l) Material Agreements. Permit any Subsidiary to enter into any material
-------------------
contractual obligation without its particular parent Borrower's consent.
(m) Mifinco, Inc. Permit Mifinco, Inc., a Delaware corporation and wholly
------------
owned Subsidiary of Merisel Europe, to incur any Debt other than intercompany
Debt permitted under Section 7.02(b) or to take or be the subject of any action
or proceeding of the type described in Section 8.01(f).
(n) Interest Rate Agreements. Enter into or permit any of its
------------------------
Subsidiaries to enter into any Interest Rate Agreements except those entered
into for non-speculative purposes to protect any Borrower or Merisel Parent or
any of their respective Subsidiaries against fluctuations in interest rates.
(o) Change in Business. Engage, or permit any Subsidiary to engage, in
------------------
any business other than the business engaged in by each such particular Person
at the Closing Date or other businesses directly related to the distribution or
marketing of computer products, services and information (it being acknowledged
that, in the case of Merisel Parent, such business is limited to the owning of
stock in its Subsidiaries and activities necessarily incidental thereto).
(p) Fiscal Year. Change its fiscal year end from the Saturday closest to
-----------
December 31 and, unless otherwise agreed by the Majority Lenders, the fiscal
year end date shall be the same for each of the Borrowers and Merisel Parent.
SECTION 7.03. Incorporation of Certain Covenants.
----------------------------------
(a) Subordinated Note Purchase Agreement. The covenants set forth in
------------------------------------
Section 9 of the Subordinated Note Purchase Agreement, as the same may be
amended from time to time in accordance with Section 7.02(i) hereof, are hereby
incorporated by reference into this Agreement as if set forth herein in full
except that references to any Noteholder (as defined in the Subordinated Note
Purchase Agreement) in such Section 9 shall be construed as references to any
Lender. For purposes of this Section 7.03, all definitions set forth in
Sections 12.1 and 13.2
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of the Subordinated Note Purchase Agreement, as the same may be amended from
time to time in accordance with Section 7.02(i) hereof, necessary to the
construction or understanding of any covenant set forth in Section 9 of the
Subordinated Note Purchase Agreement incorporated herein by reference pursuant
to the preceding sentence are also hereby incorporated by reference.
(b) Senior Note Purchase Agreement. The covenants set forth in Section 6
------------------------------
of the Senior Note Purchase Agreement, as the same may be amended from time to
time in accordance with Section 7.02(i) hereof, are hereby incorporated by
reference into this Agreement as if set forth herein in full except that
references to any Noteholder (as defined in the Senior Note Purchase Agreement)
in such Section 6 shall be construed as references to any Lender. For purposes
of this Section 7.03, all definitions set forth in Section 2.1 of the Senior
Note Purchase Agreement, as the same may be amended from time to time in
accordance with Section 7.02(i) hereof, necessary to the construction or
understanding of any covenant set forth in Section 6 of the Senior Note Purchase
Agreement incorporated herein by reference pursuant to the preceding sentence
are also hereby incorporated by reference.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default. If any of the following events ("Events
----------------- ------
of Default") shall occur and be continuing:
- ----------
(a) Any Borrower shall fail to pay any installment of principal when due
or shall fail to pay any interest or fee due hereunder or to make any payment or
prepayment pursuant to Section 2.08(a) within three days after such interest or
fee or such payment or prepayment pursuant to Section 2.08(a) shall become due,
or any Borrower shall fail to pay the amount of any Draft accepted and
discounted at its request prior to the date of maturity thereof or any Borrower
shall fail to pay when due any amount payable in reimbursement of any drawing
under any Letter of Credit issued for its account or under the Existing Letters
of Credit, or any Borrower shall fail to pay any other amount due under this
Agreement or any Loan Document within three days after the date due; or
(b) Any representation or warranty or certification made by any Borrower,
Merisel Parent or Merisel Canada (or any of their respective officers) under or
in connection with any Loan Document shall prove to have been incorrect in any
material respect when made; or
(c) Any Borrower or Merisel Parent shall fail to perform or observe any of
the covenants found in Section 2.14 or Section
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7.01(b), (f), (g), (h), (i), (j), (k), (l) or (o) or Section 7.02 (excluding
Section 7.02(j)) applicable to it; or
(d) Any Borrower or Merisel Parent or Merisel Canada shall fail to perform
or observe any other term, covenant or agreement contained in any Loan Document
on its part to be performed or observed and such default shall not have been
remedied within 10 days of notice from the Agent or any Lender of any such
default; or
(e) Any Borrower or Merisel Parent or any of their respective Subsidiaries
(including, without limitation, Merisel Canada) shall fail to pay any Debt
outstanding under the Senior Notes or the Subordinated Notes or any other Debt
(excluding Debt incurred hereunder) of that Borrower, Merisel Parent or such
Subsidiary (as the case may be) exceeding in the aggregate $5,000,000, or any
interest or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to the Senior Notes, the Subordinated Notes or such other
Debt; or any other default under any agreement or instrument relating to the
Senior Notes, the Subordinated Notes or any such other Debt, or any other event,
shall occur and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such default or
event is to accelerate, or to permit the acceleration of, the maturity of the
Senior Notes, the Subordinated Notes or such other Debt; or the Senior Notes,
the Subordinated Notes or any such other Debt shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; or
(f) Any Borrower or Merisel Parent or any of their respective Subsidiaries
shall generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be instituted
by or against any Borrower or Merisel Parent or any of such Subsidiaries seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such proceeding shall
remain undismissed or unstayed for a period of 30 days or any of the actions
sought in such proceeding (including, without limitation, the entry of an order
for relief against it or the appointment of a receiver, trustee, custodian or
other similar official for it or any substantial part of its property) shall
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occur; or any Borrower or Merisel Parent or any of such Subsidiaries shall take
any corporate action to authorize any of the actions set forth above in this
Section 8.01(f); or
(g) Any judgment or judgments or orders or order of money aggregating in
excess of $5,000,000 shall be rendered against any Borrower or Merisel Parent or
any of their respective Subsidiaries and either (i) enforcement proceedings
shall have been commenced by any creditor upon such judgment or order in excess
of $5,000,000 or judgements or orders aggregating in excess of $5,000,000 and
shall not have been stayed or (ii) there shall be any period of 10 consecutive
days during which a stay of enforcement of such judgment or order in excess of
$5,000,000 or judgments or orders aggregating in excess of $5,000,000, by reason
of a pending appeal or otherwise, shall not be in effect; or
(h) Any guaranty of or subordination with respect to the Debt of any
Borrower to the Lenders (including, without limitation, the guaranty of Merisel
Parent in Article IX and the Merisel Canada Guaranty) or the Subordinated Notes,
at any time after the execution and delivery thereof and for any reason other
than satisfaction in full of all Debt incurred hereunder, ceases to be in full
force and effect or is declared to be null and void; or any guarantor
(including, without limitation, Merisel Parent) or subordinator denies that it
has any further liability or obligation, including, without limitation, with
respect to any future advance by the Lenders, under such subordination agreement
or guaranty or gives notice to such effect or any such guarantor fails to make a
payment when due under its guaranty; or
(i) (A) Merisel Parent or any of its ERISA Affiliates fails to make full
payment when due of all amounts which, under the provisions of any Pension Plan
or Section 412 of the Internal Revenue Code, Merisel Parent or any of its ERISA
Affiliates is required to pay as contributions thereto;
(B) Any accumulated funding deficiency occurs or exists, whether or
not waived, with respect to any Pension Plan;
(C) The excess of the actuarial present value of all benefit
liabilities under all Pension Plans over the fair market value of the assets of
such Pension Plans (excluding in such computation Pension Plans with assets
greater than benefit liabilities) allocable to such benefit liabilities are
greater than $250,000;
(D) Merisel Parent or any of its ERISA Affiliates enters into any
transaction which has as its principal purpose the evasion of liability under
Subtitle D of Title IV of ERISA;
(E) (i) Any Pension Plan shall be terminated within the meaning of
Title IV of ERISA, or (ii) a trustee shall be
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appointed by an appropriate United States district court to administer any
Pension Plan, or (iii) the Pension Benefit Guaranty Corporation (or any
successor thereto) shall institute proceedings to terminate any Pension Plan or
to appoint a trustee to administer any Pension Plan, or (iv) Merisel Parent or
any of its ERISA Affiliates shall withdraw (under Section 4063 of ERISA) from a
Pension Plan, if as of the date of the event listed in subclauses (i)-(iv) above
or any subsequent date, either Merisel Parent or its ERISA Affiliates has any
liability (such liability to include, without limitation, any liability to the
Pension Benefit Guaranty Corporation, or any successor thereto, or to any other
party under Section 4062, 4063 or 4064 of ERISA or any other provision of law)
resulting from or otherwise associated with the events listed in subclauses (i)-
(iv) above;
As used in this Section 8.01(i) the term "accumulated funding deficiency" has
the meaning specified in Section 412 of the Internal Revenue Code, and the terms
"actuarial present value" and "benefit liabilities" have the meanings specified
in Section 4001 of ERISA; or
(j) The emission, discharge, release or threatened release, generation,
storage, transportation, disposal or presence of Hazardous Materials on any
property owned or leased by any Borrower or Merisel Parent or any of their
respective Subsidiaries which is reasonably likely to materially adversely
affect the business or credit of any Borrower or Merisel Parent or its ability,
or the ability of any such Subsidiary, to perform under the Loan Documents; or
(k) (i) Any Person (other than Merisel Parent) alone or together with its
Affiliates, directly or indirectly through one or more intermediaries, gains
control of more than 50% of any Borrower's outstanding capital stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors of that Borrower; or
(ii) any Person alone or together with its Affiliates, directly or
indirectly through one or more intermediaries, gains control of more than 50% of
Merisel Parent's outstanding capital stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors of Merisel
Parent; or
(l) A material adverse change in the business, earnings, properties,
condition (financial or otherwise) or operations of any Borrower and it
Subsidiaries, taken as a whole, or of Merisel Parent and its Subsidiaries, taken
as a whole, shall have occurred;
THEN, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Majority Lenders, by notice to the Borrowers, declare the
obligation of each Lender to make
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Revolving Facility Advances, the obligation of the Swing Line Lender to make
Swing Line Advances, the obligation of each Issuing Lender to Issue Letters of
Credit and the obligation of each Accepting Lender to accept and discount Drafts
to be terminated, whereupon the same shall forthwith terminate, and (ii) shall
at the request, or may with the consent, of the Majority Lenders, by notice to
the Borrowers, declare (w) the Notes and the unpaid principal amount of and
accrued interest on the Advances, (x) the face amount of all unmatured Drafts
accepted pursuant to Section 2.06, (y) an amount equal to the maximum amount
which may at any time be drawn under all Letters of Credit then outstanding
(whether or not any beneficiary under any Letter of Credit shall have presented,
or shall be entitled at such time to present, the drafts and other documents
required to draw under such Letter of Credit), and (z) all other Obligations,
all interest thereon and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Obligations, all such interest and all
such amounts, the Drafts and the reimbursement obligations with respect to the
Letters of Credit shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrowers; provided, however, that in the event
-------- -------
of an actual or deemed entry of an order for relief with respect to any Borrower
or any of its Subsidiaries under the Federal Bankruptcy Code or similar
applicable laws in other jurisdictions, (A) the obligation of each Lender to
make Revolving Facility Advances, the obligation of the Swing Line Lender to
make Swing Line Advances and the obligation of the Issuing Lenders to Issue
Letters of Credit and the obligation of each Accepting Lender to accept and
discount Drafts shall automatically be terminated and (B) an amount equal to the
amounts described in clauses (w), (x), (y) and (z) above shall automatically
become and be due and payable, together with accrued interest thereon without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrowers; provided further that the foregoing shall not
-------- -------
affect in any way the obligations of Lenders to purchase from the issuers
thereof participations in the unreimbursed amount of any drawings under any
Existing Letters of Credit as provided in Section 3.03; and provided further so
-------- -------
long as any Letter of Credit shall remain outstanding, any amounts described in
clause (y) above with respect to Letters of Credit, when received by the Agent,
shall be held in a cash collateral account to be established by the Borrowers
with the Agent as cash collateral for the obligation of the Borrowers to
reimburse the Issuing Lenders or the issuers of the Existing Letters of Credit,
as the case may be, in the event of any drawing under such Letters of Credit,
and so much of such funds shall at all times remain on deposit as cash
collateral as aforesaid as shall equal the maximum amount available at any time
for drawing under all Letters of Credit (the "Maximum Available Amount");
provided that in the event of cancellation or expiration of any Letter of Credit
- --------
or any reduction in the Maximum Available Amount, the
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Agent shall apply the difference between the Maximum Available Amount
immediately prior to such cancellation, expiration or reduction and the Maximum
Available Amount immediately after such cancellation, expiration or reduction,
first to the payment of any outstanding Obligations and second to whomsoever
- ----- ------
shall be lawfully entitled to receive such funds.
Notwithstanding anything contained in the foregoing paragraph, if at any
time within 60 days after acceleration of the maturity of the Obligations, the
Borrowers shall pay all arrears of interest and all payments on account of the
principal which shall have become due otherwise than by acceleration (with
interest on principal and, to the extent permitted by law, on overdue interest,
at the rates specified in this Agreement) and all Events of Default and
Incipient Defaults (other than non-payment of principal of and accrued interest
on the Advances and payments of amounts referred to in clause (y) above, in each
case which is due and payable solely by virtue of acceleration) shall be
remedied or waived pursuant to Section 10.01, then the Majority Lenders, by
written notice to the Borrowers, may at their option rescind and annul the
acceleration and its consequences and the Agent shall return to the Borrowers
any amounts held as cash collateral in respect of amounts described in clause
(y) above; but such action shall not affect any subsequent Event of Default or
Incipient Default or impair any right consequent thereon.
ARTICLE IX
JOINT OBLIGATIONS AND MERISEL
PARENT GUARANTY
SECTION 9.01. Nature of Obligations of the Borrowers.
--------------------------------------
(a) Obligations Joint and Several. Anything herein to the contrary
-----------------------------
notwithstanding, each Borrower hereby agrees and acknowledges that the
obligation of each Borrower for payment of the Obligations shall be joint and
several with the obligations of the other Borrower hereunder regardless of which
Borrower actually receives the proceeds of any Borrowing. Each Borrower hereby
agrees and acknowledges that it has received substantial benefits from the loans
and credit facilities made available to Merisel Parent under the Existing Credit
Agreement.
Each Borrower agrees that its joint and several obligation to pay all
Obligations hereunder is irrevocable, absolute, independent and unconditional
and shall not be affected by any circumstance which constitutes a legal or
equitable discharge of a guarantor or surety other than the indefeasible payment
in full of the Obligations, and the liability of each Borrower with respect to
the Obligations shall not be affected, reduced or impaired by (i) consideration
of the amount of proceeds of the Advances received by any Borrower relative to
the aggregate
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amount of the Advances, (ii) consideration of the face amount of Letters of
Credit issued or Drafts accepted and discounted for the account of any Borrower
relative to the aggregate face amount of all Letters of Credit issued or Drafts
accepted and discounted hereunder, (iii) the dissolution or termination of or
any increase, decrease or change in personnel of, the other Borrower, (iv) the
insolvency or business failure of, or any assignment for the benefit of
creditors by, or the commencement of any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceedings by or against the
other Borrower or (v) the appointment of a receiver for, or the attachment,
restraint of or making or levying of any order of court or legal process
affecting, the property of the other Borrower. Each Borrower agrees that a
separate action or actions may be brought and prosecuted against such Borrower
whether or not action is brought against the other Borrower and whether or not
the other Borrower is joined in any such action or actions. Any Borrower's
payment of a portion, but not all, of the Obligations shall in no way limit,
affect, modify or abridge such Borrower's liability for that portion of the
Obligations which is not paid.
Each Borrower hereby waives any right to require the Agent or any Lender,
as a condition of payment or performance of the Obligations by such Borrower, to
proceed against the other Borrower or any other Person, to exhaust any security
held from any Borrower, or pursue any other remedy in the power of the Agent or
any Lender. Each Borrower hereby waives any defense arising by reason of
incapacity, lack of authority or any disability or other defense that may be
available to the other Borrower and any defenses or benefits that may be derived
or afforded by law which would limit the liability of or exonerate any guarantor
or surety with respect to the Obligations, or which may conflict with the terms
and provisions of this Agreement.
Any indebtedness of a Borrower now or hereafter held by the other Borrower
is hereby subordinated in right of payment to the Obligations, and any such
indebtedness of a Borrower to the other Borrower collected or received by such
other Borrower after an Event of Default has occurred and is continuing shall be
held in trust for the Agent on behalf of the Lenders and shall forthwith be paid
over to the Agent for the benefit of the Lenders to be credited and applied
against the Obligations but without affecting, impairing or limiting in any
manner the liability of such other Borrower under any other provisions of this
Agreement.
(b) Contribution Among the Borrowers. In order to provide for just and
--------------------------------
equitable contribution among the Borrowers, each Borrower hereby agrees that if
any Borrower shall make payments on the Obligations in an amount in excess of
the net value of the benefits received by such Borrower and its Subsidiaries
from extensions of credit hereunder (including receipt of the proceeds of Loans
and any Letters of Credit or Drafts), it shall have a right of contribution
against the other Borrower for such excess;
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provided, however, that such right of contribution shall be subordinate to the
- -------- -------
Lenders' right to receive indefeasible payment in full of the Obligations. The
parties hereto acknowledge that the right to contribution hereunder shall
constitute an asset of the Borrower to which such contribution is owing.
For the purposes of this Section 9.01(b), the "net value of the benefits"
received by any Borrower from extensions of credit hereunder shall include
benefits of funds constituting proceeds of Advances advanced by the Lenders to
such Borrower or its Subsidiaries, benefits consisting of any drawings under
Letters of Credit issued for the account or benefit of such Borrower or its
Subsidiaries and benefits consisting of any proceeds of Drafts accepted and
discounted for the account or benefit of such Borrower or its Subsidiaries.
Nothing in this Section 9.01(b) shall impair the absolute and unconditional
obligation of the Borrowers jointly and severally to pay all Obligations when
the same shall become due in accordance with the terms of this Agreement.
(c) Financial Condition of the Borrowers. Neither the Agent nor any
------------------------------------
Lender shall have any obligation to any Borrower to disclose or discuss with
such Borrower the Agent's or any Lender's assessment of the financial condition
of any Borrower, and each Borrower hereby waives any obligation of the Agent or
any Lender to disclose any matter, fact or thing relating to the business,
operations or conditions of any Borrower now or hereafter known by the Agent or
any Lender. Each Borrower assumes the responsibility for being and keeping
informed of the financial condition of each other Borrower and of all
circumstances bearing upon the risk of nonpayment of the Obligations by any
other Borrower. Neither the Agent nor any Lender shall have any obligation to
any Borrower arising from the Agent's or any Lender's assessment of, or failure
to assess, any Borrower's financial condition in connection with the making of
any Advances or other extensions of credit hereunder.
SECTION 9.02. Merisel Parent Guaranty of the Borrowers' Obligations. In
-----------------------------------------------------
order to induce Lenders to enter into this Agreement and to make the Advances to
the Borrowers hereunder, to issue Letters of Credit for the account of the
Borrowers hereunder and to accept and discount Drafts for the account of the
Borrowers hereunder, Merisel Parent agrees as follows:
(a) Guaranty. As consideration for the Lenders agreeing to enter into
--------
this Agreement and extend the Revolving Facility Commitments hereunder, Merisel
Parent hereby unconditionally and irrevocably guaranties, as primary obligor and
not merely as a surety, the due and punctual payment when due (whether by
required prepayment, declaration, demand or otherwise) (including amounts that
would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11
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U.S.C. (S)362(a)) of all Obligations of the Borrowers (including, without
limitation, interest which, but for the filing of a petition in bankruptcy with
respect to the Borrowers would accrue on such Obligations). For purposes of
this Article IX, the obligations of Merisel Parent under this Article IX are
referred to as this "Merisel Parent Guaranty."
-----------------------
(b) Terms of Merisel Parent Guaranty. Merisel Parent agrees that the
--------------------------------
Obligations of the Borrowers may be extended or renewed, and the Advances repaid
and reborrowed in whole or in part, without notice or further assent from it,
and that it will remain bound upon this Merisel Parent Guaranty notwithstanding
any extension, renewal or other alteration of any such Obligation or repayment
and reborrowing of the Advances.
Merisel Parent waives presentation of, demand of, payment from and protest
of any Obligation of the Borrowers and also waives notice of protest for
nonpayment. The obligations of Merisel Parent under this Merisel Parent
Guaranty shall not be affected by, and Merisel Parent hereby waives its rights
(to the extent permitted by law) in connection with:
(i) the failure of the Agent or any Lender to assert any claim or
demand or to enforce any right or remedy against the Borrowers or Merisel
Parent under the provisions of this Agreement or any other agreement or
otherwise,
(ii) any extension or renewal of any provision thereof,
(iii) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Agreement or any instrument executed pursuant
hereto,
(iv) the release of any security held by the Agent or any Lender for
the Obligations of the Borrowers,
(v) the failure of the Agent, or any Lender to exercise any right or
remedy against any other guarantor of the Obligations of the Borrowers,
(vi) the Agent or any Lender taking and holding security or
collateral for the payment of this Merisel Parent Guaranty, any other
guaranties of the Obligations or other liabilities of the Borrowers and the
Obligations guarantied hereby, and exchanging, enforcing, waiving and
releasing any such security or collateral,
(vii) the Agent or any Lender applying any such security or
collateral and directing the order or manner of sale thereof as the Agent
or such Lender in its discretion may determine, or
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(viii) the Agent or any Lender settling, releasing, compromising,
collecting or otherwise liquidating the Obligations and any security or
collateral therefor in any manner determined by the Agent or such Lender.
Merisel Parent further agrees that this Merisel Parent Guaranty constitutes
a guaranty of payment when due and not of collection and waives any right to
require that any resort be had by any Lender or the Agent or any other Person to
any security held for payment of the Obligations of the Borrowers or to any
balance of any deposit or account or credit on the books of any Lender or the
Agent or any other Person in favor of the Borrowers or any other Person.
The obligations of Merisel Parent under this Merisel Parent Guaranty shall
not be subject to any reduction, limitation, impairment or termination for any
reason, including, without limitation, any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Obligations, discharge of the Borrowers
from the Obligations in a bankruptcy or similar proceeding or otherwise.
Without limiting the generality of the foregoing, the obligations of Merisel
Parent under this Merisel Parent Guaranty shall not be discharged or impaired or
otherwise affected by the failure of the Agent or any Lender to assert any claim
or demand or to enforce any remedy under this Agreement, any Loan Document or
any other agreement, by any waiver or modification of any provision thereof, by
any default, failure or delay, willful or otherwise, in the performance of the
Obligations of the Borrowers, or by any other act of thing or omission or delay
to do any other act or thing that may or might in any manner or to any extent
vary the risk of Merisel Parent or would otherwise operate as a discharge of
Merisel Parent as a matter of law or equity.
The Agent and any Lender may, at their election, foreclose on any security
held by the Agent or such Lender by one or more judicial or nonjudicial sales,
or exercise any other right or remedy the Agent or any Lender may have against
the Borrowers or any security without affecting or impairing in any way the
liability of Merisel Parent hereunder except to the extent the Obligations have
been indefeasibly paid. Merisel Parent waives any defense arising out of such
election by the Agent or any Lender, even though such election operates to
impair or extinguish any right of reimbursement or subrogation or other right or
remedy of Merisel Parent against the Borrowers or any security, so long as the
Agent, or such Lender act in a commercially reasonably manner.
Merisel Parent further agrees that this Merisel Parent Guaranty shall
continue to be effective or be reinstated, as the case may be, if at any time
payments, or any part thereof, of
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principal of or interest on any Obligation of the Borrowers is rescinded or must
otherwise be restored by the Agent or any Lender upon the bankruptcy or
reorganization of the Borrowers or otherwise.
Merisel Parent further agrees, in furtherance of the foregoing and not in
limitation of any other right that the Agent or any Lender may have at law or in
equity against Merisel Parent by virtue hereof, upon the failure of the
Borrowers to pay any of its Obligations when and as the same shall become due
(whether by required prepayment, declaration, demand or otherwise), Merisel
Parent will forthwith pay, or cause to be paid, in cash, to the Agent an amount
equal to the sum of the unpaid principal amount of such Obligations, accrued and
unpaid interest on such Obligations and all other unpaid Obligations of the
Borrowers to the Agent or any Lender.
Merisel Parent hereby irrevocably waives any right of subrogation,
contribution, indemnity or otherwise against the Borrowers that may arise out of
or be caused by this Merisel Parent Guaranty, all rights and/or claims against
the Borrowers which may arise against the Borrowers by reason of this Merisel
Parent Guaranty, any right to enforce any remedy that the Agent or any Lender
now has or may hereafter have against the Borrowers and any benefit of, and any
right to participate in, any security now or hereafter held by the Agent or any
Lender.
Any Debt of the Borrowers now or hereafter held by Merisel Parent is hereby
subordinated in right of payment to the Obligations and shall otherwise be
subordinated as described in Section 7.02(b), and any such Debt of the Borrowers
owed to Merisel Parent collected or received by Merisel Parent after an Event of
Default has occurred and is continuing shall be held in trust for the Agent on
behalf of the Lenders and shall forthwith be paid over to the Agent for the
benefit of the Lenders to be credited and applied to the Obligations but without
affecting, impairing or limiting in any manner the liability of Merisel Parent
under any provision of this Merisel Parent Guaranty.
This Merisel Parent Guaranty shall rank pari passu with the guarantee
---- -----
by Merisel Parent of the Senior Notes given pursuant to the Senior Note Purchase
Agreement.
SECTION 9.03. Certain Undertakings of Lenders Concerning Merisel Parent
---------------------------------------------------------
Guaranty. The Agent and each of the Lenders hereby agree for the benefit of the
- --------
Acquisition Banks (as defined below) that, notwithstanding any other provision
of this Merisel Parent Guaranty or any other agreement or instrument evidencing
any of the Obligations, neither the Agent nor any Lender shall (whether in any
bankruptcy or other proceeding) make any demand or claim upon, accept, sue
against or take any other action or exercise any right, remedy, power or
privilege with respect to, or execute, foreclose or seek to execute or foreclose
upon, (i)
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any assets of Merisel Parent acquired or otherwise obtained from ComputerLand
(whether at or after the Computerland Acquisition) or assets of ComputerLand
Acquisition Subsidiary or (ii) the assets of Merisel Parent consisting of the
stock, Debt or other securities of ComputerLand Acquisition Subsidiary (the
assets described in clauses (i) and (ii) being the "ComputerLand Assets") in
respect of the Obligations or any other liability (including all fees, costs,
indemnities, claims (whether in contract or tort) for breach of representation
or warranties or any other like amounts) of Merisel Parent under or in
connection with this Merisel Parent Guaranty or such other agreement or
instrument unless and until the Acquisition Debt (as defined below) shall have
indefeasibly been paid in full in cash or Cash Equivalents or the Acquisition
Banks shall have consented in writing to such action, and Merisel Parent shall
be entitled to defend against, and any Acquisition Bank shall be entitled to
prevent, any such action or attempt to take any such action. If,
notwithstanding the foregoing provisions, the Agent or any of the Lenders shall
receive any ComputerLand Asset, then such ComputerLand Asset shall be
transferred over to, or held in trust for the benefit of, the Acquisition Banks.
Except as specifically provided in this Section 9.03, nothing is intended to
impair the rights, remedies, powers or privileges of the Agent and Lenders under
or in connection with the Merisel Parent Guaranty against Merisel Parent, and
the Agent and the Lenders shall be fully entitled otherwise to demand payment,
sue and take other action against Merisel Parent under or in connection with the
Merisel Parent Guaranty so long as neither the Agent nor any Lender takes or
seeks to take any action specifically referred to above relating to the
ComputerLand Assets. For the purposes of this Section 9.03:
"Acquisition Debt" shall mean any and all obligations of Merisel
Parent, whether for principal, interest, fees, costs, indemnities or other like
amounts, under or in connection with the Credit Agreement dated as of December
23, 1993 between Merisel Parent and NationsBank of Texas, N.A., as the same may
be amended, modified, supplemented, extended or refinanced (so long as such
refinancing is through Debt, other than Debt in connection with a "distribution"
as such term is used in the Securities Act of 1933) from time to time; provided,
--------
however, that the portion of such Acquisition Debt consisting of lent principal
shall not in the aggregate exceed $65,000,000.
"Acquisition Banks" shall mean NationsBank of Texas, N.A. and each
other financial institution or institutions from time to time holding all or any
portion of the Acquisition Debt.
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ARTICLE X
THE AGENT
SECTION 10.01. Powers.
------
(a) Each Lender hereby irrevocably appoints
and authorizes CUSA to act as Agent under this Agreement and the other Loan
Documents. The Agent shall have and may exercise such powers under this
Agreement and the other Loan Documents as are specifically delegated to the
Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. The Agent shall have no duties or
responsibilities except those expressly set forth herein or in the applicable
Loan Documents. As to any matters not expressly provided for by the Loan
Documents (including, without limitation, enforcement or collection of the
Obligations), the Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in acting or refraining from acting) upon the instructions of
the Majority Lenders or all the Lenders, as the case may be, and such
instructions shall be binding upon all Lenders; provided, however, that the
-------- -------
Agent shall not be required to take any action that exposes the Agent to
personal liability or that is contrary to any Loan Document or applicable law.
No Lender other than the Agent shall have the right to give any notice required
or permitted under the Subordinated Note Purchase Agreement and the Agent shall
at the request, or may with the consent, of the Majority Lenders deliver a
"Blockage Notice" to Merisel Americas in accordance with the terms of the
Subordinated Note Purchase Agreement.
(b) The Designated Issuer shall act on
behalf of the Lenders with respect to the Existing Letters of Credit and the
documents associated therewith until such time and except for so long as the
Agent may elect to act for the Designated Issuer with respect thereto from time
to time in its discretion; provided, however, that the Designated Issuer shall
-------- -------
have all of the benefits and immunities (i) provided to the Agent in this
Article X with respect to any acts taken or omissions suffered by the Designated
Issuer in connection with Letters of Credit Issued by it or proposed to be
Issued by it and the Applications and reimbursement agreements pertaining to the
Letters of Credit as fully as if the term "Agent", as used in this Article X,
included the Designated Issuer with respect to such acts or omissions, and (ii)
as otherwise provided in this Agreement with respect to the Designated Issuer.
SECTION 10.02. Agent in its Capacity as a Lender. With respect to
---------------------------------
its Revolving Facility Commitment and the Advances made by it, Drafts accepted
and discounted by it, Letters of Credit Issued by the Designated Issuer on its
behalf and its participation in the Existing Letters of Credit, the Agent shall
have the same rights and powers under this Agreement and the
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other Loan Documents as any Lender and may exercise the same as though it were
not the Agent, and the term "Lender" or "Lenders" shall, unless otherwise
expressly indicated, include the Agent in its capacity as a Lender hereunder.
CUSA and its direct and indirect parents, subsidiaries and affiliates may accept
deposits from, lend money to, act as trustee under indentures of, and generally
engage in any kind of business with, the Borrowers, any of their respective
Subsidiaries and any Person who may do business with or own securities of any
Borrower or any such Subsidiary, all as if CUSA were not the Agent and without
any duty to account therefor to the Lenders.
SECTION 10.03. Independent Credit Analysis. Each Lender acknowledges
---------------------------
and agrees that it has, independently and without reliance upon the Agent, any
other Lender, or the directors, officers, agents, attorneys or employees of the
Agent or of any other Lender, and instead in reliance upon information supplied
to it by or on behalf of the Borrowers and upon such other documents and
information as it has deemed appropriate, made its own independent credit
analysis and decision to enter into this Agreement, and that it shall
independently and without reliance upon the Agent, any other Lender, or the
directors, officers, agents, attorneys or employees of the Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own independent credit analyses and decisions
in acting or not acting hereunder or under the Loan Documents.
SECTION 10.04. General Immunity. Neither the Agent nor any of its
----------------
directors, officers, agents, attorneys or employees shall be liable to any
Lender for any action taken or omitted to be taken by it or them hereunder or
under the other Loan Documents or in connection therewith, except for its or
their own gross negligence or willful misconduct. Without limiting the
generality of the foregoing, the Agent (i) makes no warranty or representation
to any Lender and shall not be responsible to any Lender for any statements,
warranties or representations made hereunder or under the other Loan Documents
or any agreement or document relative thereto or for the financial condition of
any Borrower or other Loan Party; (ii) shall not be responsible to any Lender
for the authenticity, accuracy, completeness, value, validity, effectiveness,
due execution, legality, genuineness, enforceability or sufficiency of this
Agreement or any of the other Loan Documents or any other agreements or any
assignments, certificates, requests, financial statements, projections, notices,
schedules, opinions of counsel or any other document or notice furnished
pursuant thereto; (iii) shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions
hereof or of any other Loan Document and shall have no duty to inspect the
property (including the books and records) of any Borrower or other Loan Party;
(iv) shall incur no liability under or in respect of this Agreement or any other
Loan Document or any other document or
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collateral by acting upon any notice (which may in the case of a Notice of
Revolving Facility Borrowing, a Notice of Bid Borrowing or a request for
Acceptance Borrowing be by telephone), consent, certificate or other instrument
or writing (which may be by telegram, cable or telex) believed by it to be
genuine and delivered, signed or sent by the proper party; (v) may consult with
legal counsel (including counsel for any Borrower or other Loan Party),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith in accordance
with the advice of such counsel, accountants or experts; (vi) may treat the
holder of any Obligation as the holder thereof until the Agent receives written
notice of the assignment or transfer thereof signed by such holder and in form
satisfactory to the Agent; (vii) shall not be liable for the payment of a pro
rata portion of fees by any Lender to any assignee pursuant to Section 4.05(a)
and (viii) shall not be liable, so long as it has acted in good faith, for any
neglect, error, or delay in giving any notices, or disseminating any
information, which it may be required to give or disseminate hereunder.
SECTION 10.05. Right to Indemnity. The Lenders agree to indemnify
------------------
the Agent (to the extent not reimbursed by the Borrowers), ratably according to
their Total Outstanding Pro Rata Shares, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of this Agreement or the other Loan Documents, or any of them, or
the transactions contemplated hereby or thereby, or the enforcement of any of
the terms hereof or thereof or of any other documents or any action taken or
omitted or event occurring in connection therewith; provided that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
which proximately results from the Agent's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse the Agent promptly upon demand, ratably as aforesaid, for all expenses
and other expenditures for which the Agent is entitled to receive, but has not
received, reimbursement pursuant to Section 11.03(a) hereof.
SECTION 10.06. Agent's Resignation. The Agent may resign any time as
-------------------
Agent under the Loan Documents by giving written notice of its intention to do
so to each Lender and to the Borrowers. Upon any such notice, the Lenders shall
have the right to appoint a successor Agent; provided that if such successor
--------
shall not be signatory to this Agreement, such appointment shall be subject to
the consent of the Borrowers, which consent shall not be unreasonably withheld.
If no successor Agent shall have been so appointed and shall have accepted such
appointment within 20 days after the resigning
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Agent gave such notice of resignation then the resigning Agent may, on behalf of
the Lenders, appoint a successor Agent, which shall be a commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $50,000,000. Upon the
acceptance of any appointment as Agent under the Loan Documents by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the resigning Agent and the
resigning Agent shall be discharged from its duties and obligations under this
Agreement. In any case after the resigning Agent's resignation, the provisions
of this Article X shall continue to inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under the Loan Documents.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments, Etc. No amendment or modification of any
----------------
provision of this Agreement or the Loan Documents (other than the Letters of
Credit), and no waiver of any provision of this Agreement or the Loan Documents
(other than the Letters of Credit) and no consent to any departure by any of the
Borrowers shall in any event be effective unless the same shall be in writing
and signed by the Majority Lenders and the Borrowers, and then such amendment,
modification, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; provided, however, that no
-------- -------
amendment, modification, waiver or consent shall, unless in writing and signed
by all the Lenders (other than the Designated Bidder), do any of the following:
(a) waive any of the conditions specified in Section 5.01 or 5.02, (b) increase
the Revolving Facility Commitments of the Lenders or the maximum amount of
Letters of Credit or subject the Lenders to any additional obligations, (c)
reduce the principal of, or interest on, the Revolving Facility Advances or any
fees or other amounts payable hereunder or under any other Loan Document, or
change the ratable distribution of funds received by the Agent for account of
the Lenders hereunder, (d) postpone any date fixed for payment of principal of,
or interest on, the Revolving Facility Advances, the required maturity or
expiration date of the Drafts or the Letters of Credit, or any fees or other
amounts payable hereunder or under any other Loan Document, (e) increase the
maximum length of the Interest Periods, (f) alter the obligations of the Lenders
to accept and discount Drafts, to Issue Letters of Credit or to purchase
participations in the Existing Letters of Credit, (g) change the definitions of
Majority Lenders or any provision of this Agreement requiring the instruction or
consent of the Majority Lenders for the Lenders or any of them to take any
action under any Loan Document or (h) amend this Section 11.01; and provided,
--------
further, that no amendment, modification, waiver or consent shall, unless in
- -------
writing and signed by the Agent in
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addition to the Lenders required above to take such action, affect the rights or
duties of the Agent under any Loan Document; provided, further, that any
-------- -------
amendment, modification, termination or waiver of the principal amount of a Bid
Advance or payments or prepayments by the Borrower in respect thereof, the
scheduled maturity dates of a Bid Advance, the dates on which interest is
payable and decreases in interest rates borne by the Bid Advances shall not be
effective without the written concurrence of the Lender which has funded such
Bid Advance; and provided, further, that no amendment, modification, waiver or
-------- -------
consent shall, unless in writing and signed by the Acquisition Banks holding the
majority in principal amount of the Acquisition Debt (both such capitalized
terms as defined in Section 9.03), in addition to the Lenders required above,
amend Section 9.03.
SECTION 11.02. No Waiver; Remedies. No failure on the part of the
-------------------
Lenders or the Agent to exercise, and no delay in exercising, any right under
any Loan Document or any failure to require strict performance by any Borrower
of any provision or term of this Agreement, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right under any Loan Document
preclude any other or further exercise thereof or the exercise of any other
right. The remedies provided in the Loan Documents are cumulative and not
exclusive of any remedies provided by law.
SECTION 11.03. Costs and Expenses.
------------------
(a) The Borrowers agree to pay on demand,
(i) all reasonable out-of-pocket costs and expenses of the Agent and the
Syndication Agent in connection with the negotiation, preparation and delivery
of this Agreement and the other Loan Documents and the administration of this
Agreement, the other Loan Documents and the Advances, the Drafts and Letters of
Credit, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Agent, and local counsel who may be retained by said
counsel, with respect thereto and with respect to advising the Agent as to its
rights and responsibilities under the Loan Documents, and (ii) all reasonable
costs and expenses, if any (including reasonable counsel fees and expenses), of
the Agent, the Syndication Agent and each Lender in connection with the
enforcement of the Loan Documents and the other documents to be delivered under
the Loan Documents (including, without limitation, any of the foregoing in
connection with the bankruptcy of any Loan Party or the collection of any
payments due from any Loan Party or with any refinancing or restructuring of the
credit arrangements provided under this Agreement). In addition, the Borrowers
agree to pay any and all stamp and other taxes, fees and expenses payable or
determined to be payable in connection with the execution, delivery, filing and
recording of the Loan Documents and the other documents to be delivered under
the Loan Documents and agrees to save the Agent and each Lender harmless from
and against any and all liabilities with respect to
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or resulting from any delay in paying or omission to pay such taxes, fees and
expenses.
(b) If any payment of principal of any
Eurodollar Rate Advance or Fixed Rate Advance is made by a Borrower to or for
the account of a Lender other than on the last day of the Interest Period for
such Advance, as a result of acceleration of the maturity of the Obligations or
the Notes pursuant to Section 8.01 or for any other reason, the Borrower shall,
upon demand by such Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender any amounts required to compensate such
Lender for any additional losses, costs or expenses which it may reasonably
incur as a result of such payment, including, without limitation, any loss
(including loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by any
Lender to fund or maintain such Advance.
SECTION 11.04. Right of Set-off. Upon (i) the occurrence and during
----------------
the continuance of any Event of Default and (ii) the making of the request or
the granting of the consent specified by Section 8.01 to authorize the Agent to
declare the Obligations due and payable pursuant to the provisions of Section
8.01, each Lender and the Designated Issuer is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits general or special, time or demand, provisional or final,
at any time held and other indebtedness at any time owing by such Lender or the
Designated Issuer, as the case may be, to or for the credit or the account of
any Borrower against any and all of the Obligations owing to such Lender or the
Designated Issuer, as the case may be, by that Borrower or any other Borrower,
irrespective of whether or not such Lender or the Designated Issuer, as the case
may be, shall have made any demand under this Agreement and although such
obligations may be unmatured. Each Lender and the Designated Issuer agrees
promptly to notify the Borrowers after any such set-off and application made by
such Lender or the Designated Issuer, as the case may be; provided that the
--------
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender and the Designated Issuer under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Lender or the Designated Issuer,
as the case may be, may have.
SECTION 11.05. Binding Effect; Governing Law. This Agreement shall
-----------------------------
be binding upon and inure to the benefit of the Borrowers, the Agent, each
Lender and the Designated Issuer and its successors and assigns, except that no
Borrower shall have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Lenders. This Agreement shall
be governed by, and construed in accordance with, the laws of the State of
California.
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SECTION 11.06. Independence of Covenants. All covenants hereunder
-------------------------
shall be given independent effect so that if a particular action or condition is
not permitted by any of such covenants, the fact that it would be permitted by
an exception to, or be otherwise within the limitations of, another covenant
shall not avoid the occurrence of an Event of Default or Incipient Default if
such action is taken or condition exists.
SECTION 11.07. Severability. In case any provision or obligation
------------
under this Agreement or any other Loan Document shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 11.08. Entire Agreement. This Agreement with Exhibits and
----------------
Schedules and the other Loan Documents embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements and
understandings relating to the subject matter hereof (except to the extent that
Section 4.05 incorporates certain arrangements relating to the payment of fees).
SECTION 11.09. Notices. Except as otherwise provided herein, all
-------
notices and other communications provided for hereunder shall be in writing
(including telegraphic communication) and mailed, telegraphed, telecopied or
delivered,if to a Borrower, the Agent or any Financial Institution, at its
address set forth under its name on the signature pages hereof; and if to any
other Lender, at its Domestic Lending Office specified in the Assignment and
Acceptance or Designation Agreement pursuant to which it became a Lender; or as
to any such Person, at such other address as shall be designated by such Person
in a written notice to the other parties hereto. All such notices and other
communications shall, when mailed, telegraphed, or telecopied respectively, be
effective three days after deposited in the mails or when delivered to the
telegraph company, telecopied, or delivered, respectively, addressed as
aforesaid, except that notices and communications to the Agent pursuant to
Articles II and III shall not be effective until received by the Agent.
SECTION 11.10. Change in Accounting Principles. If any changes in
-------------------------------
accounting principles from those used in the preparation of the financial
statements referred to in Section 6.01(e) hereafter occasioned by the
promulgation of rules, regulations, pronouncements and opinions by or required
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants (or successors thereto or agencies with similar
functions) result in a change in the method of calculation of financial
covenants, standards or terms found in Articles I and VII hereof, the parties
hereto agree to enter into
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negotiations in order to amend such provisions so as to equitably reflect such
changes with the desired result that the criteria for evaluating the financial
condition of any Borrower and its Subsidiaries shall be the same after such
changes as if such changes had not been made.
SECTION 11.11. Assignments and Participations.
------------------------------
(a) Each Lender (other than the Designated
Bidder) may assign to one or more banks or other entities all or a portion of
its rights and obligations under this Agreement (including, without limitation,
all or a portion of its Revolving Facility Commitment, the Revolving Facility
Advances owing to it, its participation in the Existing Letters of Credit and
Swing Line Advances and any Drafts it has accepted and discounted, but excluding
in the case of the Swing Line Lender its obligation to make Swing Line Advances
hereunder); provided, however, that (i) each such assignment shall be of a
-------- -------
constant, and not a varying, percentage of all rights and obligations under this
Agreement (other than any right to make Bid Advances or Bid Advances owing to
it, and in the case of the Swing Line Lender its Swing Line Commitment and any
Swing Line Advances owing to it, and except as provided in clause (iii) below);
(ii) each such assignment (other than an assignment to an Affiliate of the
assigning Lender) shall require the consent of the Borrowers, which consent
shall not be unreasonably withheld, and of the Agent, which consent shall not be
unreasonably withheld; (iii) if the assigning Lender shall have accepted Drafts
that are unmatured at the time of the assignment or shall have Issued Letters of
Credit that are available for drawing at the time of the assignment, the rights
and obligations of such Lender with respect to such Drafts and such Letters of
Credit shall not be assigned but such assigning Lender shall continue to be a
party hereto with respect to such rights and obligations and the assigning
Lender shall transfer to the assignee in accordance with Section 11.11(h) a
participation interest therein equal to percentage referred to in clause (i)
above; (iv) the amount of the Revolving Facility Commitments of the assigning
Lender being assigned pursuant to each such assignment shall not be less than
Five Million Dollars ($5,000,000), and (v) the parties to each such assignment
shall execute and deliver to the Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with a processing and
recordation fee of $2,500 and any other documents specified therein. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in such Assignment and Acceptance, (x) the assignee thereunder shall
be a party hereto and, to the extent that rights and obligations under the Loan
Documents have been assigned to it pursuant to such Assignment and Acceptance,
shall have the rights and obligations of a Lender and Issuing Lender hereunder
and under the Loan Documents, and (y) the assigning Lender thereunder shall, to
the extent that rights and obligations under the Loan Documents have been
assigned by it
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pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Documents.
(b) By executing and delivering an
Assignment and Acceptance, the Lender assignor thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and Acceptance, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency, or value of any Loan
Document or any other instrument or document furnished pursuant hereto; (ii)
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Borrower or the
performance or observance by any Borrower of any of its obligations under any
Loan Document or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter in such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon the Agent, the
Designated Issuer, such assigning Lender or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) such Assignee appoints and authorizes the Agent and the
Designated Issuer to take such action as agent on its behalf and to exercise
such powers under this Agreement and the Loan Documents as are delegated to the
Agent and the Designated Issuer by the terms hereof and thereof, together with
such powers as are reasonably incidental thereto; and (vi) such assignee agrees
that it will perform in accordance with their terms all of the obligations
which, by the terms of this Agreement, are to be performed by it as a Lender,
Accepting Lender or Issuing Lender.
(c) Upon receipt of an executed Assignment
and Acceptance and the fee referred to above, the Agent shall, if such
Assignment and Acceptance has been completed and is in substantially the form of
Exhibit N hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Borrowers. If requested by the assigning Lender or the assignee,
the Borrowers will, promptly upon receipt of such notice from the Agent, in
exchange for the existing Revolving Facility Advance Note of the assigning
Lender and, if applicable, the assignee, issue new Revolving Facility Advance
Notes hereunder to such assigning Lender and the assignee in conformity with the
requirements of Section 2.01 hereof in order to reflect their revised Revolving
Facility Commitments and, if applicable, Revolving Facility Advances. Any
Revolving Facility Advance
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Notes received by the Agent from the assigning Lender or the assignee in
exchange for such new Revolving Facility Advance Notes shall be marked "canceled
by replacement" and returned to the Borrowers.
(d) Each Lender (other than the Designated
Bidders) may designate one or more banks or other entities to have a right to
make Bid Advances as a Lender pursuant to Section 2.07; provided, however, that
-------- -------
(i) no such Lender shall be entitled to make more than two such designations,
(ii) each such Lender making one or more of such designations shall retain the
right to make Bid Advances as a Lender pursuant to Section 2.07, (iii) each such
designation shall be to a Designated Bidder and (iv) the parties to each such
designation shall execute and deliver to the Agent, for its acceptance and
recording in the Register, a Designation Agreement. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Designation Agreement, the designee thereunder shall be a party hereto
with a right to make Bid Advances as a Lender pursuant to Section 2.07 and the
obligations related thereto.
(e) By executing and delivering a
Designation Agreement, the Lender making the designation thereunder and its
designee thereunder confirm and agree with each other and the other parties
hereto as follows: (i) such Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished pursuant hereto; (ii)
such Lender makes no representation or warranty and assumes no responsibility
with respect to the financial condition of any Borrower or the performance or
observance by any Borrower or any of its obligations under this Agreement or any
other instrument or document furnished pursuant hereto; (iii) such designee
confirms that it has received a copy of this Agreement, together with copies of
the financial statements referred to in Section 6.01(e) and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into the Designation Agreement; (iv) such designee will,
independently and without reliance upon the Agent, such designating Lender or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such designee confirms that it is a
Designated Bidder; (vi) such designee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vii) such designee agrees that
it will perform in accordance with their terms all of the obligations
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which by the terms of this Agreement are required to be performed by it as a
Lender.
(f) Upon its receipt of a Designation
Agreement executed by a designating Lender and a designee representing that it
is a Designated Bidder, the Agent shall, if such Designation Agreement has been
completed and is substantially in the form of Exhibit O hereto, (i) accept such
Designation Agreement, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrowers. Promptly after
receiving any such notice the Borrowers will, if so requested by the designating
Lender, issue a new Bid Note hereunder to such Designated Bidder in conformity
with the requirements of Section 4.02(c) hereof.
(g) The Agent shall maintain at its address
listed on the signature pages hereto a register for the recordation of the names
and addresses of each of the Lenders and other than Designated Bidders the
Revolving Facility Commitment of, principal amount of the Revolving Facility
Advances owing to, Letters of Credit Issued by and participation in Existing
Letters of Credit of, Drafts on and amount of unmatured Drafts owing to, each
such Lender (other than Designated Bidders) from time to time (the "Register").
--------
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrowers, the Agent and the Lenders may treat
each Person whose name is recorded in the Register as a Lender hereunder for the
purposes of this Agreement. The Register shall be available for inspection by
the Borrowers or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(h) Each Lender may sell participations to
one or more banks or other entities in or to all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Revolving Facility Commitment, the Advances owing to it, any
Letters of Credit Issued by it, its participation in any Existing Letters of
Credit and any Drafts it has accepted and discounted); provided, however, that
-------- -------
(i) such Lender's obligations under this Agreement (including, without
limitation, its Revolving Facility Commitment to the Borrowers and its
obligation to Issue Letters of Credit, to participate in Existing Letters of
Credit and to accept and discount Drafts hereunder) shall remain unchanged, (ii)
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the Borrowers, the Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
(iv) a participant shall not be entitled to require the Lender to take or omit
to take any action hereunder except action directly effecting a reduction of any
of the aggregate principal amount of, the rate of interest payable on or the
fees or other amounts
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payable in connection with the types of Advances or other extensions of credit
that are the subject of its participation, or postponement of the time for
payment of any such amount.
(i) No assignment or participation pursuant
to this Section 11.11 shall, without the consent of the Borrowers, (i) require
any Borrower to file a registration statement with the Securities and Exchange
Commission or apply to qualify the Revolving Facility Advances under the blue
sky laws of any state or (ii) require any Borrower to qualify to do business as
a foreign corporation in any jurisdiction in which the Borrower is not so
qualified.
(j) Any Lender may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section 11.11, disclose to the assignee or participant or proposed assignee
or participant, any information relating to any Borrower or Merisel Parent
furnished to such Lender by or on behalf of the Borrowers; provided that such
--------
potential assignee or participant has been identified by a Borrower to the Agent
or that prior to any such disclosure, (i) such Lender shall notify the Borrowers
of such proposed assignment or participation and identify the proposed assignee
or participant, (ii) the Borrowers shall consent or no written objection shall
be received from the Borrowers by such Lender within 10 days of the notification
or, in the event any such objection is received, such objection is found to be
unreasonable by Majority Lenders and (iii) the proposed assignee or proposed
participant shall agree to preserve the confidentiality of any information
relating to the Borrowers or Merisel Parent received by it from such Lender,
subject to reasonable and customary industry standards and exceptions.
(k) Notwithstanding anything else contained
herein, each Lender may assign, as collateral or otherwise, any of its rights
(including, without limitation, rights to payments of principal or interest)
under this Agreement to any Federal Reserve Bank (or to any Affiliate of such
Lender for purposes of assignment to any Federal Reserve Bank) without notice to
or the consent of the Borrowers or the Agent and without any requirement that
the assignee assume any obligations of such Lender hereunder.
SECTION 11.12. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 11.13. WAIVER OF JURY TRIAL. EACH BORROWER, MERISEL PARENT
--------------------
AND EACH OF THE AGENT, THE DESIGNATED ISSUER AND THE LENDERS HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE DRAFTS, OR ANY OTHER LOAN DOCUMENT OR THE
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ADVANCES, THE ACCEPTANCE USAGE OR L/C LIABILITY OR THE NEGOTIATION,
ADMINISTRATION OR ENFORCEMENT THEREOF.
SECTION 11.14. Judgment.
--------
(a) If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due hereunder in any
currency (the "Original Currency") into another currency (the "Other Currency")
----------------- --------------
the parties hereto agree, to the fullest extent that they may effectively do so,
that the rate of exchange used shall be that at which in accordance with normal
banking procedures the Agent could purchase the Original Currency with the Other
Currency at 11:00 A.M. (London time) on the second Business Day preceding that
on which final judgment is given.
(b) The obligation of a Borrower in respect
of any sum due in the Original Currency from it to any Lender or the Agent
hereunder shall, notwithstanding any judgment in any Other Currency, be
discharged only to the extent that on the Business Day following receipt by such
Lender or the Agent (as the case may be) of any sum adjudged to be so due in
such Other Currency such Lender or the Agent (as the case may be) may in
accordance with normal banking procedures purchase Dollars with such Other
Currency; if the amount of the Original Currency so purchased is less than the
sum originally due to such Lender or the Agent (as the case may be) in the
Original Currency, the Borrowers agree, as a separate obligation and
notwithstanding any such judgment, to indemnify such Lender or the Agent (as the
case may be) against such loss, and if the amount of the Original Currency so
purchased exceeds the sum originally due to any Lender or the Agent (as the case
may be) in the Original Currency, such Lender or the Agent (as the case may be)
agrees to remit to the Borrowers such excess.
SECTION 11.15. Submission to Jurisdiction. Each Borrower and Merisel
--------------------------
Parent hereby irrevocably submits to the jurisdiction of any California state or
Federal court sitting in Los Angeles, California in any action or proceeding
arising out of or relating to this Agreement or any other Loan Document as it
may be amended from time to time, and each Borrower and Merisel Parent hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such California state or Federal court. Each
Borrower and Merisel Parent hereby irrevocably waives, to the fullest extent it
may effectively do so, the defense of any inconvenient forum to the maintenance
of such action or proceeding. Each Borrower and Merisel Parent also irrevocably
consents to the service of any and all process in any such action or proceeding
by the mailing of copies of such process to it at its address specified on the
signatures pages hereof. Each Borrower and Merisel Parent agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing herein shall affect
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the right of the Agent, the Designated Issuer or any Lender to serve legal
process in any other manner permitted by law or affect the right of the Agent,
the Designated Issuer or any Lender to bring any action or proceeding against
any Borrower or Merisel Parent or their respective property in the courts of any
other jurisdiction.
SECTION 11.16. Indemnification. Each Borrower and Merisel Parent
---------------
agrees to pay, and on demand to indemnify and hold harmless the Agent, the
Syndication Agent, each Lender and the Designated Issuer, and their respective
affiliates, and each of their respective successors, assigns, directors,
officers, employees, servants, attorneys and agents (collectively, the
"Indemnitees") from and against any and all claims, including claims based on
strict liability in tort, damages, losses, liabilities, demands, suits,
penalties, judgments, causes of action and all legal proceedings, whether civil,
criminal, administrative or in arbitration, whether or not such Indemnitee is a
party thereto, penalties, fines and other sanctions and expenses, including,
without limitation fees and disbursements of counsel, which may be imposed on
incurred by or asserted against any Indemnitee:
(a) by reason of or in connection with the
execution, delivery, performance, administration or enforcement of this
Agreement or any proposal, fee, or commitment letter relating thereto, or any
transaction contemplated by this Agreement; or
(b) arising under or pursuant to activities
of any Borrower that violate Hazardous Materials Laws; or
(c) arising out of or relating to the use of
proceeds of the Advances, the Letters of Credit or the Drafts; provided,
--------
however, that neither any Borrower nor Merisel Parent shall be liable to any
- -------
Indemnitee for any portion of such claims, damages, liabilities and expenses
that a court of competent jurisdiction shall have determined to have directly
resulted from such Indemnitee's gross negligence or willful misconduct. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in the
immediately preceding sentence may be unenforceable because it is violative of
any law or public policy, each Borrower and Merisel Parent shall contribute the
maximum portion which it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all indemnified liabilities incurred by the
Indemnitees or any of them.
SECTION 11.17. Survival of Warranties and Certain Agreements.
---------------------------------------------
(a) All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Agreement, the making of the Revolving Facility Advances
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hereunder, the Issuance of the Letters of Credit and the acceptance and
discounting of the Drafts.
(b) Notwithstanding anything in this
Agreement or implied by law to the contrary, the agreements of the Borrowers and
Merisel Parent set forth in Sections 2.06(d), 2.06(e), 2.10, 2.11, 2.12, 3.05,
3.06, 4.03, 11.03 and 11.16 and the agreements of Lenders and the Designated
Issuer set forth in Sections 4.04, 10.05 and 11.04 shall survive the payment of
the Revolving Facility Advances and the Drafts, the cancellation or expiration
of the Letters of Credit and the termination of this Agreement.
SECTION 11.18. Headings. Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
[the balance of this page is intentionally left blank]
112
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by its officers thereunto duly authorized, as of the date first
above written.
Addresses for notices, Domestic Lending Offices, Eurodollar Lending
Offices and Commitment amounts are listed on Schedule V.
THE BORROWERS
-------------
MERISEL AMERICAS, INC.
By: /s/ TIMOTHY N. JENSON
_______________________________
Name: TIMOTHY N. JENSON
Title: Vice President & Treasurer
MERISEL EUROPE, INC.
By: /s/ TIMOTHY N. JENSON
_______________________________
Name: TIMOTHY N. JENSON
Title: Vice President & Treasurer
THE PARENT GUARANTOR
--------------------
MERISEL, INC.
By: /s/ TIMOTHY N. JENSON
_______________________________
Name: TIMOTHY N. JENSON
Title: Vice President & Treasurer
THE AGENT
---------
CITICORP USA, INC., as Agent
By: /s/ BARBARA A. COHEN
_______________________________
Name: BARBARA A. COHEN
Title: Vice President
THE CO-AGENT
------------
NATIONSBANK OF TEXAS, N.A., as Co-Agent
By: /s/ JANET E. SOCKWELL
_______________________________
Name: JANET E. SOCKWELL
Title: Assistant Vice President
113
<PAGE>
THE DESIGNATED ISSUER
---------------------
CITIBANK, N.A., as Designated Issuer
By: /s/ EDWARD LETTIERI
_______________________________
Name: EDWARD LETTIERI
Title: Vice President
THE LENDERS
-----------
CITICORP USA, INC.
By: /s/ BARBARA A. COHEN
_______________________________
Name: BARBARA A. COHEN
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ JANET E. SOCKWELL
_______________________________
Name: JANET E. SOCKWELL
Title: Assistant Vice President
UNION BANK
By: /s/ BRET A. MARTIN
_______________________________
Name: BRET A. MARTIN
Title: Vice President
By: /s/ ROBERT C. PETERSEN
_______________________________
Name: ROBERT C. PETERSEN
Title: Vice President
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.,
LOS ANGELES AGENCY
By: /s/ CURT BIREN
_______________________________
Name: CURT BIREN
Title: Vice President
114
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
LOS ANGELES AGENCY
By: /s/ KAZUTAKA KIYOTO
_______________________________
Name: KAZUTAKA KIYOTO
Title: Senior Vice President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: /s/ IAN MACLEOD
_______________________________
Name: IAN MACLEOD
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ L. GENE BEUBE
_______________________________
Name: L. GENE BEUBE
Title: Senior Vice President
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK AND CAYMAN ISLANDS BRANCHES
By: /s/ MICHAEL F. McWALTERS
_______________________________
Name: MICHAEL F. McWALTERS
Title: Managing Director
By: /s/ R.W. CHALONGS BROWNE
_______________________________
Name: R.W. CHALONGS BROWNE
Title: Managing Director
DAIWA BANK
By: /s/ WILLIAM A. TYRER
_______________________________
Name: WILLIAM A. TYRER
Title: Vice President
By: /s/ YVONNE K. TSO
_______________________________
Name: YVONNE K. TSO
Title: Vice President
115
<PAGE>
ASSUMPTION AND SECOND AMENDMENT
This ASSUMPTION AND SECOND AMENDMENT dated as of December 23, 1993 made
by MERISEL AMERICAS, INC., a Delaware corporation ("Americas") and the successor
in interest by assignment and transfer of certain assets from Merisel, Inc., a
Delaware corporation (the "Original Seller"), in favor of and, in the case of
the amendments set forth in Sections 3 and 4 below and the consent set forth in
Section 5 below, by CIESCO L.P. ("CIESCO"), CITIBANK, N.A. ("Citibank") and
CITICORP NORTH AMERICA, INC., a Delaware corporation, individually ("Citicorp")
and as agent (the "Agent") for itself, CIESCO and Citibank.
PRELIMINARY STATEMENTS:
(1) The Seller, CIESCO and the Agent have entered into a Trade
Receivables Purchase and Sale Agreement dated as of September 24, 1993 (the
"CIESCO Agreement"). The Seller, Citibank, Citicorp and the Agent have entered
into a Trade Receivables Purchase Sale Agreement dated as of September 24, 1993,
as amended by the Amendment dated as of October 20, 1993 (said Agreement as so
amended being the "Parallel Purchase Commitment" and, together with the CIESCO
Agreement, the "Agreements"). Capitalized terms not otherwise defined herein
have the meanings set forth in the Agreements.
(2) Under the Asset Transfer, Assignment and Assumption Agreement
dated as of December 23, 1993 between the Original Seller and Americas, (i) the
Original Seller is assigning and transferring to Americas all of its rights,
titles and interests in, to and under, and is to delegate to Americas all of its
obligations, duties and liabilities under, among other things, the Receivables
and Related Security now existing and hereafter arising, all Collections with
respect thereto and other proceeds thereof, all Contracts, Lock-Box Accounts and
Lock-Box Agreements, and the Agreements, the Certificates, the Fee Letter and
the other documents delivered thereunder (such assignment, transfer and
delegation being the "Transfer"), and (ii) Americas is accepting the Transfer
and assuming in full, among other things, all of the obligations, duties and
liabilities of the Original Seller under the Contracts, and the Agreements, the
Certificates, the Fee Letter, the Lock-Box Agreements, and the other documents
delivered thereunder.
NOW, THEREFORE, in consideration of the premises, the parties hereto
hereby agree as follows:
<PAGE>
SECTION 1. Assumption. Effective as of the date of the Transfer,
----------
which shall be made with (and only with) the consent of the Agent, CIESCO,
Citibank and Citicorp in accordance with Section 5 below:
(a) Americas hereby unconditionally and irrevocably accepts and
assumes the rights, titles and interests of the Original Seller, and
assumes, agrees to perform, and promises to pay, all obligations, duties and
liabilities of the Original Seller, now or hereafter existing under or
arising out of the Agreements, the Certificates, the Fee Letter, the Lock-
Box Agreements and the other documents delivered thereunder as though
Americas were the original Seller thereunder.
(b) Americas further agrees to observe and perform and be bound by all
of the terms, covenants, representations, warranties, and conditions
contained in the Agreements, the Certificates, the Fee Letter, the Lock-Box
Agreements and the other documents delivered thereunder which are binding
upon, and to be observed or performed by, the Original Seller as the Seller
as though Americas were the original Seller thereunder, and hereby ratifies
and confirms the validity of the Agreements, the Certificates, the Fee
Letter, the Lock-Box Agreements and the other documents delivered thereunder
in all respects.
(c) Americas hereby confirms the sales and assignments of Eligible
Assets, including daily sales and assignments of additional interests in
newly created Pool Receivables as part of Eligible Assets, made by the
Original Seller under or in connection with the Agreements or otherwise, and
agrees to continue to make sales and assignments of Eligible Assets,
including daily sales and assignments of additional interests in newly
created Pool Receivables as part of Eligible Assets, under and pursuant to
the Agreements and the Certificates as though Americas were the original
Seller thereunder.
SECTION 2. Representations and Warranties. Americas hereby represents
------------------------------
and warrants that (i) the representations and warranties contained in Section
4.01 of the Agreements, as modified hereby (including without limitation under
Sections 3(e) and (f) and 4(e) and (f) hereof, and as though Americas were the
original Seller thereunder), will be true and correct in all material respects
on and as of the date of the Transfer as though made on and as of the date
thereof and (ii) no event has occurred and is continuing which constitutes, or
would constitute but for the requirement that notice be given or time elapse or
both, an Event of Investment Ineligibility under the CIESCO Agreement or an
Event of Termination under the Parallel Purchase Commitment.
SECTION 3. Amendments to CIESCO Agreement. The CIESCO Agreement is,
------------------------------
effective as of the date of the Transfer, which shall be made with (and only
with) the consent of the Agent,
2
<PAGE>
CIESCO, Citibank and Citicorp in accordance with Section 5 below, hereby amended
as follows:
(a) The reference to "Merisel, Inc." and the term "Seller" used in the
CIESCO Agreement, the Certificate issued thereunder, the Fee Letter, the
Lock-Box Agreements and the other documents delivered thereunder, and all
words therein referring to "Merisel, Inc." and such "Seller", shall mean and
be a reference to Americas.
(b) The definitions of the terms "Credit Agreement" and "Debt",
contained in Section 1.01 of the CIESCO Agreement, are amended in their
entirety to read as follows, respectively:
"'Credit Agreement' means the Revolving Credit Agreement dated as
----------------
of December 23, 1993 among the Seller and Merisel Europe, Inc., as
borrowers, Merisel, as guarantor, the lenders party thereto, Citibank,
N.A., as designated issuer, and Citicorp USA, Inc. as agent for such
lenders, without giving effect to any amendment, supplement or other
modification thereof or thereto or any waiver of any provision or any
termination thereof."
"'Debt' means (i) indebtedness for borrowed money, (ii)
----
obligations evidenced by bonds, debentures, notes or other similar
instruments, (iii) obligations to pay the deferred purchase price of
property or services (it being understood that 'Debt' shall not include
obligations both (a) classified as accounts payable, accrued
liabilities or income taxes payable under generally accepted accounting
principles and (b) incurred in the ordinary course of the Seller's
business), (iv) principal obligations as lessee under leases of
property (whether real, personal or mixed) which shall have been or
should be, in accordance with generally accepted accounting principles,
recorded as capital leases, (v) reimbursement obligations under letters
of credit, (vi) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds referred
to in clauses (i) through (v) above, (vii) liabilities in respect of
unfunded vested benefits
3
<PAGE>
under plans covered by Title IV of ERISA, and (viii) 'Debt' as such
term is defined in the Senior Note Purchase Agreement referred to in
the Credit Agreement; provided, that no obligation included in 'Debt'
--------
hereunder shall be included in more than one of clauses (i) through
(viii); provided, further, that 'Debt' shall not include any obligation
-------- -------
hereunder or otherwise under or resulting from any agreement for the
sale, transfer or securitization of accounts receivable permitted by
Section 7.02(f)(ii) and Section 7.02(a)(vii) of the Credit Agreement or
by equivalent clauses of replacements thereof."
(c) Section 1.01 of the CIESCO Agreement is further amended by adding
thereto the following new definitions:
"'Assumption and Second Amendment' means the Assumption and Second
-------------------------------
Amendment dated as of December 23, 1993 among the parties hereto,
amending this Agreement and the Parallel Purchase Commitment, and
whereby the Seller assumed all of the obligations, duties and
liabilities of Merisel hereunder and thereunder."
"'FAB' means Merisel FAB, Inc., a Delaware corporation and a
---
wholly-owned Subsidiary of Merisel, created to hold the assets
comprising the franchise and distribution division of ComputerLand
Corporation, a Delaware corporation."
"'Contingent Obligation' means, as applied to any Person, any
---------------------
direct or indirect liability, contingent or otherwise, of that Person
with respect to any Debt, lease, dividend, letter of credit or other
obligation of another Person, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed (otherwise than
for collection or deposit in the ordinary course of business), co-made,
or discounted or sold with recourse by that Person, or in respect of
which that Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation for which that
Person is in effect liable through any agreement (contingent or
otherwise) to
4
<PAGE>
purchase, repurchase or otherwise acquire such obligation or any
security therefor, or to provide funds for the payment or discharge of
such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the
solvency or any balance sheet, income or other financial condition of
the obligor of such obligation, or to make payment for any products,
materials or supplies or for any transportation, services or lease
regardless of the non-delivery or non-furnishing thereof, in any case
if the purpose or intent of such agreement is to provide assurance that
such obligation will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in
respect thereof. The amount of any Contingent Obligation shall be equal
to the amount of the obligation so guaranteed or otherwise supported."
"'Merisel' means Merisel, Inc., a Delaware corporation."
-------
"'Subsidiary' means, as applied to any Person, any corporation of
----------
which 50% or more of the outstanding voting securities of such
corporation shall at the time be owned or controlled, directly or
indirectly, by such Person or by one or more Subsidiaries of such
Person or by such Person and one or more of its Subsidiaries, or any
similar business organization which is so owned or controlled."
(d) Each of clause (i)(C) of the definition of the term "Rating
Period" contained in Section 1.01 of the CIESCO Agreement, and Section
7.01(j) of the CIESCO Agreement is amended by replacing the date "July 2,
1993" contained therein with the date "October 2, 1993".
(e) Section 4.01(e) of the CIESCO Agreement is amended in its entirety
to read as follows:
"(e) The pro forma consolidated balance sheet of the Seller and
its consolidated subsidiaries as at October 2, 1993, a copy of which
has been furnished to the Agent, fairly presents (subject to normal
year-end
5
<PAGE>
adjustments and the absence of footnotes required under generally
accepted accounting principles) the consolidated financial condition of
the Seller and its consolidated subsidiaries as at such date, all in
accordance with generally accepted accounting principles consistently
applied, and since October 2, 1993, there has been no material adverse
change in such condition or in the consolidated results of the
operations of the Seller and its consolidated subsidiaries."
(f) Section 4.01(f) of the CIESCO Agreement is amended in its entirety
to read as follows:
"(f) Except as disclosed in Merisel's 1992 annual report on Form
10-K, a copy of which has been furnished to the Agent, there is no
pending or, to the best knowledge of the Seller, threatened action or
proceeding affecting the Seller or any of its subsidiaries before any
court, governmental agency or arbitrator which may materially
adversely affect (i) the financial condition or operations of the
Seller and its subsidiaries taken as a whole
6
<PAGE>
or (ii) the ability of the Seller to perform its obligations under this
Agreement, the Certificate or the Fee Letter, or which purports to
affect the legality, validity or enforceability of this Agreement, the
Certificate or the Fee Letter."
(g) Section 5.01(i) of the CIESCO Agreement is amended in its entirety
to read as follows:
"(i) Lock-Box Agreements. Deliver, or cause to be delivered, to
-------------------
the Agent (i) on or before March 31, 1994, a Lock-Box Agreement with
Bank of America National Trust and Savings Association or any
replacement Lock-Box Bank therefor, duly executed by the Seller and
such Lock-Box Bank, together with Lock-Box Notices related thereto
executed by the Seller, and (ii) on or before January 31, 1994, the
written consent of each other Lock-Box Bank to the 'Transfer' under and
as defined in the Assumption and
7
<PAGE>
Second Amendment, to the extent the 'Transfer' relates to the Lock-Box
Agreement with such Lock-Box Bank."
(h) Section 5.01 of the CIESCO Agreement is further amended by adding
to the end thereof a new Section 5.01(j) to read as follows:
"(j) Maintenance of Separate Existence. Do all things necessary
---------------------------------
to maintain its corporate existence separate and apart from Merisel,
FAB and other Affiliates of the Seller, including, without limitation,
(i) maintaining proper corporate records and books of account separate
from those of such Affiliates; (ii) maintaining its assets and
transactions separate from those of such Affiliates, reflecting such
assets and transactions in financial statements separate and distinct
from those of such Affiliates, and evidencing such assets and
transactions by appropriate entries in the books and records referred
to in clause (i) above, and providing for its own operating expenses
and liabilities from its own assets and funds other than certain
expenses and liabilities relating to basic corporate overhead which may
be allocated between the Seller and such Affiliates; (iii) holding such
appropriate meetings or obtaining such appropriate consents of its
Board of Directors as are necessary to authorize all the Seller's
corporate actions required by law to be authorized by the Board of
Directors, keeping minutes of such meetings and of meetings of its
stockholders and observing all other customary corporate formalities
(and any successor Seller not a corporation shall observe similar
procedures in accordance with its governing documents and applicable
law); (iv) at all times entering into its contracts under the Seller's
own name as a legal entity separate and distinct from such Affiliates;
and (v) conducting all
8
<PAGE>
transactions and dealings between the Seller and such Affiliates on an
arm's-length basis."
(i) Sections 5.02(a) and (b) of the CIESCO Agreement are amended in
their entirety to read as follows:
"(a) as soon as available and in any event within 75 days after
the end of each of the first three quarters of each fiscal year of
Merisel, consolidated and consolidating balance sheets of Merisel, the
Seller and Merisel's other consolidated subsidiaries as of the end of
such quarter and consolidated and consolidating statements of income
and retained earnings and of cash flows of Merisel, the Seller and such
other consolidated subsidiaries for the period commencing at the end of
the previous fiscal year and ending with the end of such quarter,
certified by the Treasurer of the Seller or Merisel;
(b) as soon as available and in any event within 120 days after
the end of each fiscal year of Merisel, a copy of the annual report for
such year for Merisel, the Seller and Merisel's other consolidated
subsidiaries, containing consolidated and consolidating financial
statements for such year certified in a manner acceptable to the Agent
by Deloitte & Touche or other independent public accountants acceptable
to the Agent;".
(j) Section 5.02 of the CIESCO Agreement is further amended by adding
to the end thereof a new subsection (g) to read as follows:
"; and (g) promptly upon the execution and delivery of any of the
agreements referred to in Section 6(b)(ii)(B) of the Assumption and
Second Amendment, certified copies of such agreements."
(k) Section 5.03 of the CIESCO Agreement is amended by adding to the
end thereof new Sections 5.03(i), (j), (k), (l), (m) and (n), respectively,
to read as follows:
"(i) Other Adverse Claims. Except as otherwise
--------------------
9
<PAGE>
provided herein or in the Parallel Purchase Commitment, create or
suffer to exist any Adverse Claim upon or with respect to any of the
Seller's property other than of the type described in Section 5.03(a)
(which shall be subject to the restrictions contained in such Section),
or assign any right to receive income, to secure any Debt of any Person
other than as permitted under Section 7.02(a) of the Credit Agreement."
"(j) Debt. Except as otherwise provided herein or in the
----
Parallel Purchase Commitment, create, incur, assume or suffer to exist,
or permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any Debt other than for its own, or its Subsidiaries', corporate
purposes; provided that in the case of any intercompany Debt, the same
--------
shall be subordinated (both as to payment and remedies) to the
obligations of the Seller hereunder in form and substance satisfactory
to the Agent."
"(k) Contingent Obligations. Except as otherwise provided herein
----------------------
or in the Parallel Purchase Commitment, create, incur, assume or suffer
to exist, or permit any of its Subsidiaries to create, incur, assume or
suffer to exist, any Contingent Obligation other than as permitted
under Section 7.02(c) of the Credit Agreement."
"(l) Distributions, Etc. Declare or pay any dividends, purchase,
-------------------
redeem, retire, or otherwise acquire for value any of its capital stock
now or hereafter outstanding, return any capital to its stockholders as
such, or make any distribution of assets to its stockholders as such,
or permit any of its Subsidiaries to purchase, redeem, retire or
otherwise acquire for value any stock of the Seller, other than as
permitted under Section 7.02(d) of the Credit Agreement, provided that
--------
each such declaration, distribution or other action shall have been
duly authorized by all necessary corporate action and in accordance
with applicable law."
"(m) Transactions with Shareholders and Affiliates. Enter into
---------------------------------------------
or permit to exist any transaction (including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of
any service) with Merisel or with any other Affiliate of the Seller
(excluding any Subsidiaries of the Seller), on terms that
10
<PAGE>
are not fair and reasonable in the circumstances or that are less
favorable to the Seller than those which might be obtained at such time
from any Person who is not such an Affiliate."
"(n) FAB. Anything herein to the contrary notwithstanding, until
---
such time, if any, after December 23, 1993 as Merisel shall have
completed a new issuance of common stock or other equity securities
from which it shall have received at least $60,000,000 in net cash
proceeds:
(i) merge or consolidate with or into, or convey, transfer,
lease or otherwise dispose of (whether in one transaction or in a
series of transactions) any or all or substantially all of its
assets (whether now owned or hereafter acquired) to, or acquire
any or all or substantially all of the assets of, directly or
indirectly in any such case, FAB or any successor thereof, or
permit any of its Subsidiaries to do any of the foregoing; or
(ii) make any loan or advance to, or purchase or otherwise
acquire any stock or other securities of, or make any capital
contribution to, or otherwise invest in, directly or indirectly in
any such case, FAB or any successor thereof, or permit any of its
Subsidiaries to do any of the foregoing."
(l) Section 7.01 of the CIESCO Agreement is amended by adding after
subsection (k) thereof a new subsection (l) to read as follows:
"(l) Any of the agreements referred to in Section 6(b)(ii)(B) of
the Assumption and Second Amendment shall have been executed and
delivered by the parties thereto and shall contain any modifications to
the terms set forth in the drafts of such agreements delivered to the
Agent pursuant to such Section which (i) increase materially the
obligations of Merisel or any of its Affiliates, or confer additional
rights on any of the parties thereto (other than Merisel or any of its
Affiliates) which could be materially adverse to
11
<PAGE>
Merisel or any of its Affiliates, or (ii) would otherwise materially
adversely affect the ability of the Seller to perform its obligations
hereunder or the interests of the Owners or the Agent hereunder, in any
such case without the prior written consent of the Agent;".
SECTION 4. Amendment to Parallel Purchase Commitment. The Parallel
-----------------------------------------
Purchase Commitment is, effective as of the date of the Transfer, which shall be
made with (and only with) the consent of the Agent, CIESCO, Citibank and
Citicorp in accordance with Section 5 below, hereby amended as follows:
(a) The reference to "Merisel, Inc." and the term "Seller" used in the
Parallel Purchase Commitment, the Certificate issued thereunder, the Fee
Letter, the Lock-Box Agreements and the other documents delivered
thereunder, and all words therein referring to "Merisel, Inc." and such
"Seller", shall mean and be a reference to Americas.
(b) The definitions of the terms "Credit Agreement" and "Debt",
contained in Section 1.01 of the Parallel Purchase Commitment, are amended
in their entirety to read as follows, respectively:
"'Credit Agreement' means the Revolving Credit Agreement dated as
----------------
of December 23, 1993 among the Seller and Merisel Europe, Inc., as
borrowers, Merisel, as guarantor, the lenders party thereto, Citibank,
as designated issuer, and Citicorp USA, Inc. as agent for such lenders,
without giving effect to any amendment, supplement or other
modification thereof or thereto or any waiver of any provision or any
termination thereof."
"'Debt' means (i) indebtedness for borrowed money, (ii)
----
obligations evidenced by bonds, debentures, notes or other similar
instruments, (iii) obligations to pay the deferred purchase price of
property or services (it being understood that 'Debt' shall not include
obligations both (a) classified as accounts payable, accrued
liabilities or income taxes payable under generally accepted accounting
principles and (b) incurred in the ordinary course of the Seller's
business), (iv) principal obligations as lessee under
12
<PAGE>
leases of property (whether real, personal or mixed) which shall have
been or should be, in accordance with generally accepted accounting
principles, recorded as capital leases, (v) reimbursement obligations
under letters of credit, (vi) obligations under direct or indirect
guaranties in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor
against loss in respect of, indebtedness or obligations of others of
the kinds referred to in clauses (i) through (v) above, (vii)
liabilities in respect of unfunded vested benefits under plans covered
by Title IV of ERISA, and (viii) 'Debt' as such term is defined in the
Senior Note Purchase Agreement referred to in the Credit Agreement;
provided, that no obligation included in 'Debt' hereunder shall be
--------
included in more than one of clauses (i) through (viii); provided,
--------
further, that 'Debt' shall not include any obligation hereunder or
-------
otherwise under or resulting from any agreement for the sale, transfer
or securitization of accounts receivable permitted by Section 7.02(f)
13
<PAGE>
(ii) and Section 7.02(a) (vii) of the Credit Agreement or by equivalent
clauses of replacements thereof."
(c) The definitions of the terms "Commitment" and "Commitment Reduction
Date", contained in Section 1.01 of the Parallel Purchase Commitment, are
amended by replacing the date "March 24, 1994" each place where it appears
therein with the date "April 29, 1994".
(d) Section 1.01 of the Parallel Purchase Commitment is further
amended by adding thereto the following new definitions:
"'Assumption and Second Amendment' means the Assumption and Second
-------------------------------
Amendment dated as of December 23, 1993 among the parties hereto,
amending this Agreement and the CIESCO Agreement, and whereby the
Seller assumed all of the obligations, duties and liabilities of
Merisel hereunder and thereunder."
"'FAB' means Merisel FAB, Inc., a Delaware corporation and a
---
wholly-owned Subsidiary of Merisel, created to hold the assets
comprising the franchise and distribution division of ComputerLand
Corporation, a Delaware corporation."
"'Contingent Obligation' means, as applied to any Person, any
---------------------
direct or indirect liability, contingent or otherwise, of that Person
with respect to any Debt, lease, dividend, letter of credit or other
obligation of another Person, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed (otherwise than
for collection or deposit in the ordinary course of business), co-made,
or discounted or sold with recourse by that Person, or in respect of
which that Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation for which that
Person is in effect
14
<PAGE>
liable through any agreement (contingent or otherwise) to purchase,
repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such
obligation (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise), or to maintain the solvency or any
balance sheet, income or other financial condition of the obligor of
such obligation, or to make payment for any products, materials or
supplies or for any transportation, services or lease regardless of the
non-delivery or non-furnishing thereof, in any case if the purpose or
intent of such agreement is to provide assurance that such obligation
will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof. The
amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported."
"'Merisel' means Merisel, Inc., a Delaware corporation."
-------
"'Subsidiary' means, as applied to any Person, any corporation of
----------
which 50% or more of the outstanding voting securities of such
corporation shall at the time be owned or controlled, directly or
indirectly, by such Person or by one or more Subsidiaries of such
Person or by such Person and one or more of its Subsidiaries, or any
similar business organization which is so owned or
15
<PAGE>
controlled."
(e) Each of clause (i)(C) of the definition of the term "Rating
Period" contained in Section 1.01 of the Parallel Purchase Commitment, and
Section 7.01(j) of the Parallel Purchase Commitment is amended by replacing
the date "July 2, 1993" contained therein with the date "October 2, 1993".
(f) Section 4.01(e) of the Parallel Purchase Commitment is amended in
its entirety to read as follows:
"(e) The pro forma consolidated balance sheet of the Seller and
its consolidated subsidiaries as at October 2, 1993, a copy of which
has been furnished to the Agent, fairly presents (subject to normal
year-end adjustments and the absence of footnotes required under
generally accepted accounting principles) the consolidated financial
condition of the Seller and its consolidated subsidiaries as at such
date, all in accordance with generally accepted accounting principles
consistently applied, and since October 2, 1993, there has been no
material adverse change in such condition or in the consolidated
results of the operations of the Seller and its consolidated
subsidiaries."
(g) Section 4.01(f) of the Parallel Purchase Commitment is amended in
its entirety to read as follows:
"(f) Except as disclosed in Merisel's 1992 annual report on Form
10-K, a copy of which has been furnished to the Agent, there is no
pending or, to the best knowledge of the Seller, threatened action or
16
<PAGE>
proceeding affecting the Seller or any of its subsidiaries before any
court, governmental agency or arbitrator which may materially adversely
affect (i) the financial condition or operations of the Seller and its
subsidiaries taken as a whole or (ii) the ability of the Seller to
perform its obligations under this Agreement, the Certificate or the
Fee Letter, or which purports to affect the legality, validity or
enforceability of this Agreement, the Certificate or the Fee Letter."
(h) Section 5.01(i) of the Parallel Purchase Commitment is amended in
its entirety to read as follows:
"(i) Lock-Box Agreements. Deliver, or cause to be delivered, to
-------------------
the Agent (i) on or before March 31, 1994, a Lock-Box Agreement with
Bank of America National Trust and Savings Association or any
replacement Lock-Box Bank therefor, duly executed by the Seller and
such Lock-Box Bank, together with Lock-Box Notices related thereto
executed by the Seller, and (ii) on or before January 31, 1994, the
written consent of each other Lock-Box Bank to the 'Transfer' under and
as defined in the Assumption and Second Amendment, to the extent the
'Transfer' relates to the Lock-Box Agreement with such Lock-Box Bank."
(i) Section 5.01 of the Parallel Purchase Commitment is amended by
adding to the end thereof a new Section 5.01(j) to read as follows:
"(j) Maintenance of Separate Existence. Do all things necessary
---------------------------------
to maintain its corporate existence separate and apart from Merisel,
FAB and other Affiliates of the Seller, including, without limitation,
(i) maintaining proper corporate records and books of account separate
from those of such Affiliates; (ii) maintaining its assets and
transactions separate from those of such Affiliates, reflecting such
assets and transactions in financial statements separate and distinct
from those of such transactions by appropriate entries in the books and
records referred to in clause (i) above, and providing for its own
operating expenses and
17
<PAGE>
liabilities from its own assets and funds other than certain expenses
and liabilities relating to basic corporate overhead which may be
allocated between the Seller and such Affiliates; (iii) holding such
appropriate meetings or obtaining such appropriate consents of its
Board of Directors as are necessary to authorize all the Seller's
corporate actions required by law to be authorized by the Board of
Directors, keeping minutes of such meetings and of meetings of its
stockholders and observing all other customary corporate formalities
(and any successor Seller not a corporation shall observe similar
procedures in accordance with its governing documents and applicable
law); (iv) at all times entering into its contracts under the Seller's
own name as a legal entity separate and distinct from such Affiliates;
and (v) conducting all transactions and dealings between the Seller and
such Affiliates on an arm's-length basis."
(j) Sections 5.02(a) and (b) of the Parallel Purchase Commitment are
amended in their entirety to read as follows:
"(a) as soon as available and in any event within 75 days after
the end of each of the first three quarters of each fiscal year of
Merisel, consolidated and consolidating balance sheets of Merisel, the
Seller and Merisel's other consolidated subsidiaries as of the end of
such quarter and consolidated and consolidating statements of income
and retained earnings and of cash flows of Merisel, the Seller and such
other consolidated subsidiaries for the period commencing at the end of
the previous fiscal year and ending with the end of such quarter,
certified by the Treasurer of the Seller or Merisel;
(b) as soon as available and in any event within 120 days after
the end of each fiscal year of Merisel, a copy of the annual report for
such year for Merisel, the Seller and Merisel's other consolidated
subsidiaries, containing consolidated and consolidating financial
statements for such year certified in a
18
<PAGE>
manner acceptable to the Agent by Deloitte & Touche or other
independent public accountants acceptable to the Agent;".
(k) Section 5.02 of the Parallel Purchase Commitment is further
amended by adding to the end thereof a new subsection (g) to read as
follows:
"; and (g) promptly upon the execution and delivery of any of the
agreements referred to in Section 6(b)(ii)(B) of the Assumption and
Second Amendment, certified copies of such agreements."
(l) Section 5.03 of the Parallel Purchase Commitment is amended by
adding to the end thereof new Sections 5.03(i), (j), (k), (l), (m) and (n),
respectively, to read as follows:
"(i) Other Adverse Claims. Except as otherwise provided herein
--------------------
or in the CIESCO Agreement, create or suffer to exist any Adverse Claim
upon or with respect to any of the Seller's property other than of the
type described in Section 5.03(a) (which shall be subject to the
restrictions contained in such Section), or assign any right to receive
income, to secure any Debt of any Person other than as permitted under
Section 7.02(a) of the Credit Agreement."
"(j) Debt. Except as otherwise provided herein or in the CIESCO
----
Agreement, create, incur, assume or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist, any Debt
other than for its own, or its Subsidiaries', corporate purposes;
provided that in the case of any intercompany Debt, the same shall be
--------
subordinated (both as to payment and remedies) to the obligations of
the Seller hereunder in form and substance satisfactory to the Agent."
"(k) Contingent Obligations. Except as otherwise provided herein
----------------------
or in the CIESCO Agreement, create, incur, assume or suffer to exist,
or permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any Contingent Obligation other than as permitted under Section
7.02(c) of the Credit
19
<PAGE>
Agreement."
"(l) Distributions, Etc. Declare or pay any dividends, purchase,
-------------------
redeem, retire, or otherwise acquire for value any of its capital stock
now or hereafter outstanding, return any capital to its stockholders as
such, or make any distribution of assets to its stockholders as such,
or permit any of its Subsidiaries to purchase, redeem, retire or
otherwise acquire for value any stock of the Seller, other than as
permitted under Section 7.02(d) of the Credit Agreement, provided that
--------
each such declaration, distribution or other action shall have been
duly authorized by all necessary corporate action and in accordance
with applicable law."
"(m) Transactions with Shareholders and Affiliates. Enter into
---------------------------------------------
or permit to exist any transaction (including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of
any service) with Merisel or with any other Affiliate of the Seller
(excluding any Subsidiaries of the Seller), on terms that are not fair
and reasonable in the circumstances or that are less favorable to the
Seller than those which might be obtained at such time from any Person
who is not such an Affiliate."
"(n) FAB. Anything herein to the contrary notwithstanding, until
---
such time, if any, after December 23, 1993 as Merisel shall have
completed a new issuance of common stock or other equity securities
from which it shall have received at least $60,000,000 in net cash
proceeds:
(i) merge or consolidate with or into, or convey, transfer,
lease or otherwise dispose of
20
<PAGE>
(whether in one transaction or in a series of transactions) any or
all or substantially all of its assets (whether now owned or
hereafter acquired) to, or acquire any or all or substantially all
of the assets of, directly or indirectly in any such case, FAB or
any successor thereof, or permit any of its Subsidiaries to do any
of the foregoing; or
(ii) make any loan or advance to, or purchase or otherwise
acquire any stock or other securities of, or make any capital
contribution to, or otherwise invest in, directly or indirectly in
any such case, FAB or any successor thereof, or permit any of its
Subsidiaries to do any of the foregoing."
(m) Section 7.01 of the Parallel Purchase Commitment is amended by
adding after subsection (k) thereof new subsections (l) and (m) to read as
follows:
"(l) Any of the agreements referred to in Section 6(b)(ii)(B) of
the Assumption and Second Amendment shall have been executed and
delivered by the parties thereto and shall contain any modifications to
the terms set forth in the drafts of such agreements delivered to the
Agent pursuant to such Section which (i) increase materially the
obligation s of Merisel or any of its Affiliates, or confer additional
rights on any of the parties thereto
21
<PAGE>
(other than Merisel or any of its Affiliates) which could be
materially adverse to Merisel or any of its Affiliates, or (ii) would
otherwise materially adversely affect the ability of the Seller to
perform its obligations hereunder or the interests of the Owners or
the Agent hereunder, in any such case without the prior written consent
of the Agent; or
(m) There shall have occurred any event which constitutes or
would, with the giving of notice or the lapse of time or both,
constitute an 'Event of Termination' under the CIESCO Agreement or the
CIESCO Agreement shall cease for any reason to be in full
22
<PAGE>
force and effect;"
SECTION 5. Consent to Transfer. Effective as of the date of the
-------------------
Transfer and subject to the satisfaction of the conditions precedent set forth
in Section 6 below, each of the Agent, CIESCO, Citibank and Citicorp hereby
consents to the Transfer.
SECTION 6. Conditions of Effectiveness. Section 5 of this Assumption
---------------------------
and Second Amendment shall become effective when, and only when, all of the
following shall have occurred:
(a) The Agent shall have received (i) counterparts of this Assumption
and Second Amendment executed by Americas, the Original Seller, CIESCO,
Citibank and Citicorp, individually and as Agent and (ii) a copy of the
Credit Agreement (as defined in the Agreements as amended hereby) certified
by an officer of Americas to be a true and complete copy of such Credit
Agreement as executed by all parties thereto.
(b) The Agent shall have additionally received all of the following
documents, each document (unless otherwise indicated) being dated the date
of the Transfer, in form and substance satisfactory to the Agent:
(i) Certified copies of the charter and by-laws, as amended, of
Americas;
(ii) Certified copies of (A) all agreements relating to the
Transfer (collectively the "Transfer Agreements") and (B) drafts as of
the date hereof of all agreements relating to the ComputerLand
Acquisition (as defined in the Credit Agreement as defined in the
Agreements as amended hereby), respectively;
(iii) Certified copies of the resolutions of the Board of Directors
of each of Americas and the Original Seller approving this Assumption
and Second Amendment, the Transfer Agreements and the matters
contemplated hereby and thereby;
(iv) A certificate of the Secretary or an Assistant Secretary of
each of Americas and the
23
<PAGE>
Original Seller certifying the names and true signatures of the
officers thereof authorized to sign this Assumption and Second
Amendment, the Transfer Agreements and the other documents to be
delivered by it hereunder and thereunder;
(v) Executed copies of proper Financing Statements (both Form
UCC-1 and Form UCC-3 or UCC-2, as applicable), or other similar
instruments or documents, as may be necessary or, in the opinion of the
Agent, desirable under the law of all appropriate jurisdictions to
reflect the Transfer and to perfect the interests of the Agent under
the Agreements as amended hereby;
(vi) Executed copies of proper Financing Statements (Form UCC-3 or
UCC-2, as applicable) necessary to release all security interests and
other rights of any Person in any Receivables, Contracts or Related
Security previously granted by Americas (other than pursuant to the
Agreements);
(vii) Certified copies of Requests for Information or Copies (Form
UCC-11) (or a similar search report certified by a party acceptable to
the Agent), dated a date reasonably near to the date of the Transfer,
listing all effective financing statements which name the Original
Seller or Americas (under its present name and any previous name) as
debtor and which are filed in the jurisdictions in which the Financing
Statements referred to in subsection (b)(v) above are to be filed,
together with copies of such financing statements (none of which
(except those filed pursuant to the Agreements) shall cover any
Receivables or Contracts or Related Security);
(viii) Undated copies of (A) a Preliminary Lock-Box Notice addressed
to Bank of America National Trust and Savings Association, as a Lock-
Box Bank, and (B) Lock-Box Notices
24
<PAGE>
to each other Lock-Box Bank, in each case executed by Americas; and
(ix) A favorable opinion of Riordan & McKinzie, counsel for
Americas and the Original Seller, in substantially the form of Exhibit
A hereto.
SECTION 7. Effect on the Agreements. (a) Upon the effectiveness of
------------------------
Section 5 hereof, on and after the date of the Transfer, each reference in
either of the Agreements to "this Agreement", "hereunder", "hereof", "herein" or
words of like import referring to either of the Agreements, and each reference
in either of the Certificates, the Fee Letter or any other documents delivered
under either of the Agreements to either of the Agreements, shall mean and be a
reference to such Agreement as amended hereby.
(b) Except as specifically amended in Sections 3 and 4 above or as
otherwise provided in this Agreement, each of the Agreements, the Certificates,
the Fee Letter, the Lock-Box Agreements, and the other documents delivered
thereunder shall remain in full force and effect and are hereby ratified and
confirmed.
SECTION 8. Costs, Expenses and Taxes. Americas agrees to pay on
-------------------------
demand all costs and expenses of the Agent in connection with the preparation,
execution and delivery of this Assumption and Second Amendment and the other
instruments and documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Agent with respect thereto and with respect to advising the Agent as to its
rights and responsibilities hereunder and thereunder. In addition, Americas
shall pay any and all stamp and other taxes payable or determined to be payable
in connection with the execution and delivery of this Assumption and Second
Amendment and the other instruments and documents to be delivered hereunder, and
agrees to save the Agent, CIESCO, Citibank and Citicorp harmless from and
against
25
<PAGE>
any and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
SECTION 9. Execution in Counterparts. This Assumption and Second
-------------------------
Amendment may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which taken together shall
constitute but one and the same instrument. Delivery of an executed counterpart
of a signature page to this Assumption and Second Amendment and any other
documents to be delivered hereunder by telefacsimile shall be effective as
delivery of a manually executed counterpart of this Assumption and Second
Amendment or such document.
SECTION 10. Governing Law. This Assumption and Second Amendment shall
-------------
be governed by, and construed in accordance with, the laws of the State of
California.
IN WITNESS WHEREOF, the parties hereto have caused this Assumption and
Second Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
MERISEL AMERICAS, INC.
By: /s/ Timothy N. Jenson
------------------------
Title: Vice President &
Treasurer
CIESCO L.P.
By: Citicorp North America, Inc.,
as Attorney-in-Fact
By: /s/ Joseph J. Mackiewicz
-------------------------
Vice President
CITICORP NORTH AMERICA, INC.,
Individually and as Agent
By: /s/ Joseph J. Mackiewicz
--------------------------
Vice President
26
<PAGE>
CITIBANK, N.A.
By: /s/ Joseph J. Mackiewicz
--------------------------
Vice President
Consented and agreed as of
the date first above written:
MERISEL, INC.
By: /s/ Timothy N. Jenson
-----------------------
Title: Vice President & Treasurer
27
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION
---------------------------------------- ----------------------------
<S> <C>
Merisel (UK) Limited.................... United Kingdom
Merisel Canada, Inc..................... Canada
Merisel E.U.R.L......................... France
Merisel Pty Limited..................... State of Victoria, Australia
Merisel GESmbH.......................... Austria
MIFINCO, Inc............................ Delaware
Merisel Latin America, Inc. ............ Delaware
Merisel C.A.T. S.A. .................... Switzerland
Softsel Foreign Sales Corporation....... U.S. Virgin Islands
Merisel GmbH............................ Germany
Merisel Mexico S.A. de C.V.............. Mexico
Computer Aided Technologies Ltd......... Russia
Merisel Americas, Inc................... Delaware
Merisel Europe, Inc..................... Delaware
Merisel FAB, Inc........................ Delaware
Merisel Asia, Inc. ..................... Delaware
</TABLE>
42
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements Nos.
33-61592, 33-45781, 33-35648 and 33-34296 on Form S-8, of our report dated
February 22, 1994 appearing in this Annual Report on Form 10-K of Merisel, Inc.
for the year ended December 31, 1993.
Deloitte & Touche
Los Angeles, California
March 24, 1994
43
